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Another unicorn goes poof! Feds charge Mozido founder with fraud

The Securities and Exchange Commission has charged Michael Liberty, founder of fintech unicorn Mozido, with fraud, alleging that he bilked hundreds of investors to pay for his lavish lifestyle.

The SEC claims Liberty and four associates — including his wife Brittany and friend Paul Hess, owner of Braintree Hill Ventures — engaged in a fraudulent scheme to induce investors to buy securities in shell companies that supposedly owned transferrable interests in Mozido. In reality, the shell companies either didn’t own or couldn’t transfer interests in the company, the regulator said in a March 30 complaint filed in a Maine federal court.

Liberty and his accomplices allegedly lied to investors about Mozido’s valuation and finances, the SEC claimed. As late as 2016, Liberty and Hess, “made multiple representations” about “potential liquidity events” that would be lucrative to investors, the regulator said. Hess in May 2016 fraudulently told investors that a “big liquidity event” was expected for Mozido within 60 to 90 days and that the “game could be over in the next 12 months,” the SEC’s complaint said.

“Mozido struggled financially, defaulted on its debt, and was at times valued at less than 10 percent of what Liberty and his associates represented to investors,” the SEC said.

This is the second time the SEC has brought charges against a unicorn in the past two months. On March 14, it charged blood-testing unicorn Theranos, its CEO and former president with “massive fraud” involving more than $700 million.

Founded in 2008, Mozido, of Austin, Texas, is known for developing a digital wallet for people with mobile phones who don’t have bank accounts. The company was considered a unicorn and raised $337 million in funding from high profile investors including Google billionaire Eric Schmidtas well as MastercardWellington Management and Julian H. RobertsonMozido ranked 53rd on Fortune’s 2016 Unicorn list with a $2.4 billion valuation.

Buyouts reported in 2016 that Mozido was seeking to raise another round of funding or a possible sale. It was not clear how much Mozido was targeting at that time.

The SEC claimed that Liberty and his accomplices “raised more than $55 million from hundreds of investors, misappropriating most of it to fund Liberty’s lifestyle, including chartered flights, a dairy cow farm, and the funding of a movie production.”

Forbes reported news of Mozido’s problems, including a cash crunch, in 2016. The company was operating in 2017 without its top two executives, Forbes said last year.

The SEC is seeking a permanent injunction against Liberty and the other defendants from issuing, buying, offering or selling any security. The regulator said it is seeking an appropriate civil monetary penalty from the defendants but did not disclose a dollar amount.

Separately, Liberty pleaded guilty in 2016 to making illegal contributions to a presidential campaign, according to press reports. He was fined $100,000 and sentenced to four months in prison. The Portland Press Herald said that Liberty personally donated to the campaign of Republican Mitt Romney during his primary run.

The SEC, Mozido and Hess could not be reached for comment.

Action ItemMarc Jones, SEC senior trial counsel, can be reached at (617) 573-8947.

Photo: A person dressed as a unicorn celebrates the sunrise during the winter solstice at Stonehenge on Salisbury Plain in southern England December 21, 2012. REUTERS/Kieran Doherty