(STL.News) Audrey Strauss, the Acting United States Attorney for the Southern District of New York, and William F. Sweeney Jr., Assistant Director in Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), announced that JAMES JEREMY BARBERA, the former founder and chief executive officer of a nanotechnology company based in New York, New York, was arrested this morning in New York on securities fraud and wire fraud charges stemming from a scheme to defraud investors in the company.
Among other illicit activity, BARBERA fraudulently induced dozens of investors to invest at least approximately $12.2 million based on false and misleading statements, by failing to use investors’ funds as promised, and by converting investors’ money to his own use. BARBERA will be presented this afternoon in Manhattan federal court before U.S. Magistrate Judge Sarah Netburn.
Acting U.S. Attorney Audrey Strauss said: “As alleged, James Barbera defrauded investors out of millions of dollars by offering the opportunity to invest in a seemingly plausible but wholly fictitious technology, purportedly developed in coordination with NASA. Barbera allegedly further misled investors with false statements about institutional investors, licensing agreements, an imminent IPO, and other lies, and misappropriated investor money for his own use. Now he is in custody and facing prosecution for his alleged crimes.”
FBI Assistant William F. Sweeney Jr. said: “As we allege today, Barbera, in his position as founder and CEO of a privately-held nanotechnology company, fraudulently collected more than $12 million from investors and used approximately half the money to pay for personal expenses including private school and college tuition for his children and mortgage payments on his Central Park West apartment. Among other misrepresentations he made, Barbera claimed his company had an exclusive relationship with NASA and even used NASA’s logo to solicit investors. As we demonstrated today, Barbera’s non-existent ‘exclusive’ landed him nothing more than a trip through the federal criminal justice system.”
According to the allegations in the Complaint unsealed today in Manhattan federal court:
Between in or about 2009 and in or about 2019, BARBERA was the founder and CEO of a privately held nanotechnology company that represented to investors that the company had developed a breathalyzer sensor technology that could detect cancer and narcotics in human breath, based on technology developed by the National Aeronautics and Space Administration (“NASA”), and that it was also partnered with a major U.S. research university.
From at least in or about 2013 through in or about 2020, BARBERA and others perpetrated a scheme to defraud dozens of investors out of at least approximately $12.2 million (i) by soliciting investments in the company’s equity and notes through false and misleading statements, (ii) by failing to use investors’ funds as promised, and (iii) by converting investors’ money to his own use. BARBERA and others made false and misleading representations to actual and potential investors, including as set forth below:
BARBERA falsely represented that the company had developed a breathalyzer sensor, based on technology developed by NASA, that could detect narcotics and cancer from a person’s breath. In truth and in fact, and as BARBERA well knew, the company and NASA never developed such a technology. Indeed, NASA conducted no research for the company related to this technology after in or about late 2017, and NASA did not permit research related to narcotics testing at NASA facilities.
BARBERA falsely represented that the company had an exclusive license with NASA for certain patents related to a breathalyzer sensor technology for the life of the patents, and used NASA’s name and logo to solicit investors in the company. In truth and in fact, and as BARBERA well knew, the company did not have an exclusive license with NASA.
BARBERA falsely represented to potential and actual investors that institutional investors, including a large, publicly traded chemical company, had made substantial investments in the company. In truth and in fact, and as BARBERA well knew, that institutional investor never invested in the company.
BARBERA falsely represented that the company would soon have an initial public offering (“IPO”), which would result in large profits to investors. In truth and in fact, and as BARBERA well knew, the company was not close to an IPO.
BARBERA converted to his own use approximately 50 percent of the approximately $12.2 million in investor funds in the form of cash withdrawals and to pay personal expenses, including private school and college tuition for his children, mortgage payments on his Central Park West apartment, and for his other personal items, such as credit card bills, jewelry, automobiles, and daily living expenses.
Previously, BARBERA was the CEO of a publicly traded company. On or about July 29, 2014, the U.S. Securities and Exchange Commission (“SEC”) announced the settlement of federal securities fraud charges against BARBERA and that company for making materially false and misleading statements about the true business operations and finances of that company. As part of that settlement, BARBERA was permanently enjoined from future violations of the antifraud provisions of the federal securities laws, and agreed to pay a $100,000 penalty and to be permanently barred from acting as an officer or director of a public company.
BARBERA, 64, was arrested this morning at his home in New York, New York. BARBERA was charged with one count of securities fraud and one count of wire fraud, each of which carries a maximum sentence of 20 years in prison. He was also charged with one count of conspiracy to commit securities fraud and wire fraud, which carries a maximum sentence of five years in prison. The charges carry a maximum fine of $5 million, or twice the gross gain or loss from the offenses. The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.
Ms. Strauss praised the outstanding work of the FBI and NASA’s Office of Inspector General, and also thanked the SEC for its assistance and cooperation in this investigation.
This case is being handled by the Office’s Securities and Commodities Fraud Task Force. Assistant United States Attorney Joshua A. Naftalis is in charge of the prosecution.
The charges contained in the Complaint are merely accusations, and the defendant is presumed innocent unless and until proven guilty.