Melissa A. Alcantara, Esq. NJ Attorney ID: 014002004
DICKINSON WRIGHT PLLC
1825 Eye Street, N.W., Suite 900
Washington, DC 20006
Tel.: (202) 659-6949
Email: malcantara@dickinsonwright.com
Attorneys for Defendant Vuuzle Media Corp.
UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW JERSEY
Plaintiff: U.S. SECURITIES AND EXCHANGE COMMISSION,
Civil Action No. 2:21-cv-01226-KSH-CLW
VUUZLE MEDIA CORP.’S ANSWER TO COMPLAINT AND AFFIRMATIVE DEFENSES
Defendants: VUUZLE MEDIA CORP., RONALD SHANE FLYNN, and RICHARD MARCHITTO
Defendant Vuuzle Media Corp. (“Vuuzle” or the “Company”)), through its attorneys Dickinson Wright PLLC, for its Answer to Plaintiff U.S. Securities and Exchange Commission’s Complaint and Affirmative Defenses, states as follows:
PRELIMINARY STATEMENT
The Securities and Exchange Commission (“SEC” or the “Commission”) bases its Complaint entirely on the faulty premise that Vuuzle(1) is not a viable company, but rather some illegitimate back-room Ponzi-like scam, operating as a boiler room out of the Philippines. All that one need do to learn quickly that the Commission mischaracterizes the business of Vuuzle to fit its desired narrative is to download the “Vuuzle TV” app to access Vuuzle’s free movies, television shows and live television, which confirms the legitimacy of the Vuuzle media enterprise.(2) Vuuzle is an industry disruptor by returning the notion of free television as existed for decades. One easily can conclude that the Commission’s ‘spin’ on the Vuuzle business is little more than an effort to delegitimize what has the potential to compete with media giants.
The repeated gratuitous references to “boiler room,” “Ponzi,” and “scheme” in the Complaint serve only to reinforce the Commission’s contention that Vuuzle is merely a shell company. In fact, Vuuzle is a viable company with an independent Board of Directors, an independent executive management team, brick and mortar buildings housing a state-of-the-art studio in the United Arab Emirates (“UAE”), and office space in Las Vegas. Vuuzle also employs staff, across its creative, marketing, and programming departments.
Further contradicting the Commission’s assertions and instead confirming the Company’s viability is Vuuzle’s development and implementation of a three-part media platform to livestream music, television, and social media. Vuuzle’s first media venture focused on live interactive social media, which was designed to generate revenue for Vuuzle through users purchasing virtual gifts from Vuuzle, such as emojis that were sent to other users. For example, a user could purchase a virtual heart emoji from Vuuzle and send the heart emoji virtually to another user to express appreciation for the performer’s singing or other social media talent. Vuuzle then turned its attention to developing and maintaining free livestream music and television on its own “over-the-top”
(“OTT”) platform.(3) Vuuzle TV delivered digital television and film content via the internet to internet-connected devices without requiring users to subscribe to a traditional cable or satellite provider. This enabled Vuuzle to generate data relating to users’ preferences, relationships, habits, and location, making possible for companies’ advertising through Vuuzle to utilize the data to hyper- target their marketing strategies and reach their target audiences. Vuuzle’s income from free Vuuzle TV derives principally from revenue generated through advertisers who are able to target specific audiences within a particular demographic. Vuuzle received a Verizon Media Brandblazers Award for its innovative business platform and products hosted on the Verizon Digital Media Services platform.
Vuuzle does not dispute that it raised capital pursuant to a Regulation D exempt offering. Vuuzle raised capital and used that capital consistent with legitimate uses in such a capital intensive industry as media and entertainment. The Commission simply is incorrect in its characterization of Vuuzle’s capital raise. Regrettably, the Commission tends to conflate offshore-based capital raises by dynamic and disruptive startups with ‘scheme’ lexicon. That is not Vuuzle, and this Answer reinforces the bona fides of Vuuzle as a 21st Century cutting-edge media and entertainment company.
SUMMARY
1. This action alleges an offering fraud supposedly perpetrated by Vuuzle Media Corp. (together with its predecessor entities, hereinafter referred to as “Vuuzle”) and its founder, Ronald Shane Flynn (“Flynn”), and aided and abetted by Richard Marchitto (“Marchitto”).
ANSWER
Vuuzle denies the allegations set forth in paragraph 1 as untrue.
2. From approximately September 2016 through at least May 2020, Vuuzle and Flynn offered and sold more than $14 million of Vuuzle common stock and warrants to investors throughout the United States. In violation of the securities laws, Flynn secretly diverted approximately $5 million to support his aggressive fund-raising operations and pay commissions to stock Flynn misappropriated another nearly $5 million in direct transfers to his personal bank accounts overseas and by using corporate credit and debit cards for personal items, such as dating and gambling applications, gold bars, and luxury travel. An additional approximately $2 million appears to have been used for other expenses in furtherance of the fraud, including, but not limited to, Ponzi-like payments to a limited number of investors, Fed Ex charges, rent for a New York office, and attorney fees.
ANSWER
Vuuzle admits only that between September 2016 and May 2020, Vuuzle received more than $14 million in investment funds from investors. Vuuzle denies the remainder of the allegations set forth in paragraph 2 as untrue.
3. To raise funds, Vuuzle and Flynn falsely represented to investors that Vuuzle was a legitimate, successful, and growing company in the business of providing online live streaming and entertainment services. In fact, Vuuzle was little more than a front for a boiler room Flynn controlled.
ANSWER
Vuuzle denies the allegations set forth in paragraph 3 as untrue.
4. Operating primarily out of the Philippines under a series of different corporate entities, Flynn, directly and through marketing teams acting at his direction, engaged in aggressive
and high-pressure sales campaigns. Among other tactics, Flynn and his boiler room employees cold- called potential investors and, through relentless and deceptive phone and email communication, convinced them to buy Vuuzle securities. In return for bringing investor funds to Vuuzle, Flynn paid substantial commissions to himself and others.
ANSWER
Vuuzle denies the allegations set forth in paragraph 4 as untrue. Vuuzle specifically states that it did not use high pressure sales tactics as characterized by the Commission. Vuuzle did not pay to Flynn and others any commissions “for bringing investor funds to Vuuzle” from investment money raised by Vuuzle.
5. The securities offered were common The price per share ranged from $1 to $5, with most investors paying $5 per share. Many investors were also granted warrants that provided the investor the purported right to purchase additional shares for a limited time at a discounted price. None of these securities were registered with the Commission.
ANSWER
Vuuzle admits that it offered common stock investments at $5.00 per share, that it offered warrants, and that none of the exempt securities were registered with the Commission.
6. Vuuzle and Flynn made numerous materially false and misleading statements in their communications with investors, filings with the Commission, and in offering documents, including Vuuzle’s Private Placement Memoranda (“PPMs”). For instance, Vuuzle and Flynn told investors that their funds would be used to operate and build Vuuzle’s online streaming business, which would earn millions of dollars in revenue from service fees and advertising. In fact, of the $14 million raised in investor funds, Vuuzle and Flynn used only approximately $2 million to build the streaming applications, which served as props to raise more investor funds.
ANSWER
Vuuzle denies the allegations set forth in paragraph 6 as untrue.
7. Vuuzle and Flynn also falsely represented Vuuzle as a “pre-IPO” investment opportunity that would provide returns to investors in the form of dividends and skyrocketing post- IPO stock values. Yet, Vuuzle has never made a profit, never paid dividends to any investor, and never made a public offering on any stock exchange. From its inception in October 2016 through May 2020, Vuuzle’s U.S. bank account reflects total business revenue of less than $1,670.
ANSWER
Vuuzle denies the allegations set forth in paragraph 7 as untrue.
8. Vuuzle’s public filings and offering documents falsely suggest Flynn had only a peripheral relationship with the company, if For example, in the PPMs, Vuuzle described Flynn as merely a “non-voting beneficial owner” of a Vuuzle corporate shareholder. And Vuuzle’s Forms D, filed with the Commission in 2017 and 2019, do not name Flynn as a related party at all. In fact, however, Flynn exercised ultimate control over every part of Vuuzle’s business for the primary purpose of enriching himself.
ANSWER
Vuuzle states that the company Private Placement Memoranda (“PPMs”) and the Form D Notices speak for themselves, and otherwise denies Plaintiff’s characterization of said documentation and denies all remaining allegations set forth in paragraph 8 as untrue.
9. Vuuzle and Flynn concealed Flynn’s control over Vuuzle by falsely representing to investors and the public that Vuuzle was operated by a legitimate team of independent executive officers. In early 2018, Flynn hired two former executives of a publicly-traded company to ostensibly serve as Vuuzle’s Chief Executive Officer (“CEO”) and Chief Operating Officer
(“COO”). Their hiring was all for show. During their time at Vuuzle, bothindividuals raised serious questions about Flynn’s operation of Vuuzle, and both were gone by November of that year.
ANSWER
Vuuzle denies the allegations set forth in paragraph 9 as untrue. Vuuzle specifically states that it is managed by a team of executive officers including Company President John Robert Lamb, CEO Ted Joseph, COO George Moore, CTO Prophecy Onasis, and Board Members John Lamb, Ted Joseph, Jenny Permales, Prophecy Onasis, Tomasita Camayra, Joshua Flynn, Daniel Skulnick, Joseph Bonica, and Dr. Richard Marchitto (“Marchitto”); and that Vuuzle, from time-to-time, has terminated the employment of former executives whose continued employment was deemed not in the best interest of Vuuzle.
10. Vuuzle and Flynn were aided and abetted in their fraud by Marchitto, a former dentist who had lost money investing in one of Flynn’s previous business He provided substantial assistance to Vuuzle and Flynn by acting as their U.S. corporate and financial presence, thereby enhancing Vuuzle’s aura of legitimacy as a U.S.-based company. Because Flynn avoided U.S. jurisdiction, Marchitto was instrumental to the fraud.
ANSWER
Vuuzle denies the allegations set forth in paragraph 10 as untrue.
11. Specifically, Marchitto (a) organized Vuuzle’s predecessor legal entity and served as its initial member; (b) opened and maintained a U.S. bank account for Vuuzle, which was used to receive and disburse the overwhelming majority of investor funds; (c) maintained a New York office space, which was represented to investors as Vuuzle’s primary place of business; and (d) facilitated Flynn’s misappropriation of investor funds by transferring funds to Flynn’s accounts overseas and opening and maintaining corporate credit cards, which Flynn used for personal
ANSWER
Vuuzle admits that Marchitto incorporated and was the initial member to Vuuzle’s predecessor – Boink Live Streaming, and that Marchitto opened and maintained a U.S. bank account for Vuuzle. Vuuzle denies the remainder of the allegations set forth in paragraph 11.
12. Marchitto was the sole signatory to Vuuzle’s S. bank account and had direct access to that account. Marchitto also collected mail from the New York office space and deposited investor checks to Vuuzle’s U.S. bank account. Because he had all the account information, Marchitto knew or was reckless in not knowing that investor funds were deposited to that U.S. bank account, and that his actions directly aided Flynn in misappropriating these funds. By his conduct, he substantially assisted Flynn’s and Vuuzle’s violations of the securities laws.
ANSWER
Vuuzle admits only that Marchitto was a signatory on the account for Vuuzle at certain times at a United States-based Bank located in New York, had access to the United States- based Bank account, and collected mail and deposited checks into the United States-based Bank account. Vuuzle denies the remainder of the allegations set forth in paragraph 12.
13. By perpetrating this offering fraud, Vuuzle and Flynn have violated Section 17(a) of the Securities Act of 1933 (“Securities Act”) [15 S.C. § 77q(a)] and Section 10(b) of the Securities Exchange Act of 1934 (“Exchange Act”) [15 U.S.C. § 78j(b)] and Rule 10b-5 [17 C.F.R. § 240.10b- 5] thereunder, and Marchitto aided and abetted those violations. By failing to register the offering of Vuuzle securities, Vuuzle and Flynn also have violated Section 5 of the Securities Act [15 U.S.C. § 77e]. And, by acting as a broker in selling Vuuzle securities without being registered as, or associated with, a registered broker-dealer, Flynn has violated Section 15(a) of the Exchange Act [15 U.S.C. § 78o(a)].
ANSWER
Vuuzle denies the allegations set forth in paragraph 13 as untrue.
14. Because of the Defendants’ unlawful conduct, the Commission respectfully requests that the Court: (i) permanently enjoin each Defendant from further violations of the foregoing securities laws, (ii) order each Defendant to disgorge the unlawful profits from their violations with prejudgment interest, (iii) impose civil money penalties on each Defendant, and (iv) impose such other and further relief as the Court may deem just and
ANSWER
Vuuzle denies the allegation that it engaged in any unlawful conduct as set forth in paragraph 14. Answering further, Vuuzle neither admits nor denies the remaining allegations to the extent they state a legal conclusion, and otherwise denies that the Plaintiffs are entitled to any of the relief requested.
JURISDICTION AND VENUE
15. The Court has jurisdiction over this action pursuant to Section 20 of the Securities Act [15 S.C. §§ 77t(b)] and Sections 21A and 27 of the Exchange Act [15 U.S.C. §§ 78u-1, 78aa]. Defendants, directly or indirectly, singly or in concert with others, made use of the means or instruments of transportation and communication in interstate commerce, or of the mails, in connection with the acts, transactions, and practices alleged in this Complaint.
ANSWER
Vuuzle neither admits nor denies the allegations set forth in paragraph 15 to the extent they call for a legal conclusion for which no response is required. To the extent a response is required, Vuuzle denies the allegations set forth in paragraph 15.
16. Venue is proper in this district under Section 22(a) of the Securities Act [15 S.C. § 77v(a)] and Section 27(a) of the Exchange Act [15 U.S.C. § 78aa] because, among other things, Defendant Marchitto resides in this district, and Defendants Vuuzle and Flynn have targeted, communicated with, and raised money from investors that reside in this district.
ANSWER
Vuuzle neither admits nor denies the allegations set forth in paragraph 16 to the extent they call for a legal conclusion for which no response is required. To the extent a response is required, Vuuzle denies the allegations set forth in paragraph 16.
DEFENDANTS
17. Vuuzle Media Corp. is a Delaware corporation formed on August 22, 2017 as a successor entity to Boink Live Streaming LLC, which was incorporated in Delaware on September 16, 2016. (A separate corporation called Boink Live Streaming Corp. was also incorporated in Delaware on August 22, 2017 and, until October 26, 2018, when the name was officially changed to Vuuzle Media Corp., company documents referred to the entity interchangeably as Boink Live Streaming, Boink Live Streaming Corp., and Boink Live Streaming LLC.) Vuuzle markets itself as a provider of online live streaming and entertainment services. Vuuzle has claimed at various times to have offices around the world, including in New York City, Las Vegas, and Scottsdale, as well as the Philippines, United Arab Emirates, and United Kingdom. Vuuzle was founded by Flynn, who controlled Vuuzle’s operations at all times during the relevant period.
ANSWER
Vuuzle denies the allegation in paragraph 17 that Flynn controlled Vuuzle’s operations at all times during the relevant period. Vuuzle denies the characterization that it “has claimed at various times to have offices around the world;” Vuuzle admits that, at various times, it has had offices including in New York City, Las Vegas, and Scottsdale, as well as the Philippines, United Arab Emirates, and United Kingdom. Vuuzle admits the remaining allegations set forth in paragraph 17.
18. Vuuzle has never registered any of its securities with the Commission. Vuuzle filed a Form D Notice of Exempt Offering of Securities on September 26, 2017 (in the name of Boink Live Streaming Corp.), and an amendment on February 15, 2019 (in the name of Vuuzle Media Corp.), claiming an exemption from registration under Securities Act Rule 506(b).
ANSWER
Vuuzle admits its CEO John Robert Lamb filed a Form D Notice of Exempt Offering of Securities on September 26, 2017, and an amendment on February 15, 2019, on the advice of counsel. The documents speak for themselves, and are the best evidence of their content.
19. Ronald Shane Flynn (a/k/a Ronnie Shane), age 56, is a United States citizen, resident of the Philippines and/or the United Arab Emirates, and the founder of Vuuzle. While Flynn currently holds no official title at Vuuzle, he is Vuuzle’s majority shareholder and exercises ultimate control over all aspects of Vuuzle’s business, including its operations, online presence, communications with investors, and company finances.
ANSWER
Vuuzle neither admits nor denies the allegations set forth in paragraph 19 as the stated allegations are not directed to the answering party and accordingly no answer is required. To the extent an answer is required, Vuuzle admits only that Flynn is not employed by Vuuzle, nor does Flynn hold any title at Vuuzle. Vuuzle denies the remaining allegations set forth in paragraph 19 as untrue.
20. Flynn has been subject to at least two state cease-and-desist orders in connection with his prior solicitations of investors: one dated October 4, 2000 by the Ohio Division of Securities; and a second dated September 22, 2016 by the State of California Department of Business Oversight. Flynn was a registered representative of a registered broker-dealer from November 1988 to March 1989, but he is not currently registered with the Commission in any capacity.
ANSWER
Vuuzle neither admits nor denies the allegations set forth in paragraph 20 as the stated allegations are not directed to the answering party and accordingly no answer is required. To the extent an answer is required, Vuuzle admits that publicly available records are consistent with the allegations set forth in paragraph 20.
21. Richard Marchitto, age 72, is a retired dentist residing in Rockaway, New Marchitto has held various titles at Vuuzle, including “VP Marketing” and “board director.” He acts on behalf of Vuuzle at Flynn’s direction. For example, at Flynn’s direction, Marchitto established the original Vuuzle entity (Boink Live Streaming LLC) on September 28, 2016 and was its initial member. Also at Flynn’s direction, Marchitto opened Vuuzle’sprimary U.S. bank account (initially using his home address) – which Defendants used to receive and transfer investor assets – and provided Flynn with electronic access to that account while Marchitto remained the sole signatory. In addition, Marchitto opened credit card accounts in the names of his former dental practice and various Vuuzle entities and granted Flynn the use of those cards. Marchitto has never been registered with the Commission in any capacity.
ANSWER
Vuuzle denies that Marchitto is a former dentist. Vuuzle admits that Marchitto is a retired dentist. Vuuzle denies that Marchitto held the title “VP Marketing” for Vuuzle, or that Marchitto acts or acted on behalf of Vuuzle at Flynn’s direction. Vuuzle admits only that Marchitto was a signatory on an account for Vuuzle at certain times at a United States-based Bank located in New York City. Vuuzle neither admits nor denies the remaining allegations set forth in paragraph 21 as attempting to be overly broad and inclusive such that Vuuzle does not have sufficient information upon which to respond.
FACTS
I. Vuuzle’s Purported Business ANSWER
This caption is simply a heading and does not constitute an allegation. Notwithstanding the aforementioned, Vuuzle denies the characterization that Vuuzle is a “Purported Business.”
22. Vuuzle and Flynn convinced investors to buy Vuuzle securities bypresenting Vuuzle as a legitimate, successful, and growing provider of online live streaming and entertainment Investors were inundated with communications drafted and sent by Flynn, directly or through his marketing teams, that used hyperbole to describe Vuuzle, its products, and the online entertainment industry as whole.
ANSWER
Vuuzle admits only that it presented Vuuzle as the legitimate and growing provider of online live streaming and entertainment services that it is, and that Vuuzle sent investors frequent communications regarding the company in an effort to maintain transparency regarding operations and how investment funds were being allocated to increase Vuuzle products, services, and ultimately profit. Vuuzle denies the remaining allegations set forth in paragraph 22 as untrue.
23. Vuuzle, Flynn, and his subordinates told investors that Vuuzle would usetheir funds to grow and operate Vuuzle’s But instead, Flynn misappropriated the vast majority of what Vuuzle received. Of the $14 million investors gave Defendants, only approximately $2 million was used to operate Vuuzle – just enough to build and maintain superficial versions of the online streaming applications from which Vuuzle was purportedly going to earn revenue. These purported products were mere props Flynn used to raise additional investor funds.
ANSWER
Vuuzle denies the allegations set forth in paragraph 23 as untrue.
24. Beginning in September 2016, Vuuzle and Flynn told investors that Vuuzle was in the process of building a mobile phone application called “Bonk.live” through which the company would provide a platform for performers who wanted to livestream their talent to an Flynn, Vuuzle, and Flynn’s marketing teams provided investors with revenue projections showing millions and, in some instances, even billions of dollars in expected company earnings. For example, in a September 11, 2016 email to investors, Flynn claimed that “BONK LIVE HAS 6 UNIQUE INCOME STREAMS” and depicted math equations purportedly reflecting revenues from each income stream ranging from $50,457,600 per year to more than $21 billion per year.
ANSWER
Vuuzle admits it was in the process of building a mobile phone application called “Bonk.live” to provide a platform for performers to livestream their talent to an audience, and that it informed investors of its’ plan, and shared projections of revenue growth with the investors. Answering further, Vuuzle states it entered into a contract with IDAP to develop the application, but IDAP subsequently breached the contract and failed to develop a useable application, which is currently subject to litigation. With respect to the incomplete quoted language, Vuuzle notes that Plaintiff did not attach the email, and further states that the document speaks for itself, and is the best evidence of its content.
25. On October 30, 2016, Flynn sent an another email to investors attaching a “press announcement” in which he described Bonk.live as “the newest streaming super app in the world” which was “nothing less than genius as it allows digital publishers, advertisers, and the live social streamers to make enormous money.” In this press announcement, Flynn claimed that the “advertising carousel” on Bonk.live “will earn the company more th[a]n 50 million United States Dollars per year” and that advertising during an influencer’s live stream could result in another “$350,000,000 Million” to “1 billion USD to 3 billion USD Dollars per ”
ANSWER
With respect to the incomplete quoted language, Vuuzle notes that Plaintiff did not attach the email, and further states that the document speaks for itself, and is the best evidence of its content.
26. Vuuzle and Flynn told investors that Bonk.live users would be able to purchase virtual gift packages that they could send to live streamers they In that same October 30, 2016 announcement, Flynn told investors that “Bonk potential earnings with only 100 million users buying one package of $128.95 per year is more than 12 billion [dollars] per year.” Performers that received enough virtual gifts were supposed to be able to cash out the value of those gifts through debit cards. Indeed, Flynn sent investors photos of what appeared to be Bonk-branded debit cards. Yet, Vuuzle never actually created or distributed any such cards.
ANSWER
Vuuzle admits that it told investors that Bonk.live users would be able to purchase virtual gift packages to send to live steamers and that performers were supposed to be able to cash out the value of virtual gifts through debit cards. Answering further, Vuuzle states it entered into a contract with IDAP to develop the application, but IDAP subsequently breached the contract and failed to develop a useable application, which is currently subject to litigation. With respect to the incomplete quoted language, Vuuzle notes that Plaintiff did not attach the email, and further states that the document speaks for itself, and is the best evidence of its content.
27. Despite these promises to investors, Bonk.live never made millions of dollars, or really any money at all. Using outside vendors to build the platform, Flynn directed just enough money to create an application with the minimum functionality necessary for downloading on a mobile device. Flynn then used the existence of the app as proof of Vuuzle’s legitimacy, by, for example, sending investors images of the Bonk.live application downloaded to his own phone.
ANSWER
Vuuzle neither admits nor denies the allegations set forth in paragraph 27 as the stated allegations are not directed to the answering party and accordingly no answer is required. To the extent an answer is required, Vuuzle denies the allegations set forth in paragraph 27 as untrue.
28. Vuuzle’s revenue projections assumed that there would be millions of Bonk.live users. In fact, however, there were From May 25 through November 15, 2018, the average daily number of devices using the Bonk.live app was 371. Flynn knew the actual number of users because he received weekly emails containing updated charts of Bonk.live user data.
ANSWER
Vuuzle admits it was in the process of building a mobile phone application called “Bonk.live” and that it projected growth of a million users. Answering further, Vuuzle states it entered into a contract with IDAP to develop the Vuuzle live streaming application but IDAP subsequently breached the contract and failed to develop a useable application, which is currently subject to litigation. Vuuzle neither admits nor denies the remaining allegations set forth in paragraph 28 as the stated allegations are not directed to the answering party and accordingly no answer is required.
29. Moreover, Flynn knew that there never could be millions of users. In an email dated September 27, 2018, a Vuuzle adviser told Flynn that his first discussion about the Bonk.live application was “terrifying” because he “just found out how weak and undeveloped this whole initiative is right ” In particular, the adviser emphasized that he had just learned that the software could only handle 40,000 users with “a full system crash imminent at 50,000+.” Flynn responded that he already knew the app’s limitations, stating: “[t]he question about users is not a new question as it was addressed months ago.”
ANSWER
Vuuzle neither admits nor denies the allegations set forth in paragraph 29 as the stated allegations are not directed to the answering party and accordingly no answer is required. To the extent an answer is required, Vuuzle states it entered into a contract with IDAP to develop the application, but IDAP subsequently breached the contract and failed to develop a useable application, which is currently subject to litigation. With respect to the incomplete quoted language, Vuuzle notes that Plaintiff did not attach the email, and further states that the document speaks for itself, and is the best evidence of its content.
30. In approximately November 2018, Vuuzle began to shift its focus away from the Bonk.live app. Flynn, directly and through his marketing teams, told investors that Vuuzle was moving its business toward online streaming of television shows, through a mobile application it later called “Vuuzle TV.” Flynn drafted and sent to investors, directly and through his marketing teams, multiple emails raving about Vuuzle TV, its capabilities, and its potential. According to this marketing material, Vuuzle TV was going to offer free as well as paid versions of its app and would earn money through subscription fees and advertising. Investors were told that online streaming was going to be the next revolution in entertainment and that Vuuzle investors would earn “gargantuan return[s].”
ANSWER
Vuuzle admits it shifted away from the Bonk.live application due to the litigation with IDAP. Answering further, Vuuzle states since its inception, the business plan was to develop a triple play media company that utilized live streaming in connection with OTT Vuuzle TV, Vumu Music, and a live streaming social media platform. Vuuzle neither admits nor denies the remaining allegations set forth in paragraph 30 as the stated allegations are not directed to the answering party and accordingly no answer is required. With respect to the incomplete quoted language, Vuuzle notes that Plaintiff did not attach the email, and further states that the document speaks for itself, and is the best evidence of its content.
31. For example, on April 13, 2019, Flynn sent an email to investors with an attached document titled, “Vuuzle TV’s Ten Million Dollar Investment Is Set To Win OTT subscribers while eliminating the competition.” Flynn encouraged investors to “cash out of those mediocre investments and finally make a sizeable investment in Vuuzle Media and get paid for being in the right place at the right time with an investment that will win you BIG money!!!!!!!”
ANSWER
Vuuzle neither admits nor denies the allegations set forth in paragraph 31 as the stated allegations are not directed to the answering party and accordingly no answer is required. With respect to the incomplete quoted language, Vuuzle notes that Plaintiff did not attach the email, and further states that the document speaks for itself, and is the best evidence of its content.
32. Flynn’s statement that “ten million dollar[s]” was invested into building Vuuzle TV was false. As described above, Flynn directed just enough money toward the business to build a mobile application that users could download and view some television shows. Once the app was available, Flynn sent investors, directly and through his marketing teams, links to the Vuuzle.TV site along with images of Vuuzle.TV on his phone.
ANSWER
Vuuzle denies the allegations set forth in paragraph 32 as untrue.
33. And, contrary to the promises of “BIG money,” Vuuzle TV has not resulted in the promised revenues. From its inception in October 2016 through May 2020, Vuuzle’s U.S. bank account reflects total business revenue of less than $1,670. In its entire four years of operation, through all the various mobile products Vuuzle and Flynn have hyped, Vuuzle has never made a profit.
ANSWER
Vuuzle denies the allegations in paragraph 33, except that Vuuzle admits the allegations that the total revenue that Vuuzle held in its U.S. bank account (as distinguished from bank accounts outside the United States) during the stated period was less than $1,670 and that, to date, Vuuzle has not made a profit.
II. Vuuzle was a Front for Flynn’s Boiler Room
ANSWER
This caption is simply a heading and does not constitute an allegation. Notwithstanding the aforementioned, Vuuzle denies that Vuuzle was a “front” for a boiler room and further denies that Flynn had or had an association with a “boiler room.”
34. Rather than the legitimate, successful business touted to investors, Vuuzle was simply a front for a boiler room, the sole purpose of which was to bring investor funds to Vuuzle to be spent by Flynn and at Flynn’s
ANSWER
Vuuzle denies the allegations set forth in paragraph 34 as untrue.
35. Operating primarily out of the Philippines, Flynn directed marketing teams headed by four to six “Investment Representatives” (“IRs”) who were mostly close associates of Flynn or members of his family. The marketing teams operated, at varying times, through four companies under Flynn’s control: WorldCom Online Marketing, Inc.; Bonk Marketing Trade and Promotion, Inc.; iMagically LLC; and Vuuzle Media Corp Fze LLC.
ANSWER
Vuuzle neither admits nor denies the allegations set forth in paragraph 35 because it lacks sufficient knowledge and information to form a belief as to the truth of the allegations.
36. Together, Flynn and the marketing teams engaged in coordinated and aggressive sales campaigns to convince investors to buy Vuuzle These sales campaigns involved repeated, high-pressure sales calls. Flynn and his marketing teams also inundated current and potential investors with emailed marketing materials – sometimes several in a single day – relating to the business of Vuuzle, its products, and the industry as a whole.
ANSWER
Vuuzle denies the allegations set forth in paragraph 36 as untrue.
37. Vuuzle and Flynn identified potential investors by purchasing “lead lists” of purportedly accredited investors from several independent sellers, for anywhere from $1,000 to
$5,000 per list. In addition to names and contact information, certain lists also included information such as the types of investments the investor was interested in and, sometimes, descriptions of the investors themselves. For instance, one lead list received by Flynn on June 5, 2019, included additional, often profane, descriptors next to certain names such as “dumbass,” “old,” or “stroke.”
ANSWER
Vuuzle admits (only) that Flynn purchased “lead lists” for Bonk Live Marketing and Promotions for the amounts stated. Vuuzle denies the remaining allegations set forth in paragraph 37 as untrue.
38. After receiving the lists, Flynn had his marketing teams “wash” them for duplicate names from prior lead lists and then directed them to cold-call the remaining Flynn provided his marketing teams with initial “sales pitch” scripts for them to use in their calls with potential investors.
ANSWER
Vuuzle denies the allegations set forth in paragraph 38 as untrue.
39. In most cases, Flynn’s scripts directed comparisons of Vuuzle to Facebook, Twitter, and Google, highlighting the billions of dollars made by Facebook shareholders from the Facebook IPO. In at least one instance, aware of the misrepresentations typically made to investors, Flynn instead recommended that a particular investor be pitched “super clean.” In a July 19, 2018 email, Flynn directed an IR to call an acquaintance of the then-CEO of Vuuzle. Specifically, Flynn instructed the IR to “just pitch clean because he will tell [the CEO] everything and I don’t want him to scare [the CEO] into thinking we are selling dirty.” Notwithstanding Flynn’s efforts, Vuuzle’s CEO resigned a few months after Flynn’s July 2018 email.
ANSWER
Vuuzle neither admits nor denies the allegations set forth in paragraph 39 as the stated allegations are not directed to the answering party and accordingly no answer is required.
40. Flynn controlled nearly every aspect of the sales campaigns. He directed the sales pitches, created marketing material sent to investors via email, oversaw Vuuzle’s online presence, controlled the content posted to Vuuzle’s websites, followed up directly with each investor by phone to address any concerns, if necessary, and often “closed” the investment deal.
ANSWER
Vuuzle denies the allegations set forth in paragraph 40 as untrue.
41. In addition to the IRs and marketing representatives, Flynn retained a staff of secretaries, IT support specialists, content writers, and finance employees who reported solelyto him and who helped him solicit investor funds. Flynn required each group of employees to provide him with periodic reports of their “accomplishments.” These reports make clear that selling Vuuzle securities – not building a legitimate business – consumed the overwhelming majority of Flynn’s and his employees’ time and energy.
ANSWER
Vuuzle neither admits nor denies the allegations set forth in paragraph 41 as the stated allegations are not directed to the answering party and accordingly no answer is required. To the extent an answer is required, Vuuzle denies the allegations in this paragraph as untrue.
42. For example, at any given time, Flynn retained anywhere from four to thirteen secretaries to contact existing and potential investors (who they referred to as “clients”) and to maintain meticulous records of their efforts to procure additional investor funds. To control the messaging to investors, Flynn required his secretaries to send him written investor communications for his approval before they were sent to In addition, Flynn arranged for his secretaries to receive trainings in dealing with investors. As part of these trainings, Flynn was provided reports on each secretary’s skills in “pitch[ing] a customer,” including evaluations of their English pronunciation and their ability to recite “rebuttals” to standard investor concerns.
ANSWER
Vuuzle neither admits nor denies the allegations set forth in paragraph 42 as the stated allegations are not directed to the answering party and accordingly no answer is required.
43. On a daily basis, each secretary provided Flynn with a report of her “accomplishments.” These reports included detailed information about which investors the secretary had contacted, when the communications occurred, what was said, how much the investor planned to invest, and what next steps were necessary to close the investment deal. Periodically, secretaries also sent group reports to Flynn, titled “Incoming Done Deals,” which were consolidated lists of investors who had committed funds that Flynn could expect to receive
ANSWER
Vuuzle neither admits nor denies the allegations set forth in paragraph 43 as the stated allegations are not directed to the answering party and accordingly no answer is required. To the extent an answer is required, Vuuzle admits daily reports, including “Incoming Done Deals,” circulated.
44. Similarly, Flynn received daily reports from his “IT Department.” These reports reflected virtually no activity relating to the production or maintenance of the Bonk.live or Vuuzle TV applications, the ostensible focus of Vuuzle’s business. Instead, his IT employees primarily reported providing computer and tech support to Flynn and his marketing teams, “washing” lead lists, creating Skype and email accounts for new marketing representatives, and double-checking investor calls reported by Flynn’s
ANSWER
Vuuzle neither admits nor denies the allegations set forth in paragraph 44 as the stated allegations are not directed to the answering party and accordingly no answer is required. To the extent an answer is required, Vuuzle denies that “IT Department” reports ever were circulated to Flynn.
45. In addition, Flynn received “Treasury Department” reports, which had nothing to do with business revenue or Vuuzle’s books and records. Instead, these reports detail finance employees’ efforts to track investments made into Vuuzle, issuing share certificates and warrant agreements, and maintaining the Vuuzle shareholder
ANSWER
Vuuzle neither admits nor denies the allegations set forth in paragraph 45 as the stated allegations are not directed to the answering party and accordingly no answer is required. To the extent an answer is required, Vuuzle denies that “Treasury Department” reports ever were circulated to Flynn.
46. Marketing team meeting notes similarly reflected the pressure to make investor sales within the boiler room. For instance, in a meeting that took place on May 25, 2019, one IR told his marketing representatives that he needed potential investors to be “fully pitched and not half- pitched,” and that marketing representatives should “do whatever it takes every day to produce” investor sales. As the IR reminded his marketing team, their focus should always be on the money: “[y]ou have good opportunities to make good cash right here and right now if you stay focus[ed] and do what needs to be done every ”
ANSWER
Vuuzle neither admits nor denies the allegations set forth in paragraph 46 because it lacks sufficient knowledge and information to form a belief as to the truth of the allegation.
47. As compensation for recruiting investors, Vuuzle and Flynn paid commissions to Flynn, his IRs, and other boiler room staff based upon their respective roles. To receive payment, the IR was required to submit a request or invoice to Flynn for his No one got paid unless Flynn approved it.
ANSWER
Vuuzle denies the allegations set forth in paragraph 47 as untrue. Answering further, Vuuzle admits that for Vuuzle to make payments, Vuuzle required the party requesting payment(s) to submit requests or invoices.
48. Accordingly, detailed spreadsheets were emailed to Flynn by his IRs, which calculated each investor’s “done deal” investment amount, the initials of the boiler room staff person credited with “opening” and/or “closing” the deal, and the percentage commission earned. According to these charts, Flynn and his IRs received commissions from 8% to 15% of investor funds, while lower level marketing reps were paid commissions of up to 2.5% of investor funds.
ANSWER
Vuuzle admits only that Bonk Live Marketing and Promotions maintained spreadsheets but denies the characterization of the nature of the spreadsheets. Vuuzle denies the remaining allegations set forth in paragraph 48 as untrue.
III. Vuuzle and Flynn Misused $10 Million in Investor Funds
ANSWER
This caption is simply a heading and does not constitute an allegation. Notwithstanding the aforementioned, Vuuzle denies that Vuuzle and Flynn misused investor funds in any amount.
49. Vuuzle and Flynn falsely represented to investors, directly and through the marketing teams, that Vuuzle was a legitimate business and that it would use investor funds to grow and operate the company.
ANSWER
Vuuzle denies the allegations set forth in paragraph 49 as untrue.
50. For example, a 2017 PPM that was provided to investors describes the use of investor proceeds as follows:
ANSWER
Vuuzle denies that any false statements were made or that the allegations set forth in paragraph 50 are false statements.
51. In this chart and other similar statements, Flynn, Vuuzle, and their marketing team represented that Vuuzle would use more than 99% of investor funds for building, marketing, and selling Vuuzle’s online They also claimed that only 0.5% of investor funds would be used in connection with offering securities. Similarly, in an email dated April 20, 2020, Flynn told an investor that “the corporation is using its funds to grow the platform.”
ANSWER
Vuuzle denies the allegations set forth in paragraph 51 as untrue. With respect to the incomplete quoted language, Vuuzle notes that Plaintiff did not attach the email, and further states that the document speaks for itself, and is the best evidence of its content.
52. Vuuzle made similarly false statements in two Forms D filed with the Commission in 2017 and 2019
ANSWER
Vuuzle denies that the statements in the two Forms D filed with the Commission were false. With respect to the Forms D, Vuuzle states that the documents speak for themselves and are the best evidence of their content.
53. Both Forms D contained identical responses that specifically represented that Vuuzle had paid $0 in sales commissions and $0 in finders’ fees in connection with the offering of Vuuzle securities.
ANSWER
Vuuzle admits the allegations set forth in paragraph 53. Answering further, Vuuzle admits that Vuuzle never paid any commissions or finders’ fees.
54. As Flynn knew, these statements were false. Of the $14 million invested in Vuuzle, only approximately $2 million was ultimately used for the costs of building and maintaining Vuuzle’s online products. Flynn diverted more than $10 million for his personal use and benefit and to support his boiler room operations, including paying commissions to himself and others.
ANSWER
Vuuzle denies the allegations set forth in paragraph 54 as untrue.
A. Flynn Personally Misappropriated $5 million of Investor Funds
ANSWER
This caption is simply a subheading and does not constitute an allegation. Notwithstanding the aforementioned, Vuuzle denies that Flynn personally misappropriated funds or misappropriated any amount of investor funds.
55. Flynn diverted a total of nearly $5 million of investor proceeds from Vuuzle’s primary S. bank account for his own benefit. Specifically, from November 21, 2016 to August 22, 2019, Flynn transferred (or directed Marchitto to transfer) more than $2.6 million in investor funds from Vuuzle’s U.S. bank account to Flynn’s personal bank accounts in Singapore and the United Arab Emirates. In addition, Flynn used investor funds to pay more than $2.3 million in expenses that he incurred using corporate credit and debit cards.
ANSWER
Vuuzle denies the allegations set forth in paragraph 55 as untrue.
56. The overwhelming majority of the $2.3 million in expenses were personal. They included, for instance, nearly $1 million in purchases at jewelry stores in Singapore, Dubai, and the Philippines. Receipts from the Dubai jewelry store reflect that some of Flynn’s purchases were for 24 Karat gold bars. Flynn also racked up more than $500,000 in credit card charges for his travel and entertainment, including international business class flights, luxury hotels, strip clubs, and restaurants. Flynn also used the Vuuzle debit card connected to the primary U.S. bank account that received investor funds to spend another more than $25,000 on clearly personal items, such as online dating and gambling applications. Investors unwittingly paid for it
ANSWER
Vuuzle denies the allegations set forth in paragraph 56 as untrue.
B. Vuuzle Paid Undisclosed Commissions to Flynn and Others
ANSWER
This caption is simply a subheading and does not constitute an allegation. Notwithstanding the aforementioned, Vuuzle denies that Vuuzle paid undisclosed commissions to any person.
57. In addition to $5 million misappropriated for Flynn’s personal use, Vuuzle and Flynn diverted another approximately $5.5 million in investor funds to sustain Flynn’s boiler room operations, including paying undisclosed commissions to himself and his marketing staff.
ANSWER
Vuuzle denies the allegations set forth in paragraph 57 as untrue.
58. Flynn engaged in efforts to conceal the nature of these From November 22, 2016 through May 28, 2020, Flynn transferred (or directed Marchitto to transfer) a total of $5.1 million from Vuuzle’s primary U.S. bank account to overseas accounts in the names of entities under Flynn’s control, including more than $2.2 million to his company, iMagically.
ANSWER
Vuuzle denies the allegations set forth in paragraph 58 as untrue.
59. Flynn attempted to legitimize some of these payments by directing iMagically to send Vuuzle invoices for “consulting ” However, these invoices clearly reflect commissions, as they contain investor names, along with the amounts invested, and a description of the charges that said “40% Fees, Consulting, meetings, phone, time, FedEx, Credit charges & secretarial.” The bottom of each invoice had a note stating “[i]f you have any questions about this invoice please contact Ronnie Shane Flynn” and providing Flynn’s phone and email address.
ANSWER
Vuuzle denies the allegations set forth in paragraph 59 as untrue.
60. Once the funds arrived in the overseas accounts, Flynn directed them to be disbursed to himself and his marketing staff, mostly in the form of commissions. For example, on April 9, 2019, Flynn sent his treasury staff an email with the subject line, “10k sent to magically” and a message saying, “SENT YOU TEN THOUSAND, GET JOSHUA PAID…” Similarly, on August 24, 2019, Flynn sent his staff an email that stated “I have sent off an additional 5 k that can be used for the commission this week coming ”
ANSWER
Vuuzle denies the allegations set forth in paragraph 60 as untrue.
61. Flynn directed an additional $400,000 of investor funds from Vuuzle’s U.S. bank account to accounts controlled by independent stock promoters that recruited investors to Vuuzle. Emails reflect that these stock promoters were also paid commissions based on the amounts invested by their investor recruits.
ANSWER
Vuuzle denies the allegations set forth in paragraph 61 as untrue.
IV. Other Material Misrepresentations to Investors
ANSWER
This caption is simply a heading and does not constitute an allegation. Notwithstanding the aforementioned, Vuuzle denies that Vuuzle made material misrepresentations to investors.
62. To induce investors to purchase Vuuzle securities, Vuuzle and Flynn made additional materially false and misleading statements, including that Vuuzle intended to proceed with an IPO, pay investors dividends, and that Vuuzle was operated by a team of independent executive
ANSWER
Vuuzle denies the allegations set forth in paragraph 62 as untrue.
A. False Promises of an Initial Public Offering
ANSWER
This caption is simply a subheading and does not constitute an allegation. Notwithstanding the aforementioned, Vuuzle denies that it made false promises of an initial public offering.
63. From the beginning, Flynn and his marketing teams falsely presented Vuuzle (initially called “Boink Live”) as a pre-IPO investment opportunity. For example, a December 15, 2016 email sent to investors and potential investors stated, in part:
This is your Opportunity to finally win big! You missed out on FACEBOOK, you missed out on TWITTER and GOOGLE, you didn’t have an opportunity to be considered for SNAPCHAT.
Now you have a chance to get involved with the #1 social platform for broadcasting, advertising and watching live streaming videos…. Facebook founder Mark Zuckerberg earned 19.1 Billion United States Dollars after just 30 seconds in the stock market!!!!
… BONK LIVE is like mixing up FACEBOOK, GOOGLE, TWITTER, and SNAPCHAT and injecting it with an overdose of steroids!
ANSWER
Vuuzle denies the allegations set forth in paragraph 63 as untrue. With respect to the incomplete quoted language, Vuuzle notes that Plaintiff did not attach the email, and further states that the document speaks for itself, and is the best evidence of its content.
64. Another email sent on the same day to many of the same investors and potential investors emphasized the supposed urgency of investing immediately, stating:
The opportunity is now and it won’t last forever, or even a few more months. Investment is secured and once the 250 investors required to go public has been reached, Bonk Live will be the next big stock people wish they didn’t pass down no matter how much money they didn’t have at the time. Beg, Borrow, Steal or make more excuses…
ANSWER
Vuuzle neither admits nor denies the allegations set forth in paragraph 64 because it lacks sufficient knowledge and information to form a belief as to the truth of the allegation. With respect to the incomplete quoted language, Vuuzle notes that Plaintiff did not attach the email, and further states that the document speaks for itself, and is the best evidence of its content.
65. Flynn and his marketing teams were even more explicit in phone conversations, telling investors and potential investors that they could expect Vuuzle’s stock price to increase to up to $25 to $30 a share or more after the promised IPO. However, notwithstanding claims that the investment opportunity would not last “a few more months,” Vuuzle did not go public.
ANSWER
Vuuzle admits that it did not file a registration statement to go public or merge with a shell company or SPAC to go public on a capital market within the regulatory jurisdiction of the SEC. Vuuzle denies the remaining allegations set forth in paragraph 65 as untrue.
66. The inevitable lack of an IPO – Vuuzle was, after all, little more than a boiler room front – did not deter Flynn, Vuuzle, and the marketing teams from continuing to lure investors with promises that an IPO would eventually occur. For example, on August 19, 2019, investors received an email stating that “[w]e are very close to making the announcement that the company will be going public.” The email claimed that Vuuzle had hired a “federally regulated trust company in Canada” as the company’s transfer agent. Investors were advised that “[e]veryone must talk with Ronnie Flynn who will be gathering information” to provide to the transfer
ANSWER
Vuuzle denies the allegations set forth in paragraph 66 as untrue. With respect to the incomplete quoted language, Vuuzle notes that Plaintiff did not attach the email, and further states that the document speaks for itself, and is the best evidence of its content.
67. These representations were false and misleading, and Flynn knew it. As of August 2019, Vuuzle had made no preparations to go public. Despite having told investors that Vuuzle had hired a transfer agent, Flynn sent an email to a former Vuuzle CEO five days later denying that fact, stating “[w]hen we have a transfer agent, I will inform you. Until then, I am still building the company.” That same day, Flynn, responding to the former CEO’s questions about Vuuzle’s plans to go public, stated, “[i]f there was anything to tell you I would … [r]ight now the company is negative and owes lots of ”
ANSWER
Vuuzle denies the allegations set forth in paragraph 67 as untrue. With respect to the incomplete quoted language, Vuuzle notes that Plaintiff did not attach the email, and further states that the document speaks for itself, and is the best evidence of its content.
68. In May 2020, Vuuzle and Flynn sent investors yet another email announcing plans for an This time, they claimed that a group of Swedish investors had paid $50 million to acquire 10% of Vuuzle. Vuuzle and Flynn represented that these purported investors would form a Swedish corporation, called Vuuzle Media Sweden AB, which they intended to publicly list on the Nasdaq Stockholm. Since May, Flynn and Vuuzle have continued to send investors emails reinforcing the idea that Vuuzle is about to be listed in Sweden.
ANSWER
Vuuzle admits that there is a Swedish corporation, called Vuuzle Media Sweden AB, and that Swedish investors are investors in Vuuzle Media Sweden AB as of the time of the filing of this Answer. With respect to the emails, Vuuzle notes that Plaintiff did not attach the emails, and further states that the documents speak for themselves, and are the best evidence of their content.
69. Vuuzle and Flynn have used the purported upcoming Swedish IPO to pressure some investors to exercise their warrant options – thereby sending even more money to Yet there is no evidence that Vuuzle is preparing to go public in Sweden. Moreover, the Nasdaq Stockholm has certain listing criteria – including a documented history of profitability – which Vuuzle cannot possibly meet because, as Flynn knows, it has never made a profit.
ANSWER
Vuuzle denies the allegations set forth in paragraph 69 as untrue.
B. False Promises of Dividends ANSWER
This caption is simply a subheading and does not constitute an allegation. Notwithstanding the aforementioned, Vuuzle denies that Vuuzle or Flynn made false promises of dividends.
70. To induce individuals to invest, Vuuzle and Flynn also promised that Vuuzle would pay shareholders
ANSWER
Vuuzle denies that it “promised” that Vuuzle would pay shareholders dividends. Vuuzle admits that Vuuzle’s stated objective was and is to pay dividends from company earnings when Vuuzle realizes company earnings.
71. Vuuzle, Flynn, and the marketing teams, however, apparently gave different investors and potential investors different information about the dividends. Some earlier investors were told to expect dividend payments within a few months of their For instance, one email sent to investors and potential investors on December 5, 2016 stated that, “[t]he first projected dividend is for the end of February amounting to around $2.50 per share per quarter on the low side to $10 per share on the high side,” based on expected revenues of $50,000,000 in the first quarter of 2017.
ANSWER
Vuuzle denies the allegations set forth in paragraph 71 as untrue. With respect to the incomplete quoted language, Vuuzle notes that Plaintiff did not attach the email, and further states that the document speaks for itself, and is the best evidence of its content.
72. Another investor received an emailed memorandum from the purported “CEO/President” of Vuuzle dated July 26, 2017, which represented in relevant part that “[a]s a result of the stream of revenue, the company intends to pay its first quarterly dividend on or about Oct. 19, 2017 with additional quarterly dividends on or about every 90 days thereafter …”
ANSWER
Vuuzle neither admits nor denies the allegations set forth in paragraph 72 because it lacks sufficient knowledge and information to form a belief as to the truth of the allegation. With respect to the incomplete quoted language, Vuuzle notes that Plaintiff did not attach the email, and further states that the document speaks for itself, and is the best evidence of its content.
73. According to the July 26, 2017 memo, “[a]t the time the company goes public, the dividend will cease or be re-evaluated.” In contrast, other investors were told they would not receive dividends until Vuuzle was publicly
ANSWER
Vuuzle denies the allegations set forth in paragraph 73 as untrue. With respect to the incomplete quoted language, Vuuzle notes that Plaintiff did not attach the email, and further states that the document speaks for itself, and is the best evidence of its content.
74. In any event, no dividends were ever paid, and no dividends were ever going to be paid because, as Flynn knew, Vuuzle was not a legitimate business. Vuuzle had little to no revenue from operations, and investor funds mostly lined Flynn’s
ANSWER
Vuuzle denies the allegations set forth in paragraph 74 as untrue.
C. Flynn Concealed his Interest and Control from Investors
ANSWER
This caption is simply a subheading and does not constitute an allegation. Notwithstanding the aforementioned, Vuuzle denies that Flynn concealed from investors his interest and admits that Vuuzle properly disclosed the relationship between Flynn and iMagically and the relationship between iMagically and Vuuzle.
75. Flynn exercised ultimate control over every part of Vuuzle’s business for the nearly exclusive purpose of enriching himself. No one was paid without Flynn’s approval – from the purported President and CEO, to the technical vendors, to the lead list providers, to his own marketing representatives. Flynn controlled who was hired and fired, what material was posted to Vuuzle’s online websites, what was said to investors and prospective investors, how and when share certificates were issued, and how investor funds were
ANSWER
Vuuzle denies the allegations set forth in paragraph 75 as untrue.
76. Yet Vuuzle and Flynn falsely represented to investors and the public that Vuuzle was a legitimate business operated by a team of independent executive Flynn presented himself as merely the founder and a major shareholder of the company, with no actual control over Vuuzle’s operations.
ANSWER
Vuuzle denies the allegations set forth in paragraph 76 as untrue.
77. For instance, Vuuzle’s 2017 PPM only mentioned Flynn as the “non-voting beneficial owner” of iMagically LLC, which was described as the majority shareholder of Vuuzle, holding 80 million According to the PPM, Josh Flynn (Flynn’s adult son) was the “manager” of iMagically, and he was, supposedly, “free to vote his shares without consequence from the Non-Voting Member” (Flynn).
ANSWER
Vuuzle denies the allegations set forth in paragraph 77 because the use of the words “only” and “supposedly” render the allegations untrue Vuuzle admits that the PPM described Flynn as the “non-voting beneficial owner” of iMagically LLC. Vuuzle further admits that the PPM describes Josh Flynn (Flynn’s adult son) as the “manager” of iMagically, and that Josh Flynn was and is “free to vote his shares without consequence from the Non-Voting Member.”
78.This statement was false. Flynn himself was Vuuzle’s majority shareholder, and the 80 million shares were issued in his iMagically was nothing more than a corporate name used for Flynn’s boiler room, where Flynn was everyone’s “boss,”, including his son Josh.
ANSWER
Vuuzle denies the allegations set forth in paragraph 78 as untrue.
79. Indeed, Josh Flynn had to request his father’s approval even to get And on those occasions when Flynn determined that Josh Flynn (along with other boiler room employees) had not met his employment obligations, Flynn would discipline him by taking away some of his commissions for the relevant period.
ANSWER
Vuuzle denies the allegations set forth in paragraph 79 as untrue.
80. For example, on July 19, 2019, Flynn directed a treasury department employee to send a notice to a group of four IRs, including his son, Josh Flynn, which stated:
Despite all of the reminders and warnings by the Founder, still it has been observed that you are not reporting to work daily and if it’s not late, early our or worse is absent.
International Representatives should be on top of their Marketing Sales to drive cash, as you know that the Founder is paying all the bills and expense of the Company…
For this reason, the Founder will be deducting certain amount from your commission for the following violation:
a. Absent for 1 day —————————$200.00 Deduction
b. Late for the day or early out————-$100.00 Deduction
ANSWER
With respect to the incomplete quoted language, Vuuzle notes that Plaintiff did not attach the email, and further states that the document speaks for itself, and is the best evidence of its content.
81. When investors asked Flynn questions about Vuuzle, such as why dividendshad not been paid or why the company has not progressed to an IPO as promised, Flynn claimed he was not in For instance, on April 12, 2019, an investor emailed Flynn stating, “you should remember what you put me through on this thing when you told me over and over again that this comp[a]ny would go public and I would have my money in time to pay my taxes.” In response, Flynn stated “I am a shareholder in the company like you are.” He then directed the investor to speak with an IR for additional information.
ANSWER
Vuuzle denies the allegations set forth in paragraph 81 as untrue. With respect to the incomplete quoted language, Vuuzle notes that Plaintiff did not attach the email, and further states that the document speaks for itself, and is the best evidence of its content.
82. In that same email, the investor asked Flynn to return $10,000 because “I relied on what you told me and now I am really in a ” Flynn responded by claiming he did not have the money to give the investor; yet, less than two weeks later, Flynn found $13,000 to pay commissions to his boiler room staff. In an email dated April 23, 2019, Flynn forwarded a wire transfer notice of $13,000 from Vuuzle’s U.S. bank account to iMagically, directing his staff to “get Joshua his commission asap…money sent!!!!!!!!”
ANSWER
Vuuzle neither admits nor denies the allegations set forth in paragraph 82 because it lacks sufficient knowledge and information to form a belief as to the truth of the allegation. With respect to the incomplete quoted language, Vuuzle notes that Plaintiff did not attach the email, and further states that the document speaks for itself, and is the best evidence of its content.
83. Vuuzle concealed from investors Flynn’s financial relationship with the company, including the transfers of funds between Vuuzle and Flynn’s overseas entities such as In fact, the PPM included a section that expressly denied the existence of any related party transactions:
Certain Relationships and Related Transactions
We have not entered into any material transactions with any director, executive officer, promoter, security holder who is a beneficial owner of 5% or more of our common stock, or any immediate family member of such persons.
ANSWER
Vuuzle denies the allegations set forth in paragraph 83 as untrue. With respect to the incomplete quoted language, Vuuzle notes that the document speaks for itself, and is the best evidence of its content. Answering further, the PPM disclosed that Vuuzle entered into a contract with iMagically LLC.
84. This statement was obviously false. As discussed above, Vuuzle paid Flynn and his companies approximately $5 million for recruiting investors, including more than $2.2 million transferred to an overseas account held in the name of Flynn’s company,
ANSWER
Vuuzle denies the allegations set forth in paragraph 84 as untrue.
85. While Vuuzle’s PPM misrepresented the nature of Flynn’s role, Vuuzle’s Forms D, filed with the Commission in 2017 and 2019, did not even name Flynn as an individual related to Vuuzle.
ANSWER
With respect to the Form D Notices, Vuuzle states that the documents speak for themselves, and are the best evidence of their content.
86. The regulations for such Forms D required Vuuzle to provide: (1) a list of related persons, defined to include “[e]ach executive officer and director of the issuer and person performing similar functions”; (2) the name and address of each person who was to be or will be paid commissions or other consideration in connection with the sales of securities in the offering; (3) the amount of sales commissions paid or estimated to be paid; and (4) the “amount of gross proceeds of the offering that has been paid or is proposed to be used for payments to any of the persons required to be named as executive officers, directors or promotors” of the
ANSWER
Vuuzle admits the allegations set forth in paragraph 86.
87. Accordingly, Vuuzle was required to identify Flynn on the Forms D as both the person “functionally” in control of Vuuzle and as a promoter of Vuuzle securities who was paid commissions. Instead, the Forms D listed as related parties, individuals that, in reality, were hired by Flynn, reported to Flynn, and relied on Flynn to be
ANSWER
Vuuzle denies the allegations set forth in paragraph 87 as untrue.
V. Marchitto Aided and Abetted Vuuzle and Flynn in Defrauding Investors
ANSWER
This caption is simply a heading and does not constitute an allegation. Notwithstanding the aforementioned, Vuuzle denies that Vuuzle and Flynn defrauded investors such that Vuuzle, accordingly, denies that Marchitto aided and abetted the defrauding of investors.
88. Vuuzle and Flynn were aided and abetted in their fraud by Marchitto, a former dentist who claims to have lost money investing in one of Flynn’s previous business ventures. Marchitto has been involved with Vuuzle from the Over time, Marchitto has held various titles with Vuuzle. For instance, in Vuuzle’s 2017 PPM, Marchitto was described as the “VP Marketing.” Sometime in 2019, Marchitto was named a Vuuzle director and identified himself as such on Vuuzle’s 2019 Form D amendment filed with the Commission. In communications with third parties, Flynn and Marchitto often referred to each other as business “partners.”
ANSWER
Vuuzle denies that Marchitto is a former dentist. Answering further, Vuuzle admits that Marchitto is a retired dentist who claims to have lost money investing in one of Flynn’s previous business ventures, and has been involved with Vuuzle since the Company’s inception. With respect to the PPM and the Form D Notices, Vuuzle further states that the documents speak for themselves, and are the best evidence of their content. Vuuzle denies that Marchitto held the title “VP Marketing” for Vuuzle, and denies the remaining allegations set forth in paragraph 88 as untrue.
A. Marchitto Provided Substantial Assistance to Vuuzle and Flynn
ANSWER
This caption is simply a subheading and does not constitute an allegation. Notwithstanding the aforementioned, Vuuzle denies that Marchitto provided substantial assistance to Vuuzle and Flynn to the extent that the vague and ambiguous phrase “provided substantial assistance” is intended to imply assistance in any improper or unlawful activity.
89. At Flynn’s direction, Marchitto provided substantial assistance to Vuuzle and Flynn, including by establishing a U.S. corporate and financial presence for Vuuzle, collecting and depositing investor checks to Vuuzle’s S. bank account, and facilitating Flynn’s misuse of investor funds.
ANSWER
Vuuzle admits only that Marchitto maintained a Vuuzle corporate office and established a U.S. Bank Account into which checks were deposited. Vuuzle denies the remaining allegations set forth in paragraph 89 as untrue.
90. Because Flynn was unwilling to travel to the United States, Marchitto’s acts were essential to the success of Vuuzle’s and Flynn’s Without Marchitto’s assistance, Flynn would not have been able to portray Vuuzle as a U.S. company, a claim several investors have identified as a significant factor in their decision to invest in Vuuzle.
ANSWER
Vuuzle neither admits nor denies the allegations set forth in paragraph 90 because it lacks sufficient knowledge and information to form a belief as to the truth of the allegations.
91. From at least September 9, 2016 – before the first Boink entity was organized in the United States – through November 23, 2016, Marchitto accepted Vuuzle investor funds into the account of another Flynn-controlled entity, called E Diamond Trade LLC, for which Marchitto was the In total, more than $175,000 of Vuuzle investments were deposited to the E Diamond account via both wire-transfer and checks that were clearly marked for investment. Of these funds, only $1,000 ever ended up in Vuuzle’s primary U.S. Bank account, while Marchitto used more than $95,000 to pay Flynn’s credit card bills. He sent another $55,000 directly to Flynn’s personal bank account in Singapore.
ANSWER
Vuuzle neither admits nor denies the allegations set forth in paragraph 90 because it lacks sufficient knowledge and information to form a belief as to the truth of the allegations. To the extent that Plaintiff’s allegation seeks an admission or denial as to whether funds from investors were used by Vuuzle for Vuuzle business purposes, then Vuuzle admits that funds received from investors were used by Vuuzle for Vuuzle business purposes.
92. On September 16, 2016, Marchitto also organized Vuuzle’s first predecessor entity, Boink Live Streaming LLC (“Boink LLC”), in Delaware, using Marchitto’s home address in Rockaway, New Jersey, as the entity’s corporate address. On September 23, 2016, Marchitto successfully obtained a tax identification number for Boink LLC from the Internal Revenue And, on September 28, 2016, Marchitto had himself designated the “Initial Member” of the Boink LLC.
ANSWER
Vuuzle denies that Marchitto “had himself designated ‘the initial member’;” however, Vuuzle admits that Marchitto “designated himself ‘the initial member.’” Vuuzle admits the remaining allegations set forth in paragraph 92.
93. In addition to forming Boink LLC, Marchitto also facilitated the incorporation of Boink Live Streaming Corp. (“Boink Corp.”). On August 23, 2017, Marchitto wrote a letter to the Delaware Secretary of State, Division of Corporations, wherein he identified himself as the “organizer of ‘Boink Live Streaming LLC’” and expressly authorized the incorporation of
ANSWER
Vuuzle admits the allegations set forth in paragraph 93.
94. On October 11, 2016, Marchitto opened Vuuzle’s primary bank account at a large New York City-based bank. The account was initially opened in the name of Boink LLC and later changed to Vuuzle Media Corp. This was Vuuzle’s primary U.S. bank account, and it was used to receive the overwhelming majority of investor funds. Although account records listed Marchitto as the sole signatory at all times, Marchitto gave Flynn electronic access to the account, including the ability to execute transactions in the account. In addition, Marchitto arranged for the bank to send wire transfer confirmations directly to Flynn’s email address.
ANSWER
Vuuzle admits only that Marchitto was a signatory on an account for Vuuzle at certain times at a United States-based Bank located in New York City, that Marchitto had access to the United States-based Bank account, and collected mail and deposited checks into the United States-based Bank account. Vuuzle neither admits nor denies the balance of the allegations set forth in paragraph 94 because it lacks sufficient knowledge and information to form a belief as to the truth of the allegations.
95. Flynn and Vuuzle directed Vuuzle investors to send their funds to this U.S. bank account, and Marchitto (at Flynn’s direction) and Flynn transferred the overwhelming majority of these proceeds to overseas accounts in the name of Flynn or entities Flynn controlled. Marchitto monitored the U.S. account and provided Flynn or his boiler room staff with updates when investor funds were deposited into the account. Periodically, Marchitto printed copies of bank account statements and sent them via facsimile to Flynn’s office in the
ANSWER
Vuuzle admits only that it directed investors to send their funds to the United States- based Bank located in New York City and that Marchitto monitored the account at the United States-based Bank. Vuuzle neither admits nor denies the remaining allegations set forth in paragraph 95 because it lacks sufficient knowledge and information to form a belief as to the truth of the allegations.
96. In addition to providing a U.S. bank account for Vuuzle, Marchitto also facilitated the process of obtaining and maintaining a S. address for Vuuzle. By his actions, Marchitto created the appearance that Vuuzle had a substantial physical corporate presence in New York. Many investors, reassured that Vuuzle was a U.S.-based company, mailed their investment checks and subscription documentation to this New York address.
ANSWER
Vuuzle admits only that Marchitto obtained and maintained a U.S. address for Vuuzle.
Vuuzle denies the remaining allegations set forth in paragraph 96 as untrue.
97. In the beginning, Marchitto used his own residential address in New Jersey on Vuuzle documents. At some point, Marchitto began using the address of his former Manhattan dental practice located at “42 Broadway, 1536, New York, New York.” This address even appeared on early versions of the 2017
ANSWER
Vuuzle admits the allegations set forth in paragraph 97.
98. Beginning in 2017, Vuuzle began using a virtual office address located at “42 Broadway, Suite 12-117, New York, New York” – again, the same building where Marchitto’s former dental practice was located. Marchitto signed the checks issued from Vuuzle’s U.S. bank account to pay the monthly rent on this address.
ANSWER
Vuuzle denies that the “42 Broadway, Suite 12-1117” was virtual. Vuuzle admits the remaining allegations set forth in paragraph 98.
99. Vuuzle and Flynn identified the Manhattan location as Vuuzle’s primary place of business on several documents, including the Forms D filed with Commission, and in email communications with investors. When investors sent mail to this New York address – including subscription documentation and investment checks – Marchitto was responsible for picking up the mail, forwarding relevant communications on to Flynn, and depositing any investor checks into Vuuzle’s U.S. bank
ANSWER
Vuuzle admits the allegations set forth in paragraph 99.
B. Marchitto Knew or Was Reckless in Not Knowing that Vuuzle and Flynn Misused Investor Funds
ANSWER
This caption is simply a subheading and does not constitute an allegation. Notwithstanding the aforementioned, Vuuzle denies the misuse by anyone of investor funds. Accordingly, Vuuzle further denies that Marchitto knew or was reckless in not knowing that Vuuzle and Flynn misused investor funds, or that Vuuzle and Flynn misused investor funds.
100. Marchitto knew or was reckless in not knowing that Vuuzle and Flynn were engaged in fraudulent conduct; he had information that (1) Vuuzle’s U.S. bank account was almost entirely funded by investors and (2) that a significant amount of those investor funds were spent by Flynn or sent to his personal bank Moreover, Marchitto ignored early communications from at least one investor expressing concerns about Vuuzle, and he thereafter continued to provide assistance to Vuuzle and Flynn.
ANSWER
Vuuzle denies the allegations set forth in paragraph 100 as untrue. With respect to the last sentence in paragraph 100, Vuuzle neither admits nor denies the allegation because it lacks sufficient knowledge and information to form a belief as to the truth of the allegation.
101. Again, Marchitto was the sole signatory and had direct access and control over the U.S. bank account, which received nearly $14 million in investor funds. Account statements reflecting these investments were first sent directly to Marchitto’s residence and later to the Manhattan address that Marchitto monitored.
ANSWER
Vuuzle admits only that Marchitto was a signatory on an account for Vuuzle at certain times at a United States-based Bank located in New York City. With respect to the last sentence in paragraph 101, Vuuzle neither admits nor denies the allegation because it lacks sufficient knowledge and information to form a belief as to the truth of the allegation.
102. Investor deposits to Vuuzle’s U.S. bank account came in the form of wire transfers or checks, primarily from individuals or retirement accounts in large, round dollar increments. In many instances, investors clearly marked the wire or check as being for the purchase of Vuuzle securities. For example, on July 30, 2019, Marchitto sent an email to Flynn with an attached photo of three checks totaling $41,500, each of which clearly notes in the memo line, “stocks” or “shares.”
ANSWER
Vuuzle neither admits nor denies the allegations set forth in paragraph 102 because it lacks sufficient knowledge and information to form a belief as to the truth of the allegations.
103. On July 31, 2017, an investor contacted Marchitto about his investment, noting that he had received inconsistent information from Vuuzle about dividends and revenues. That investor explicitly warned Marchitto to “[j]ust be aware and make your own decisions consistent with fact.”
ANSWER
Vuuzle neither admits nor denies the allegations set forth in paragraph 103 because it lacks sufficient knowledge and information to form a belief as to the truth of the allegations.
104. On September 4, 2017, that same investor emailed Marchitto again, this time with a series of questions, noting that “[i]t seems that the primary income …was from the sale of stock.” Marchitto responded by saying “I have no knowledge to answer[] the questions u presented.” Yet, at that time, Marchitto had direct access to Vuuzle’s primary bank account, which contained numerous entries that plainly identified deposits as investments. Consequently, when responding, Marchitto either chose not to look into the source of Vuuzle’s income, or he examined the statements and lied. Nonetheless, Marchitto continued to assist Vuuzle and Flynn in their fraud.
ANSWER
Vuuzle neither admits nor denies the allegations set forth in paragraph 104 because it lacks sufficient knowledge and information to form a belief as to the truth of the allegations.
105. During this time, Marchitto also knew or was reckless in not knowing that Flynn had misappropriated nearly $5 million in investor Flynn and Marchitto (at the direction of Flynn) transferred nearly $2.6 million of investor funds from Vuuzle’s U.S. bank account to Flynn’s personal accounts overseas. Marchitto knew these were Flynn’s personal accounts because Flynn sent Marchitto the account information, which showed clearly that the accounts were in his name.
ANSWER
Vuuzle denies the allegations set forth in paragraph 105 as untrue.
106. Vuuzle’s S. bank account statements also reflected more than $25,000 in debit card charges by Flynn for expenses – such as dating websites, Netflix, and iTunes – that had no
discernable business purpose. Apple receipts sent to Flynn confirm the personal nature of the iTunes purchases, the vast majority of which were for online gambling, dating, and video games.
ANSWER
Vuuzle denies the allegations set forth in paragraph 106 as untrue.
107. In addition, Marchitto opened credit card accounts in the name of his former dental practice, as well as in the names of Boink and Vuuzle, and granted Flynn use of these cards. Marchitto had access to these statements, too, because they were likewise sent directly to him at his New Jersey residence and, later, to Vuuzle’s New York City
ANSWER
Vuuzle admits only that Marchitto opened credit card accounts in the names of Boink and Vuuzle to be used for Vuuzle business purposes. Vuuzle neither admits nor denies the remaining allegations set forth in paragraph 107 because it lacks sufficient knowledge and information to form a belief as to the truth of the allegations.
108. As described above, the credit card statements Marchitto received make clear that Flynn used these ostensibly corporate credit cards for his personal expenses, including luxury travel, jewelry store purchases, and strip Nonetheless, Marchitto used investor funds in Vuuzle’s
U.S. bank account to pay off the balances on these credit cards.
ANSWER
Vuuzle denies the allegations set forth in paragraph 108 as untrue.
VI. Vuuzle’s Securities Offering Was Not Registered ANSWER
This caption is simply a heading and does not constitute an allegation. Notwithstanding the aforementioned, Vuuzle admits only that it conducted an offering that was exempt from registration and therefore was not required to register the securities offering with the Commission.
109. Despite raising over $14 million through the sale of stocks and warrants from 2016 to at least May 2020, Vuuzle has never registered with the Commission any securities offering. On September 26, 2017, Vuuzle filed with the Commission a Form D Notice of Exempt Offering of Securities (under its previous name, Boink Live Streaming ), which announced a $10,000,000 private offering of securities. An amended Form D was filed on February 15, 2019. In these notices, Vuuzle claimed that its offering was exempt from registration under Rule 506(b) under the Securities Act.
ANSWER
Vuuzle admits it did not register with the Commission its exempt securities offerings. With respect to the Form D Notices, Vuuzle further states that the documents speak for themselves and are the best evidence of their content.
110. In fact, however, Vuuzle did not qualify for any exemption for a “private offering” of securities because, it was conducting a general solicitation through the cold-calling of potential investors.
ANSWER
Vuuzle neither admits nor denies the allegations set forth in paragraph 110 to the extent they call for a legal conclusion for which no response is required. To the extent a response is required, Vuuzle denies the allegations set forth in paragraph 110 as untrue.
111. Moreover, it does not appear that Vuuzle, Flynn, or his marketing teams made any independent effort to determine the accredited investor status, financial qualifications, or investment experience of Vuuzle investors, all of which is pertinent to the availability of the Rule 506(b) exemption Vuuzle claimed.
ANSWER
Vuuzle denies the allegations set forth in paragraph 111 as untrue.
112. Vuuzle’s 2017 PPM stated that it was offering shares to “accredited and sophisticated investors only.” The associated subscription documents contained a check-the-box certification for investors to indicate whether they were “accredited” or “sophisticated.” Although these completed subscription forms were sent to Flynn and his marketing teams for their review, many investors never checked either box on the subscription form. Still, Flynn and Vuuzle took their money.
ANSWER
With respect to the incomplete quoted language in the 2017 PPM, Vuuzle states that the document speaks for itself, and is the best evidence of its content. Vuuzle denies the remaining allegations set forth in paragraph 112 as untrue.
113. According to a treasury department report sent to Flynn on August 2, 2019, one investor apparently told a Vuuzle employee that he was not accredited. This information was provided to Flynn, who instructed that the investor be accepted anyway. Four days later, Vuuzle accepted the investment and issued the investor Vuuzle
ANSWER
Vuuzle neither admits nor denies the allegations set forth in paragraph 113 because it lacks sufficient knowledge and information to form a belief as to the truth of the allegations.
114. As a result, numerous unaccredited investors ended up investing in Vuuzle. None of these investors ever received any revenue or earnings reports of any
ANSWER
Vuuzle admits that unaccredited investors may have “ended up investing in Vuuzle.” Vuuzle neither admits nor denies the balance of the allegations set forth in paragraph 114 because it lacks sufficient knowledge and information to form a belief as to the truth of the allegations.
FIRST CLAIM FOR RELIEF
Violations of Section 10(b) of the Exchange Act and Rule 10b-5 Thereunder
(Against Vuuzle and Flynn)
115. The Commission realleges and incorporates by reference the allegations in paragraphs 1 through 114, as if they were fully set forth
ANSWER
Vuuzle repeats and realleges each and every preceding response as if fully set forth herein.
116. By engaging in the conduct described above, Vuuzle and Flynn, directly and indirectly, in connection with the purchase or sale of securities, and by use of the means or instrumentalities of interstate commerce, or the mails, has, with scienter: (a) employed devices, schemes or artifices to defraud; (b) made untrue statements of material facts or omitted to state material facts necessary in order to make the statements made, in light of the circumstances they were made, not misleading; and/or (c) engaged in acts, practices, or courses of business which operated or would operate as a fraud or deceit upon any person in connection with the purchase or sale of any
ANSWER
Vuuzle denies the allegations set forth in paragraph 116 as untrue.
117. By engaging in the foregoing misconduct, Vuuzle and Flynn have violated, and unless enjoined will continue to violate, Section 10(b) of the Exchange Act [15 U.S.C. § 78j(b)] and Rule 10b-5 thereunder [17 C.F.R. § 240.10b-5].
ANSWER
Vuuzle neither admits nor denies the allegations set forth in paragraph 117 to the extent they call for a legal conclusion for which no response is required. To the extent a response is required, Vuuzle denies the allegations set forth in paragraph 117 as untrue.
SECOND CLAIM FOR RELIEF
Violation of Section 17(a) of the Securities Act
(Against Vuuzle and Flynn)
118. The Commission realleges and incorporates by reference the allegations in paragraphs 1 through 114, as if they were fully set forth
ANSWER
Vuuzle repeats and realleges each and every preceding response as if fully set forth herein.
119. By engaging in the conduct described above, Vuuzle and Flynn, directly and indirectly, in the offer or sale of a security by the use of the means or instruments of transportation or communication in interstate commerce or by use of the mails, has, with scienter: (a) employed a device, scheme, or artifice to defraud; (b) obtained money or property by means of any untrue statement of a material fact or any omission of a material fact necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading; or (c) engaged in a transaction, practice, or course of business which operates or would operate as a fraud or deceit upon the
ANSWER
Vuuzle denies the allegations set forth in paragraph 119 as untrue.
120. By engaging in the foregoing misconduct, Vuuzle and Flynn have violated, and unless enjoined will continue to violate, Section 17(a) of the Securities Act [15 U.S.C. § 77q(a)].
ANSWER
Vuuzle neither admits nor denies the allegations set forth in paragraph 120 to the extent they call for a legal conclusion for which no response is required. To the extent a response is required, Vuuzle denies the allegations set forth in paragraph 120 as untrue.
THIRD CLAIM FOR RELIEF
Aiding and Abetting Violations of Section 10(b) of the Exchange Act and Rule 10b-5 Thereunder
(Against Marchitto)
121. The Commission realleges and incorporates by reference the allegations in paragraphs 1 through 114, as if they were fully set forth herein.
ANSWER
Vuuzle repeats and realleges each and every preceding response as if fully set forth herein.
122. By engaging in the conduct alleged above, Defendant Marchitto knowingly or recklessly provided substantial assistance to Defendants Vuuzle and Flynn, who, with scienter, directly or indirectly, singly or in concert with others, in connection with the purchase or sale of a security, used the means or instrumentalities of interstate commerce or of the mails to employ devices, schemes, or artifices to defraud; and to engage in acts, practices, or courses of business which operated or would operate as a fraud or deceit upon OTHERS.
ANSWER
Vuuzle denies the allegations set forth in paragraph 122 as untrue.
123. By engaging in the foregoing misconduct, Defendant Marchitto aided and abetted, and unless enjoined will continue to aid and abet violations of Section 10(b) of the Exchange Act [15 U.S.C. § 78j(b)] and Rule 10b-5 thereunder [17 C.F.R. § 240.10b-5].
ANSWER
Vuuzle neither admits nor denies the allegations set forth in paragraph 123 to the extent they call for a legal conclusion for which no response is required. To the extent a response is required, Vuuzle denies the allegations set forth in paragraph 123 as untrue.
FOURTH CLAIM FOR RELIEF
Aiding and Abetting Violations of Section 17(a) of the Securities Act
(Against Marchitto)
124. The Commission realleges and incorporates by reference the allegations in paragraphs 1 through 114, as if they were fully set forth
ANSWER
Vuuzle repeats and realleges each and every preceding response as if fully set forth herein.
125. By engaging in the conduct alleged above, Defendant Marchitto knowingly or recklessly provided substantial assistance to Defendants Vuuzle and Flynn, who, with scienter, directly or indirectly, singly or in concert with others, in the offer or sale of a security, usedthe means or instruments of transportation or communication in interstate commerce or used the mails to employ devices, schemes, or artifices to defraud, or engaged in transactions, practices, or courses of business which operated or would operate as a fraud or deceit upon a purchaser.
ANSWER
Vuuzle denies the allegations set forth in paragraph 125 as untrue.
126. By engaging in the foregoing misconduct, Defendant Marchitto aided and abetted, and unless enjoined will continue to aid and abet violations of Section 17(a) of the Securities Act [15 U.S.C. § 77q(a)].
ANSWER
Vuuzle neither admits nor denies the allegations set forth in paragraph 126 to the extent they call for a legal conclusion for which no response is required. To the extent a response is required, Vuuzle denies the allegations set forth in paragraph 126 as untrue.
FIFTH CLAIM FOR RELIEF
Violation of Sections 5(a) and 5(c) of the Securities Act
(Against Vuuzle and Flynn)
127. The Commission realleges and incorporates by reference the allegations in paragraphs 1 through 114, as if they were fully set forth herein.
ANSWER
Vuuzle repeats and realleges each and every preceding response as if fully set forth herein.
128. By engaging in conduct alleged above, Defendants Vuuzle and Flynn, directly or indirectly, through use of the means or instruments of transportation or communication in interstate commerce, or of the mails, offered to sell or sold securities, or carried or caused such securities to be carried through the mails or in interstate commerce for the purpose of sale or for delivery after sale.
ANSWER
Vuuzle admits only that Vuuzle offered to sell or sold securities through the mails or in interstate commerce for the purpose of sale or for delivery after sale. Vuuzle denies the remaining allegations set forth in paragraph 128 as untrue.
129. No registration statement was filed with the Commission or was in effect with respect to the securities offered by Defendants Vuuzle and Flynn prior to the offer or sale of these securities.
ANSWER
Vuuzle admits the allegations set forth in paragraph 129.
130. By engaging in the foregoing misconduct, Vuuzle and Flynn have violated, and unless enjoined will continue to violate, Sections 5(a) and 5(c) of the Securities Act [15 U.S.C. §§ 77e(a) and 77e(c)].
ANSWER
Vuuzle neither admits nor denies the allegations set forth in paragraph 130 to the extent they call for a legal conclusion for which no response is required. To the extent a response is required, Vuuzle denies the allegations set forth in paragraph 130 as untrue.
SIXTH CLAIM FOR RELIEF
Violation of Section 15(a)(1) of the Exchange Act
(Against Flynn)
131. The Commission realleges and incorporates by reference the allegations in paragraphs 1 through 114, as if they were fully set forth
ANSWER
Vuuzle repeats and realleges each and every preceding response as if fully set forth herein.
132. By engaging in the in conduct alleged above, Defendant Flynn, by the use of means or instrumentalities of interstate commerce or of the mails, has engaged in the business of effectuating transactions in, or inducing or attempting to induce the purchase or sale of securities as a “broker.”
ANSWER
Vuuzle denies the allegations set forth in paragraph 132 as untrue.
133. Flynn solicited investors, promoted the merits of a Vuuzle investment, facilitated and negotiated the transactions, supervised and controlled a securities sales force, handled customer funds, drafted offering documents, and was paid in commissions.
ANSWER
Vuuzle denies the allegations set forth in paragraph 133 as untrue.
134. During the relevant time period, Defendant Flynn was not registered with the Commission as a broker-dealer or a person associated with a broker-dealer registered with the Commission. Nor did any exemption from the broker-dealer registration requirements exist with respect to the securities and transactions described in this Complaint.
ANSWER
Vuuzle admits that, during the relevant time period, Vuuzle has no information to suggest that Flynn was registered with the Commission as a broker-dealer or a person associated with a broker-dealer registered with the Commission. Answering further, Vuuzle denies that Vuuzle securities were being offered or sold by Flynn. Vuuzle further denies that there was no applicable exemption from the broker-dealer registration requirements.
135. By engaging in the foregoing misconduct, Flynn has violated, and unless enjoined will continue to violate, Section 15(a)(1) of the Exchange Act [15 U.S.C. § 78o(a)(1)].
ANSWER
Vuuzle denies the allegations set forth in paragraph 135 as untrue.
s/ Melissa A. Alcantara
Melissa A. Alcantara, Esq. NJ Attorney ID: 014002004
DICKINSON WRIGHT PLLC
1825 Eye Street, N.W., Suite 900
Washington, DC 20006
Tel.: (202) 659-6949
Emails: malcantara@dickinsonwright.com
Attorneys for Defendant Vuuzle Media Corp.
Vuuzle reserves the right to amend his Answer as necessary once the precise nature of the relevant circumstances or events is determined through discovery.
AFFIRMATIVE DEFENSES
Without assuming the burden of proof for such defenses that it would not otherwise have, Vuuzle asserts the following affirmative defenses:
FIRST AFFIRMATIVE DEFENSE
The Commission’s Complaint and each claim alleged therein fails to state a claim upon which relief can be granted.
SECOND AFFIRMATIVE DEFENSE
The Commission’s Claims are barred, in whole or in part, because Vuuzle acted in good faith at all material times and in conformity with all applicable federal statutes, including the Securities Act and Exchange Act, and all applicable rules and regulations promulgated thereunder.
THIRD AFFIRMATIVE DEFENSE
The Commission’s claims for injunctive relief are barred because, inter alia, there has been no violation of the Securities Act or the Exchange Act, and because there is no reasonable likelihood that any violation will be repeated. The Commission’s injunctive relief claim is further barred because the adverse effects of an injunction far outweigh any benefit from an injunction.
FOURTH AFFIRMATIVE DEFENSE
The Commission’s claim for penalties is barred because, inter alia, any alleged violation was isolated and/or unintentional.
FIFTH AFFIRMATIVE DEFENSE
The Complaint fails to sufficiently allege that Vuuzle acted with the requisite scienter or mental state that is necessary under the circumstances for it to be held liable.
SIXTH AFFIRMATIVE DEFENSE
The purported claims against Vuuzle, and the allegations upon which they are based, are improperly vague, ambiguous, and confusing and omit critical facts.
Vuuzle hereby gives notice that it intends to rely upon such other and further defenses as may become available or apparent during proceedings in this action and reserves all rights to amend this Answer and all such defenses, accordingly.
PRAYER FOR RELIEF
WHEREFORE, Vuuzle respectfully requests that the Court enter an Order:
1. Entering judgment in favor of Vuuzle and against the Commission on all alleged claims for relief;
2. Dismissing the Complaint with prejudice; and
3. Granting such other and further relief as the Court deems just and
s/ Melissa A. Alcantara Jacob Frenkel, Esq. (Pro Hac Vice)
Seth Waxman, Esq. (Pro Hac Vice) Aimee Gibbs, Esq. (Pro Hac Vice) Melissa A. Alcantara, Esq.
NJ Attorney ID: 014002004
DICKINSON WRIGHT PLLC
1825 Eye Street, N.W., Suite 900
Washington, DC 20006
Tel.: (202) 659-6949
Emails: jfrenkel@dickinsonwright.com swaxman@dickinsonwright.com agibbs@dickinsonwright.com malcantara@dickinsonwright.com
Attorneys for Defendant Vuuzle Media Corp.
CERTIFICATE OF SERVICE
I hereby certify that, on March 24, 2021, a copy of the within: (1) Vuuzle Media Corp.’s Answer To Complaint And Affirmative Defenses, will be sent by email to counsel for all parties by operation of the Court’s electronic filing system or by email to anyone unable to accept electronic filing as indicated on the Notice of Electronic Filing. Parties may access this filing through the Court’s CM/ECF System.
By: s/ Melissa A. Alcantara
Melissa A. Alcantara
4844-2372-3746 v2 [89868-2]
1 Vuuzle’s predecessor, Boink Live Streaming, was incorporated in Delaware on August, 22, 2017. On October 26, 2018, a certificate to amend the name to Vuuzle was filed in Delaware, and, since then, the company has been operating as Vuuzle.
2 Government agency-issued telephones may be disabled to prevent the downloading of video streaming apps or the Commission’s policy may prohibit the downloading of video streaming apps.
3 OTT media services are traditional media services, including film and television, streamed directly to viewers via the Internet without the need for the traditional distribution requirements and hardware as historically required for such media as cable, broadcast, and satellite. OTT services provide viewers access to film and television content (including existing series acquired from other producers, as well as original content produced specifically for the service), and may also offer access to live streams of linear specialty channels. The media is streamed directly to the customer’s personal computer, or via apps on mobile devices, or digital media players such as through video games platforms.