SEC Alleges Website Development Business Was $75 Million "Ponzi-Like" Scheme

Full disclosure: Jordan Maglich represents several victims of this alleged fraud.

The Securities and Exchange Commission announced today that it had obtained an emergency asset freeze and obtained the appointment of a receiver over an Illinois-based company that purportedly raised over $75 million from hundreds of investors who were promised lucrative returns from the development, purchase, and maintenance of websites. Today’s Growth Consultant Inc. (“TGC”) and Kenneth D. Courtright, III (“Courtright”) were named as defendants in the SEC’s action filed in a Chicago federal court on December 27, 2019 and kept under seal until today while a court-appointed receiver took over TGC and began an investigation. Both TGC and Courtright have retained counsel although it is unknown whether they intend to fight the SEC’s allegations.

The SEC’s Complaint alleges that TGC told potential investors that the company’s lucrative strategy of acquiring and/or developing internet websites would generate the payment of either 50% of the website’s revenues or a minimum annual guaranteed return ranging from 13% to 20% of an investor’s initial investment amount - or, as TGC called it, the investor’s “upfront fee.” TGC employed a variety of ways to market this opportunity to investors, including through SiriusXM radio, internet advertisements, and even a regular podcast series by Courtright that as of today is still hosted on Apple Podcasts. The Company’s website has since been taken down, but TGC also heavily touted its affiliate The Income Store’s (“IS”) regular appearances on the Inc. 5000 list which ranks the “fastest-growing private companies in America.” In a December 2019 press release announcing TGC’s new CEO, IS was described as a “six-time Inc.5000 honoree.”

In order to invest with TGC, investors were required to sign a “Consulting Performance Agreement” which, among other things, (i) memorialized an annual return ranging from 13% to 20%, (ii) represented that the company was in “satisfactory financial condition,” and (iii) represented that the company would use the “upfront fee…exclusively” for the purchase, building, hosting, and maintenance of the investor’s websites. The SEC alleges that TGC raised over $75 million from at least 500 investors during just the period from January 2017 to October 2019.

The SEC alleges that TGC’s claims of developing a lucrative business from developing and maintaining websites were false. While the SEC’s accounting showed that the websites underlying TGC’s Consulting Performance Agreements generated approximately $9 million in advertising and product sale revenues from January 2017 to October 2019, TGC made payments to investors of at least $30 million during that same period. To cover that shortfall, the SEC claims that TGC turned “to other funding sources” including “lenders who specialize in distressed lending.” Courtright is also accused of diverting approximately $2 million from TGC to his personal accounts or to third parties for his benefit, including (i) the transfer of $1.5 million in cash to his personal bank accounts, (ii) arranging for TGC to make weekly $3,000 mortgage payments towards his Chicago primary residence, and (iii) more than $35,000 to a private secondary school presumably for his family members’ tuition.

Despite its alleged financial distress in the months leading up to the SEC’s emergency enforcement action, TGC allegedly continued to solicit new investors and apparently raised approximately $2 million in new funds in November 2019.

A copy of the SEC’s Complaint is below: