SEC Charges Issuer and CEO with Violating Whistleblower Protection Laws to Silence Investor Complaints
The SEC amended its complaint against Collectors Café and CEO Mykalai Kontilai, accusing them of a $23 million fraudulent securities offering, misappropriating over $6 million for personal use, and illegally blocking investors from reporting misconduct by conditioning fund returns on non-reporting agreements, while also suing two investors and naming Kontilai’s wife Veronica as a relief defendant.
The SEC charged Collectors Café and its CEO Mykalai Kontilai with a $23 million fraudulent securities offering, during which Kontilai misappropriated over $6 million in investor funds for personal expenses. The amended complaint adds that they obstructed whistleblowers by forcing investors to sign agreements prohibiting reports to the SEC or other agencies—a violation of federal whistleblower protections—and sued two investors for allegedly breaching these illegal contracts. The SEC also alleges Kontilai continued to lie about the company’s finances, falsely claiming he had loaned millions to the business, and named his wife Veronica Kontilai as a relief defendant to recover ill-gotten gains, seeking injunctions, disgorgement with prejudgment interest, and civil penalties.
The SEC filed an amended complaint against online auction portal Collectors Café and its CEO Mykalai Kontilai, expanding charges from a previously alleged $23 million fraudulent securities offering to include obstruction of whistleblowers. Kontilai is accused of misappropriating over $6 million in investor funds for personal use and then attempting to cover up the fraud by conditioning the return of investor money on signing agreements that barred them from reporting misconduct to the SEC or other government agencies, in direct violation of federal whistleblower protections. The complaint further alleges that the defendants sued two investors whom they believed had breached these illegal non-reporting agreements, escalating their efforts to silence criticism. Despite the SEC’s initial May 2019 action, Kontilai allegedly continued to deceive investors by falsely claiming he had loaned millions to the company in the late 2000s—when in reality no such loans were made. The SEC also named Veronica Kontilai, the CEO’s wife, as a relief defendant, seeking disgorgement of any funds she received from the fraudulent scheme. The Commission is pursuing preliminary and permanent injunctions, disgorgement with prejudgment interest, and civil penalties for violations of antifraud and whistleblower provisions of federal securities laws. The investigation was led by the SEC’s Denver Regional Office, with litigation handled by Mark L. Williams and Terry R. Miller under supervision of Gregory Kasper.
Exhibits & Attached Documents (1)
Extracted insights
- $23.00M $23 million $10M–$100M
- $6.00M $6 million $1M–$10M
- person amended complaint
- person gregory kasper
- agency investors from reporting misconduct to sec
- person jacqueline m. moessner
- person kurt l. gottschall
- person mary s. brady
- agency sec's amended complaint
- agency sec's investigation
- agency sec's litigation
- agency Securities and Exchange Commission
- agency sec whistleblower protection rules
- SEC Filed Amended Complaint Against Collectors Café and Mykalai Kontilai
- Collectors Café and Mykalai Kontilai Sought to Prohibit Investors From Reporting Misconduct to SEC
- SEC Charged Collectors Café and Kontilai with Fraudulent $23 Million Securities Offering
- Kontilai Misappropriated Over $6 Million of Investor Proceeds
- Collectors Café and Kontilai Attempted to Resolve Investor Allegations of Wrongdoing
- Agreements Violate SEC Whistleblower Protection Rules
- Defendants Sued Two Investors
- Defendants Misrepresented Material Facts About Collectors Café's Business
- Kurt L. Gottschall Said Defendants Attempted to Cover Up Fraud
- SEC's Amended Complaint Charges Collectors Café and Kontilai with Violations of Federal Securities Laws
- Amended Complaint Adds Veronica Kontilai as a Relief Defendant
- Jacqueline M. Moessner Conducted SEC's Investigation
- Mary S. Brady Supervised SEC's Investigation
- Mark L. Williams and Terry R. Miller Led SEC's Litigation
- Gregory Kasper Supervised SEC's Litigation
The Securities and Exchange Commission today filed an amended complaint against online auction portal Collectors Café and its CEO Mykalai Kontilai to add allegations that they unlawfully sought to prohibit their investors from reporting misconduct to the SEC and other governmental agencies. The SEC previously charged Collectors Café and Kontilai with a fraudulent $23 million securities offering based on false statements to investors, and alleged that Kontilai misappropriated over $6 million of investor proceeds. The SEC's amended complaint alleges that Collectors Café and Kontilai attempted to resolve investor allegations of wrongdoing by conditioning the return of investor money on the investors signing agreements prohibiting them from reporting potential securities law violations to law enforcement, including the SEC. According to the complaint, these agreements violate the SEC's whistleblower protection rules. The complaint alleges the defendants went so far as to sue two investors that they believed breached one of the illegal agreements. Following the filing of the SEC's action in May 2019, the defendants allegedly have continued to misrepresent to investors material facts about Collectors Café's business and the reasons why Kontilai took money from the company for personal expenses, including continuing to tell investors that he loaned Collectors Café millions of dollars in the late 2000s when, in reality, he never lent the company the amounts that he claims. "We allege that the defendants attempted to cover up their fraud by holding investors' money hostage until the investors signed agreements preventing them from seeking law enforcement intervention," said Kurt L. Gottschall, Director of the SEC's Denver Regional Office. "Through the amended complaint, the Commission seeks to hold the defendants accountable for their fraudulent stock offerings as well as the separate claims for violations of the Commission's whistleblower protection laws." "The SEC's whistleblower protections broadly protect not just employees, but anyone who seeks to report potential securities law violations to the Commission," Jane Norberg, Chief of the SEC's Office of the Whistleblower added. The SEC's amended complaint charges Collectors Café and Kontilai with violations of the antifraud and whistleblower provisions of the federal securities laws, seeking preliminary and permanent injunctions, disgorgement plus prejudgment interest, and penalties. The amended complaint also adds Veronica Kontilai, Kontilai's wife, as a relief defendant, and seeks disgorgement plus prejudgment interest. The SEC's investigation was conducted by Jacqueline M. Moessner and supervised by Mary S. Brady of the Denver Regional Office. The SEC's litigation is being led by Mark L. Williams and Terry R. Miller, and supervised by Gregory Kasper.
The Securities and Exchange Commission today filed an amended complaint against online auction portal Collectors Café and its CEO Mykalai Kontilai to add allegations that they unlawfully sought to prohibit their investors from reporting misconduct to the SEC and other governmental agencies. The SEC previously charged Collectors Café and Kontilai with a fraudulent $23 million securities offering based on false statements to investors, and alleged that Kontilai misappropriated over $6 million of investor proceeds. The SEC's amended complaint alleges that Collectors Café and Kontilai attempted to resolve investor allegations of wrongdoing by conditioning the return of investor money on the investors signing agreements prohibiting them from reporting potential securities law violations to law enforcement, including the SEC. According to the complaint, these agreements violate the SEC's whistleblower protection rules. The complaint alleges the defendants went so far as to sue two investors that they believed breached one of the illegal agreements. Following the filing of the SEC's action in May 2019, the defendants allegedly have continued to misrepresent to investors material facts about Collectors Café's business and the reasons why Kontilai took money from the company for personal expenses, including continuing to tell investors that he loaned Collectors Café millions of dollars in the late 2000s when, in reality, he never lent the company the amounts that he claims. "We allege that the defendants attempted to cover up their fraud by holding investors' money hostage until the investors signed agreements preventing them from seeking law enforcement intervention," said Kurt L. Gottschall, Director of the SEC's Denver Regional Office. "Through the amended complaint, the Commission seeks to hold the defendants accountable for their fraudulent stock offerings as well as the separate claims for violations of the Commission's whistleblower protection laws." "The SEC's whistleblower protections broadly protect not just employees, but anyone who seeks to report potential securities law violations to the Commission," Jane Norberg, Chief of the SEC's Office of the Whistleblower added. The SEC's amended complaint charges Collectors Café and Kontilai with violations of the antifraud and whistleblower provisions of the federal securities laws, seeking preliminary and permanent injunctions, disgorgement plus prejudgment interest, and penalties. The amended complaint also adds Veronica Kontilai, Kontilai's wife, as a relief defendant, and seeks disgorgement plus prejudgment interest. The SEC's investigation was conducted by Jacqueline M. Moessner and supervised by Mary S. Brady of the Denver Regional Office. The SEC's litigation is being led by Mark L. Williams and Terry R. Miller, and supervised by Gregory Kasper.