SEC Halts Boiler Room Scheme Involving State Lottery Tickets
The SEC charged Florida-based LottoNet Operating Corp., its CEO David Gray, and top sales agent Joseph A. Vitale with operating a boiler room fraud that raised $4.8 million by falsely promising $8,500 monthly dividends on $25,000 investments, while siphoning over $1.1 million in commissions and personal expenses—including strip clubs and weddings—and paying investors just $10,525 in returns, with Vitale using the alias 'Donovan Kelly' to hide his FINRA ban.
The SEC alleges that LottoNet Operating Corp., CEO David Gray, and sales agent Joseph A. Vitale raised approximately $4.8 million from investors through a boiler room scheme, falsely claiming the funds would develop a legal online lottery ticket platform and that sales agents received no commissions. In reality, over $1.1 million was paid as commissions to sales agents, and investor funds were diverted for personal use—including clothing, wedding expenses, and strip clubs—while only $10,525.43 in returns were paid to investors. Vitale used the alias 'Donovan Kelly' to conceal his permanent FINRA ban, and the SEC obtained an emergency asset freeze while pursuing charges for securities fraud, with the investigation ongoing and litigation led by Amie Riggle Berlin.
The SEC charged Florida-based LottoNet Operating Corp., its CEO David Gray, and top sales agent Joseph A. Vitale with operating a boiler room fraud that raised approximately $4.8 million from investors by using deceptive cold-call scripts promising $8,500 monthly dividends on $25,000 investments and falsely claiming the company facilitated legal online lottery sales. The SEC alleges that sales agents received over $1.1 million in commissions—far exceeding the 35% threshold cited in the complaint—and that the company siphoned investor funds for personal expenses including clothing, wedding-related costs, and strip club visits. Despite these claims, investors received only $10,525.43 in returns through the end of February, and the company never developed a legitimate business model. Vitale, who personally raised at least $1.4 million, used the alias 'Donovan Kelly' to conceal his permanent ban by FINRA, furthering the deception. The SEC obtained an emergency court order freezing the assets of LottoNet, Gray, and Vitale, and filed charges for securities fraud based on material misrepresentations and fabricated sales pitches. The investigation, conducted by the SEC’s Miami Regional Office with assistance from FINRA, is ongoing and led by Kate Zoladz, Gary Miller, and Allen J. Genaldi, under supervision of Elisha L. Frank and litigation by Amie Riggle Berlin.
Exhibits & Attached Documents (1)
Extracted insights
- $4.80M $4.8 million $1M–$10M
- $1.40M $1.4 million $1M–$10M
- $1.10M $1.1 million $1M–$10M
- $25K $25,000 $10K–$100K
- $11K $10,525 $10K–$100K
- $9K $8,500 <$10K
- person eric i. bustillo
- agency of finra
- person sales agents
- agency Securities and Exchange Commission
- agency the sec's complaint
- agency the sec's investigation
- agency the securities and exchange commission
- The Securities and Exchange Commission Announced Charges a Florida-based company, its CEO, and its top sales agent accused of conducting a boiler room scheme
- The SEC Obtained an Emergency Court Order freezing the assets of LottoNet Operating Corp., David Gray, and Joseph A. Vitale
- The SEC's complaint Alleges they misrepresented to investors that their money would be used to develop and market LottoNet and that sales agents did not receive commissions
- LottoNet Allegedly Siphoned Investor Funds for personal spending on clothing, wedding-related expenses, and strip clubs
- The SEC's complaint Alleges among the pitches used in sales agent scripts prepared for cold calls to investors was 'you’re looking at a monthly dividend payout of $8,500 every month' on a $25,000 investment if LottoNet reaches 1 percent market share
- The scripts Allegedly Touted the purported safety of the investment, noting a 60 percent return as a 'worst case' scenario if the company was ever sold
- The SEC Alleges LottoNet has raised a total of approximately $4.8 million from investors
- The SEC Alleges the company had only paid $10,525.43 in investment returns to investors through the end of February
- Sales agents Allegedly Have Been Paid more than $1.1 million out of investor funds
- The SEC's complaint Further Alleges Vitale, who personally raised at least $1.4 million from investors, used the alias Donovan Kelly in an apparent attempt to hide from investors that he is permanently barred by the Financial Industry Regulatory Authority (FINRA)
- Eric I. Bustillo Said 'As alleged in our complaint, little did investors know they were being duped with a script based on misrepresentations while investor funds were being spent in strip clubs'
- The SEC's investigation Has Been Conducted in the Miami office by Kate Zoladz, Gary Miller, and Allen J. Genaldi
- The case Is Being Supervised by Elisha L. Frank
- The litigation Is Being Led by Amie Riggle Berlin
- The SEC Appreciates the Assistance of FINRA
The Securities and Exchange Commission today announced charges against a Florida-based company, its CEO, and its top sales agent accused of conducting a boiler room scheme that solicits investments in a business purportedly facilitating online and cell phone sales of lottery tickets in various states. The SEC has obtained an emergency court order freezing the assets of LottoNet Operating Corp., David Gray, and Joseph A. Vitale. The SEC's complaint alleges that they misrepresented to investors that their money would be used to develop and market LottoNet and that sales agents did not receive commissions. At least 35 percent of investor proceeds were allegedly paid to boiler room sales agents in the form of commissions, and LottoNet allegedly siphoned investor funds for personal spending on clothing, wedding-related expenses, and strip clubs. According to the SEC's complaint, which was unsealed in federal court today, among the pitches used in sales agent scripts prepared for cold calls to investors was "you’re looking at a monthly dividend payout of $8,500 every month" on a $25,000 investment if LottoNet reaches 1 percent market share. The scripts also allegedly touted the purported safety of the investment, noting a 60 percent return as a "worst case" scenario if the company was ever sold. The SEC alleges that while LottoNet has raised a total of approximately $4.8 million from investors, the company had only paid $10,525.43 in investment returns to investors through the end of February. Sales agents allegedly have been paid more than $1.1 million out of investor funds. The SEC's complaint further alleges that Vitale, who personally raised at least $1.4 million from investors, used the alias Donovan Kelly in an apparent attempt to hide from investors that he is permanently barred by the Financial Industry Regulatory Authority (FINRA). "As alleged in our complaint, little did investors know they were being duped with a script based on misrepresentations while investor funds were being spent in strip clubs," said Eric I. Bustillo, Director of the SEC’s Miami Regional Office. The SEC's investigation, which is continuing, has been conducted in the Miami office by Kate Zoladz, Gary Miller, and Allen J. Genaldi. The case is being supervised by Elisha L. Frank and the litigation is being led by Amie Riggle Berlin. The SEC appreciates the assistance of FINRA.
The Securities and Exchange Commission today announced charges against a Florida-based company, its CEO, and its top sales agent accused of conducting a boiler room scheme that solicits investments in a business purportedly facilitating online and cell phone sales of lottery tickets in various states. The SEC has obtained an emergency court order freezing the assets of LottoNet Operating Corp., David Gray, and Joseph A. Vitale. The SEC's complaint alleges that they misrepresented to investors that their money would be used to develop and market LottoNet and that sales agents did not receive commissions. At least 35 percent of investor proceeds were allegedly paid to boiler room sales agents in the form of commissions, and LottoNet allegedly siphoned investor funds for personal spending on clothing, wedding-related expenses, and strip clubs. According to the SEC's complaint, which was unsealed in federal court today, among the pitches used in sales agent scripts prepared for cold calls to investors was "you’re looking at a monthly dividend payout of $8,500 every month" on a $25,000 investment if LottoNet reaches 1 percent market share. The scripts also allegedly touted the purported safety of the investment, noting a 60 percent return as a "worst case" scenario if the company was ever sold. The SEC alleges that while LottoNet has raised a total of approximately $4.8 million from investors, the company had only paid $10,525.43 in investment returns to investors through the end of February. Sales agents allegedly have been paid more than $1.1 million out of investor funds. The SEC's complaint further alleges that Vitale, who personally raised at least $1.4 million from investors, used the alias Donovan Kelly in an apparent attempt to hide from investors that he is permanently barred by the Financial Industry Regulatory Authority (FINRA). "As alleged in our complaint, little did investors know they were being duped with a script based on misrepresentations while investor funds were being spent in strip clubs," said Eric I. Bustillo, Director of the SEC’s Miami Regional Office. The SEC's investigation, which is continuing, has been conducted in the Miami office by Kate Zoladz, Gary Miller, and Allen J. Genaldi. The case is being supervised by Elisha L. Frank and the litigation is being led by Amie Riggle Berlin. The SEC appreciates the assistance of FINRA.