SEC v. LOTTONET OPERATING CORP.; DAVID GRAY; and JOSEPH VITALE AIK/A DONOVAN KELLY, No. 1:17-cv-21033, Southern District of Florida (Mar. 27, 2017) — Complaint

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF FLORIDA
CASE NO.:
SECURITIES AND EXCHANGE COMMISSION,
Plaintiff,
v.
LOTTONET OPERATING CORP.,
DAVID GRAY,
JOSEPH VITALE AIK/A DONOVAN KELLY,
Defendants,
and
ORACLE MARKETING GROUP INC.,
CRM INTERACTIVE LLC,
THE COUNCIL CLUB LLC,
Relief Defendants.
.........
FILED by fl\ Jt/\ D.C.
MAR 2 0 2017
s~E:VEN M. LARIMORE
CtERK U. $. DIST. CT.
s. o. of FIA -MIAMI
COMPLAINT FOR INJUNCTIVE AND OTHER RELIEF
Plaintiff Securities and Exchange Commission alleges:
I. INTRODUCTION
1. The Commission brings this action to enjoin LottoNet Operating Corp.
("LottoNet" or the "Company"), its CEO David Gray, and its sales person Joseph Vitale from
continuing to defraud investors through the ongoing sale
of securities in violation of the anti-
fraud and broker-dealer registration provisions
of the federal securities laws.
2. From no later than July 21, 2015 until present, the Defendants have sold securities
in the fonn
of shares in LottoNet, which purports to be in the business of facilitating the purchase
of lottery tickets from lotteries in various states online.
3. The LottoNet offering has thus far raised approximately $4.8 million from about
138 investors nationwide.

4. To lure investors, the Defendants have knowingly or recklessly materially
misrepresented how they would use investor funds.
5. LottoNet and Gray have misused or misappropriated more than $2 million of the
$4.8 million raised in a manner contrary
to the representations to investors.
6. For example, in its private placement memorandum ("PPM") and SEC filings,
LottoNet and Gray represent that the Company will not pay sales agents any commission.
7. This is false. In truth, LottoNet and Gray use investor proceeds to pay sales
agents commissions
of at least 3 5 percent of the amount raised from an investor. As of February
28, 2017, Lotto Net has paid sales agents more than $1.1 million of the investor funds.
8. Similarly, Vitale tells potential investors LottoNet will use investor proceeds to
develop the company's business and technology, while failing to disclose LottoNet uses investor
proceeds to pay Vitale, through his companies Relief Defendants Oracle Marketing Group Inc.,
CRM Interactive LLC, and The Council Club
LLC.
9. In addition, Gray, who has authority over LottoNet and runs the day-to-day
operations, has misappropriated at least $464,000 of investor funds and an additional $121,000
of investor funds have been siphoned off to pay for personal expenditures, including strip clubs
and clothing.
10. Contrary to Gray's representations in LottoNet's SEC filings that officer and
director compensation would total about $200,000, LottoNet has paid its officers and directors,
including Gray and others, more than three times that amount, or about $617,000.
11. Through their conduct, LottoNet, Gray, and Vitale are violating the anti-fraud
provisions
of the federal securities laws, LottoNet and Vitale are violating the broker-dealer
2

registration provisions of the federal securities laws, and Gray is aiding and abetting the violation
of the broker-dealer registration provisions of the federal securities laws.
12. Based on the ongoing nature of their violations and the scienter the Defendants
have demonstrated through their willful and wanton disregard for the federal securities laws, the
Defendants have shown they will continue
to violate the law unless the Court grants the
injunctive and other relief the Commission seeks.
II. DEFENDANTS AND RELIEF DEFENDANTS
A. Defendants
13. LottoNet is a  Delaware corporation Gray formed on May 20, 2015 with its
principal place
of business in Pompano Beach, Florida. LottoNet is not registered with the
Commission in any capacity. On October 21, 2015, LottoNet filed a  Form D with the SEC to
raise
$5 million through a  private offering, and filed an amended Form D on November 23,
2015.
14. Gray is a  resident of Lighthouse Point, Florida. He is the Chief Executive
Officer, President, and Chairman
of the Board of Directors of LottoNet, and he owns more than
half of LottoNet's common stock. He has ultimate authority over LottoNet and runs the day-to-
day operations. Gray is  not registered with the Commission in any capacity.
15. Vitale, a/k/a Donovan Kelly, is a resident of Boca Raton, Florida. Since no later
than May 2016, Vitale has been a  sales agent for Lotto Net. He is not currently registered with
the Commission in any capacity. From
2006 until 2009, Vitale was a Series 7  and
63 licensed
registered representative. On January
5, 2010, the Pennsylvania Securities Commission entered
a  cease-and-desist order against Vitale
to prevent him from offering unregistered securities. In
the Matter
of LADP Acquisition, Inc., et al., Docket No. 2009-12-16, 2010 WL 428767 (Pa. Sec.
3

Com. Jan. 5, 2010). On October 19, 2011, the Financial Industry Regulatory Authority
("FINRA") pennanently barred Vitale from acting
as a  broker or otherwise associating with
firms that sell securities
to the public.
B. RELIEF DEFENDANTS
16. Oracle Marketing Group Inc. ("Oracle") is  a Florida corporation Vitale formed in
March
2015. Vitale was Oracle's president from March 2015 until at least September 2016
when the State
of Florida administratively dissolved Oracle for failure to file annual reports.
From August 28, 2015 until August 15, 2016, Lotto Net and Gray have paid their sales agent
Vitale through at least
41 payments of investor funds to Oracle totaling at least $245,000.
Without any legitimate basis, Oracle received investor proceeds emanating from the Defendants'
securities fraud.
17. CRM Interactive LLC is a  Delaware company formed in 2016. Vitale is the
signatory on CMR Interactive' s bank account and from August 30, 2016 until January 31, 2017,
LottoNet has paid Vitale by making at least 14 payments
of investor funds to CMR Interactive
totaling at least $335,000. Without any legitimate basis, CRM Interactive has received investor
proceeds emanating from the Defendants' securities fraud.
18. The Council Club LLC is a  Delaware company formed in 2015, and Vitale is its
sole member. Vitale
is the signatory on The Council Club's bank account and from June 3, 2016
until September
14, 2016, LottoNet paid its sales agent Vitale by making at least at least 10
payments of investor funds to The Council Club totaling at least $129,663. Without any
legitimate basis, The Council Club has received investor proceeds emanating from the
Defendants' securities fraud.
4

III. JURISDICTION AND VENUE
19. The Court has jurisdiction over this action pursuant to Sections 20(b ), 20( d), and
22(a) of the Securities Act of 1933 ("Securities Act"), 15 U.S.C. §§ 77t(b), 77t(d), and 77v(a);
and
Sections 2l(d), 21(e), and Section 27 of the Securitiys Exchange Act of 1934 ("Exchange
Act"), 15 U.S.C. §§ 78u(d), 78u(e), and 78aa.
20. This Court has personal jurisdiction over the Defendants and Relief Defendants,
and venue is proper in the Southern District of Florida, because many of the  Defendants' acts
and transactions constituting or resulting from violations
of the Securities Act and the Exchange
Act occurred, and continue to occur, in the
Southern District
of Florida. LottoNet's principal
place
of business is in the Southern District of Florida, the Defendants reside in the Southern
District of Florida, Gray manages LottoNet's operations from the Southern District of Florida,
Vitale solicits investors from
LottoNet's boiler room located in the Southern District of Florida,
and LottoNet directs investors to
make their investments by wiring funds to LottoNet's bank in
Pompano Beach or by mailing checks to Lotto Net's office in Pompano Beach.
21. In connection with the conduct alleged in this Complaint, the Defendants, directly
and indirectly, singly
or in concert with others, have made use of the means or instrumentalities
of interstate commerce, the means or instruments of transportation and communication in
interstate commerce, and the mails.
IV. THE LOTTONET FRAUD
A. The LottoNet Offering
22. From approximately July 21, 2015 through present, LottoNet and Gray have
offered and sold shares in the
Company to the public.
23.
The terms of the offering are memorialized in a PPM dated July 1, 2015.
5

24. As set forth in the PPM, LottoNet seeks to raise $5 million by offering to sell
40,000 shares
of common stock in the Company for $125.00 per share.
25. Gray is  responsible for the representations in the
PPM, which states:
DG [Gray] has the power and authority
to execute, deliver, and perform
this Agreement and other agreements and instruments to be executed and
delivered by them in connection with the transactions contemplated
hereby, and DG [Gray] will have taken all necessary action
to authorize
the execution and delivery
of this Agreement .... This Agreement is, and
the other agreements and instruments to be executed and delivered by
[Gray] in connection with the transactions contemplated hereby, when
such other agreements and instruments are executed and delivered, shall
be, the valid and legally binding obligations
of Gray enforceable against
Gray in accordance with their respective terms.
26. LottoNet filed a  Form D with the
SEC on October 21, 2015, and an amended
Form D with the SEC on November 23, 2015 ("Form D Filings"), stating LottoNet seeks
to raise
$5 million from investors.
27. Gray, in his capacity as CEO, executed the Form D and Amended Form D on
behalf
of Lotto Net.
28.
In the Form D Filings, LottoNet and Gray state the offering will not last longer
than one year.
29. This representation is  false,
as the LottoNet offering continued beyond one year.
30.
In addition, LottoNet and Gray have launched a  second securities offering, for
LottoNet
Peru, which LottoNet claims has
an exclusive license to operate lotteries in Peru.
31. LottoNet and its sales agents are raising funds for this new offering.
32.
On February 23, 2017, LottoNet transferred approximately $72,000
of LottoNet
investor funds overseas
to a LottoN et Peru account.
6

B. Solicitation of Investors
33. From
no later than July 21, 2015 until at least February 2017, Gray has solicited
investor contributions for LottoNet by managing a  boiler room in Pompano Beach where Gray
has utilized unregistered sales agents to place cold calls to potential investors nationwide.
34. LottoNet is seeking
to hire an additional sales agent. Specifically, LottoNet is
currently advertising on the website www.lndeed.com that it seeks to hire an additional "Private
Placement Account Specialist," entailing"[ o ]utbound dialing fronting" for a commission.
35. From
no later than May 2016 until at least February 2017, Vitale has worked as
an unregistered sales agent in the LottoNet boiler room.
36. Gray and LottoNet provide the sales agents with scripts Vitale prepared to use
during calls to solicit investors (the "Scripts").
37. From no later than July 2016 until at least February 2017, Vitale drafted the
Scripts, and Vitale and Gray directed the sales agents to read them verbatim during calls to
solicit investors in LottoNet.
38. From
no later than July 2016 until at least February 2017, the sales agents used
the Scripts during calls to solicit investors.
39. Pursuant to the Scripts, LottoNet sales agents tell investors that
"you're looking at
a monthly dividend payout
of $8,500 every month" on a $25,000 investment if Lotto Net reaches
1
% market share.
40. LottoNet's PPM, executive summary, and
proforma financial projections include
similar figures touting the potential for enormous investment returns.
7

41. The Scripts also tout the purported safety of the investment, noting that there is  a
"minimum floor" paid to the investor in the event the company is acquired and a  60% return is
the "worst case" in that scenario.
42. As
of February 28, 2017, Lotto Net has only paid a total of $10,525.43 to investors
in investment returns in a  Ponzi-like fashion, using funds from later investors to pay earlier
investors.
43. After Vitale and other LottoNet sales agents make cold-calls
to potential investors
by telephone, Vitale and the other LottoNet sales agents email the potential investors marketing
materials that include a PPM, subscription agreement, investor questionnaire, pro fonna financial
projections, marketing video, and executive summary
("Marketing Materials").
44. After the cold calls, Gray utilizes his sales agents to place additional telephone
calls to potential investors to close the sales.
45. To date, LottoNet has raised a  total of more than $4.8 million from about 138
investors.
46. Vitale has personally raised at least $1.4 million
of this amount by soliciting
potential investors.
C. Misrepresentations and Omissions in the LottoNet Offering
47. In connection with LottoNet's offering, LottoNet, Gray, Vitale, and others have
knowingly or recklessly made material misrepresentations and omissions about the use
of
investor funds, Gray's compensation, and commissions paid to LottoNet's sales agents.
I. Defendants' Representations About The Use Of Investor Funds
48. From no later than July 21, 2015 until at least February 2017, LottoNet and Gray
have made materially false and misleading statements
to potential investors in LottoNet's PPM.
8

49. The PPM states that investor proceeds will be used to pay for:
"(i) the development cycle, which includes perfecting the software and hosting
platform, (ii) for marketing; including online
& offline advertising and the initial
free ticket promotion; (iii) managerial and administrative expenses; (iv) legal
expenses and consulting fees, including fees to take the company
public."
50. The PPM further estimates how much
of the $5 million raised would be spent in
each
of these four categories, stating 15% of the total amount raised would be spent on
management and administration.
51. Similarly, in the executive summary Gray and Vitale distribute to potential
investors, LottoNet asserts that the Company will use investor funds to
"invest[] primarily into
marketing a quality
product," as well to pay for LottoNet software, management and
administration, legal expenses including patents, and to go public.
52. The
PPM falsely assures potential investors that "no commissions or any other
form ofremuneration will be paid on sales made directly
to the public by the Company."
53. The Form D and Amended Form D Gray executed and filed with the SEC on
behalf
of LottoNet falsely represents that LottoNet will not pay commissions to sales agents or
promoters.
54.
In the LottoNet Form D and Amended Form D, Gray also falsely represents that
the total compensation to officers and directors would be approximately $200,000.
55. During telephone calls to solicit investors, Vitale and the sales agents have made
materially misleading oral representations to potential investors about the use
of investor funds.
56. For example, one
of the Scripts the sales agents read potential investors states that
"we are only raising a  small amount
of 5  million dollars for advertising and Technical Support
on the
backside."
9

57. During telephone calls with potential investors, Vitale has also represented that
LottoNet would use investor funds for technical development, including development
of a
cellular phone application, and the marketing
of Lotto Net.
58. As
of February 28, 2017, LottoNet has only received about $4,075 from non-
investor sources. All other funds in the LottoNet accounts are from investors, totaling more than
$4.8 million.
59. The Defendants' representations about the use
of investor funds are materially
false.
60. As set forth in more detail below, Gray and LottoNet have misused or
misappropriated more than $2 million of the investor funds, contrary to the representations the
Defendants made about the use
of investor funds.
2. Misappropriation of Investor Funds and Gray's Compensation
61. Contrary
to the LottoN et and Gray's representations about the use of investor
funds in the PPM and during solicitation calls, from July 21, 2015 until at least February 28,
2017, more than $464,000
of the investor funds have been transferred from LottoNet to Gray
directly. Contrary to the representation in the PPM that Gray will receive $10,000 a  month as
compensation, Gray has directly received an average of $22,000 per month:
Month and Year
Amount
August 2015
$16,097
September
2015
$19,231
October 2015 $22,776
November 2015 $14.534
December
2015 $17,852
January 2016
$14,181
February 2016
$15,202
March 2016
$27,624
April 2016
$16,815
May 2016
$25,645
10

June2016 $33,026
July 2016
$40,731
August 2016 $41,231
September 2016 $32,538
October
2016 $32,231
November 2016 $21,731
December
2016
$27,851
January 2017 $26,453
62. An additional $121,000
of investor funds have been used to pay for personal
expenses, including strip clubs, clothing, and some
of Gray's wedding-related expenses.
63. Gray and LottoNet have not disclosed
to investors the misappropriation and
misuse
of investor funds to pay personal expenses.
64. The misappropriation and misuse
of investor funds is omitted from the PPM,
executive summary, Scripts, and other Marketing Materials.
65. Contrary
to the Amended Fonn D Gray filed with the SEC in which he
represented officer and director compensation would be about $200,000, LottoNet has paid the
officers and directors three times that amount -  or about $617 ,000.
3. Use of Investor Funds to Pay Undisclosed Commissions to Sales Agents
66. LottoNet, Gray, and Vitale have failed to disclose to potential investors that
LottoNet uses investor funds
to pay commissions to sales representatives in exchange for selling
the LottoNet shares to investors.
67. Contrary to the Defendants' representations about the use
of investor funds in the
PPM, executive summary, and Form D filings, and contrary to Vitale's oral representations to
potential investors, LottoNet and Gray have used investor funds to pay Vitale and other sales
agents commissions in exchange for selling LottoNet shares to investors.
68.
In exchange for selling LottoNet shares, LottoNet and Gray pay sales agents at
least
35 percent of each investor contribution they obtain through their solicitation efforts.
11

69. Lotto Net has paid more than $1.1 million of the investor funds to sales agents.
70. The Defendants knowingly or recklessly conceal the commissions from potential
investors. For example, in August 2016, Vitale told a  potential investor LottoNet would use
investor funds for the technical development and marketing of Lotto Net, while failing to disclose
that he would receive a commission
if the potential investor contributed funds.
71. However, by August
2016, Vitale had received at least $245,000 in commissions
from LottoNet.
72. As
of February 28, 2017, Vitale has received more than $710,000 of investor
funds in the form
of payments to his entities Relief Defendants Oracle, CRM Interactive, and
The Council Club.
73. Gray has further concealed the commissions by, among other things, telling at
least one sales agent to refer to the commission he received
as a "bonus," and paying
commissions in installments so they would appear
to be salaries.
74. Additionally, in the PPM, LottoNet and Gray represent that "no commissions or
any remuneration will be paid on sales of the shares," but that the Board of Directors "may
authorize payment of commissions to licensed broker dealers who participate in the offer and
sale
of shares of common stock in this Offering."
75. This is  another lie. Not only did Lotto Net and Gray pay commissions on the sales
of shares, but also they recruited and paid commissions to unlicensed broker-dealers, including
Vitale.
76.
In fact, during the time he worked at LottoNet, Vitale was under a  FINRA Order
prohibiting him from affiliating with broker-dealers.
12

D. The Scheme To Conceal Vitale's Background From Investors
77. From no later than July 21, 2015 until approximately February 2017, Gray and
Vitale engaged in a  fraudulent scheme to knowingly or recklessly conceal from investors the
negative regulatory history and sanctions previously imposed against Vitale for securities-related
violations.
I. The Pennsylvania Securities Commission Has Found Vitale Violated The Securities Laws
78. On January 5, 2010, the Pennsylvania Securities Commission entered a Summary
Order to Cease and Desist against Vitale arising from his violations of the Pennsylvania
Securities Act in connection with a $10 million securities offering.
79. Specifically, the Pennsylvania Securities Commission found Vitale was the CEO
and president of an unregistered broker-dealer he operated to place cold calls to solicit
unaccredited investors to invest in an unregistered securities offering.
80. The Pennsylvania Securities Commission found Vitale violated Section 1-201
of
the Pennsylvania Securities Act, which makes it unlawful to offer or sell unregistered securities,
and Section 1-301(a) of the Act, which makes it unlawful to transact business as an unregistered
broker-dealer.
81. Based on Vitale' s violations
of the Pennsylvania securities laws, the Pennsylvania
Securities Commission entered an
Order directing him to cease and desist his securities offering
in Pennsylvania.
2. FINRA Has Barred Vitale From Associating With Any Broker-Dealer
82. In Spring 2009, FINRA initiated an investigation, including but not limited to,
whether Vitale had engaged in excessive trading in a  customer's account in violation
of FINRA
Conduct Rule
2010 and Procedural Rule 8210.
13

83. On October 14, 2010, the FINRA Department of Enforcement filed a Disciplinary
Proceeding against Vitale for failing to respond to
at least seven FINRA requests for information
in connection with the investigation.
84. The FINRA Hearing Officer found Vitale "frustrated FINRA's investigation into
his misconduct, which had been protracted for over a  year because
of his obstructive tactics,"
and found his misconduct "renders him 'presumptively unfit for employment in the securities
industry.'"
85. On September 11, 2011, FINRA barred Vitale from associating with any FINRA
member in any capacity.
3. Vitale and Gray Tell LottoNet Investors Vitale Is "Donovan Kelly"
86. To conceal Vitale's disciplinary history from potential investors, Gray and Vitale
referred to Vitale
as "Donovan Kelly."
87. Vitale used the alias Donovan Kelly during his telephone calls to solicit potential
investors to contribute to LottoNet.
E. LottoNet and Vitale Acted As Unregistered Broker-Dealers,
And Gray Aided And Abetted This Conduct
88. From no later than May 2016 until at least February 2017, LottoNet, through
Gray, retained Vitale and other unregistered sales agents to solicit investors for the LottoNet
offering.
89. Gray and LottoNet agreed
to pay Vitale and other unregistered sales agents for
raising investor funds directly and through an unregistered boiler room where Gray managed at
least
13 individuals to assist him with investor solicitation.
14

90. In exchange for soliciting investors, LottoNet and Gray used investor funds to pay
the unregistered sales agents and others commissions totaling at least 35 percent
of the amount
raised from investors, broken down
as follows:
• 10-15% commission
to "fronters," who placed the initial cold calls to solicit potential
investors; and
• 20% commission
to "closers," who followed up with the potential investors to close
the deals and obtain the investor funds.
91. Lotto Net has paid the sales agents at least $1.1 million
of investor funds.
92. Neither the boiler room nor Vitale or the other sales agents used
to sell the
LottoNet shares were registered
as broker-dealers, as required by the federal securities law.
COUNT I
Fraud in Violation of Section lO(b) and Rule 10b-5(a) of the Exchange Act
Against LottoNet, Gray, and Vitale
93. The Commission repeats and realleges paragraphs 1 through 92 of its Complaint.
94. LottoNet and Gray, beginning no later than July 2015, and Vitale, beginning no
later than May 2016, directly or indirectly, by use of the means and instrumentalities of interstate
commerce, or of the mails, in connection with the purchase or sale of securities, knowingly or
recklessly have employed devices, schemes or artifices to defraud in connection with the
purchase or sale of securities.
95. By reason
of the foregoing, LottoNet, Gray, and Vitale, directly or indirectly
violated, and, unless enjoined, are reasonably likely to continue to violate, Section 1
O(b) of the
Exchange Act [15 U.S.C.
§ 78j(b)] and Exchange Act Rule 10b-5(a) [17 C.F.R. § 240.1 Ob-5(a)].
15

COUNT II
Fraud in Violation
of Section lO(b) and Rule 10b-5(b) of the Exchange Act
Against LottoNet, Gray, and Vitale
96. The Commission realleges and incorporates paragraphs 1 through 92
of this
Complaint.
97. LottoNet and Gray, beginning no later than July 2015, and Vitale, beginning no
later than
May 2016, directly or indirectly, by use of the means or instrumentalities of interstate
commerce,
or of the mails, in connection with the purchase or sale of securities, knowingly or
recklessly made untrue statements of material facts or omitted to state material facts in order to
make the statements made, in the light
of the circumstances in which they were made, not
misleading.
98.
By reason of the foregoing, LottoNet, Gray, and Vitale, directly or indirectly
violated, and, unless enjoined, are reasonably likely to continue to violate, Section 1
O(b) of the
Exchange Act [15 U.S.C. § 78j(b)] and Exchange Act Rule 10b-5(b) [17 C.F.R. § 240.10b-5(b)].
COUNT III
Fraud in Violation
of Section lO(b) and Rule 10b-5(c) of the Exchange Act
Against LottoNet, Gray, and Vitale
99. The Commission repeats and realleges paragraphs 1 through 92
of this Complaint.
100. LottoNet and Gray, beginning no later than July 2015, and Vitale, beginning no
later than May 2016, directly
or indirectly, by use of the means or instrumentalities of interstate
commerce, or
of the mails, in connection with the purchase or sale of securities, knowingly or
recklessly engaged in acts, practices, and courses of business which have operated, are now
operating, and will operate as a fraud upon the purchasers of such securities.
16

101. By reason of the foregoing, LottoNet, Gray, and Vitale, directly or indirectly
violated, and, unless enjoined, are reasonably likely to continue to violate, Section 1
O(b) of the
Exchange Act [15
U.S.C. § 78j(b)] and Exchange Act Rule 10b-5(c) [17 C.F.R. § 240.1 Ob-5(c)].
COUNT IV
Fraud in the Offer or Sale
of Securities in
Violation of Section 17(a)(l) of the Securities Act
Against LottoNet, Gray, and Vitale
102. The Commission repeats and realleges paragraphs 1 through 92 of this Complaint
as
if fully restated herein.
103. LottoNet and Gray, beginning no later than July 2015, and Vitale, beginning no
later than
May 2016, directly or indirectly, in the offer or sale of securities, by the use of means
or  instruments
of transportation or communication in interstate commerce or of the mails have
knowingly
or recklessly employed devices, schemes or artifices to defraud.
104.
By reason of the foregoing, Lotto Net, Gray, and Vitale, directly or indirectly
violated, and, unless enjoined, are reasonably likely to continue to violate,
Section
17(a)(l) of the
Securities Act [15 U.S.C. § 77q(a)(l)].
COUNTV
Fraud in the Offer or Sale of Securities in
Violation
of Section 17(a)(2) of the Securities Act
Against LottoNet, Gray, and Vitale
105. The Commission repeats and realleges paragraphs 1 through 92 of this Complaint.
106. LottoNet and Gray, beginning no later than July 2015, and Vitale, beginning no
later than
May 2016, directly or indirectly, in the offer or sale of securities, by the use of means
or  instruments
of transportation or communication in interstate commerce or of the mails have
negligently obtained
money or property by means of untrue statements of material facts and
17

omissions to state material facts necessary in order to make the statements made, in the light of
the circumstances under which they were made, not misleading.
107.
By reason of the foregoing, LottoNet, Gray, and Vitale, directly or indirectly
violated, and, unless enjoined, are reasonably likely to continue to violate, Section l 7(a)(2)
of the
Securities Act [15 U.S.C. § 77q(a)(2)].
COUNT VI
Fraud in the Offer or Sale
of Securities in
Violation
of Section 17(a)(3) of the Securities Act
Against LottoNet, Gray, and Vitale
108. The Commission repeats and realleges paragraphs 1 through 92 of this Complaint.
109. LottoNet and Gray, beginning no later than July 2015, and Vitale, beginning no
later than May 2016, directly
or indirectly, in the offer or sale of securities, by the use of means
or instruments
of transportation or communication in interstate commerce or of the mails have
negligently engaged in transactions, practices, or courses
of business which operated or would
have operated as a fraud or deceit upon the purchasers.
110.
By reason of the foregoing, Lotto Net, Gray, and Vitale, directly or indirectly
violated, and, unless enjoined, are reasonably likely to continue to violate, Section
l 7(a)(3) of the
Securities Act [15 U.S.C. § 77q(a)(3)].
COUNT VII
Unregistered Broker-Dealer Conduct in Violation of Section lS(a)(l) of the Exchange Act
Against LottoN et and Vitale
111. The Commission repeats and realleges paragraphs 13, 15-18, 20, 22,  24, 33-46,
88-92
of this Complaint.
112. LottoNet, beginning no later than July
2015, and Vitale, beginning no later than
May 2016, directly and indirectly
by the use of the means and instrumentalities of interstate
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commerce, while acting as a broker or dealer engaged in the business of effecting transactions in
securities for the accounts
of others, effected transactions in securities, or induced or attempted
to induce the purchase and sale of securities, without registering as a broker-dealer in accordance
with Section 15(b)
of the Exchange Act, 15 U.S.C. § 78o(b).
113.
By reason of the foregoing, LottoNet and Vitale, directly or indirectly, violated
and, unless  enjoined, will continue to violate Section 15(a)(l)
of the Exchange Act [15 U.S.C.
§ 78o(a)(l)].
COUNT VIII
Aiding And Abetting LottoNet and Vitale's Unregistered
Broker-Dealer Conduct in Violation
of Section 15(a)(l) of the Exchange Act
Against Gray
114. The Commission repeats and realleges paragraphs 13-18, 20, 22, 24, 33-46, 88-92
of this Complaint.
115. LottoNet, beginning no later than July 2015, and Vitale, beginning no later than
May 2016, directly or indirectly,
by the use of the means and instrumentalities of interstate
commerce, while acting as a broker or dealer engaged in the business
of effecting transactions in
securities for the accounts
of others, effected transactions in securities, or induced or attempted
to induce the purchase and sale of securities, without registering as a broker-dealer in accordance
with
Section 15(b)
of the Exchange Act, 15 U.S.C. § 78o(b).
116. Gray knowingly or recklessly provided substantial assistance to LottoNet and
Vitale in connection with their violations
of Section 15(a)(l) of the Exchange Act.
117.
By reason of the foregoing, Gray and aided and abetted, and unless enjoined, is
reasonably likely to continue to aid and abet LottoNet and Vitale's violations
of Section 15(a)(l)
of the Exchange Act. [15 U.S.C. § 78o(a)(l)].
19

COUNT IX
Aiding And Abetting LottoNet's Unregistered
Broker-Dealer Conduct in Violation
of Section 15(a)(l) of the Exchange Act
Against Vitale
118. The Commission repeats and realleges paragraphs 13-18, 20, 22, 24, 33-46, 88-
92
of this Complaint.
119. LottoNet, beginning no later than July 2015, directly or indirectly,
by the use of
the means and instrumentalities of interstate commerce, while acting as a  broker or dealer
engaged in the business
of effecting transactions in securities for the accounts of others, effected
transactions in securities, or induced
or attempted to induce the purchase and sale of securities,
without registering as a broker-dealer in accordance with Section 15(b)
of the Exchange Act, 15
U.S.C. § 78o(b).
120. Vitale knowingly
or recklessly provided substantial assistance to LottoNet in
connection with its violation
of Section 15(a)(l) of the Exchange Act.
121.
By reason of the foregoing, Vitale and aided and abetted, and unless enjoined, is
reasonably likely to continue to aid and abet LottoNet's violation
of Section 15(a)(l) of the
Exchange Act. [15
U.S.C. §
78o(a)(l)].
COUNTX
Section 20(a) - Control Person Liability
Against Gray
122. The Commission repeats and realleges paragraphs 1 through 92 of this Complaint.
123. Beginning no later than July
2015, Gray has been, directly
or indirectly, a  control
person
of Lotto Net for purposes of Section 20(a) of the Exchange Act. [ 15 U .S.C. § 78t(a)).
124. Beginning no later than July
2015, LottoN et violated Section 1
O(b) and Rule 1 Ob-
5 of the Exchange Act.
20

125. As a  control person of LottoNet, Gray is jointly and severally liable with and to
the same extent as LottoNet for each
of its violations of Section lO(b) and Rule lOb-5 of the
Exchange Act.
126.
By reason of the foregoing, Gray directly and indirectly violated, and unless
enjoined, is reasonably likely
to continue violating, Section 1 O(b) and Rule 1 Ob-5 of the
Exchange Act. [
15 U.S.C. § 78j(b) and § 78t(a), and 17 C.F.R. § 240.1 Ob-5).
RELIEF REQUESTED
WHEREFORE, the Commission respectfully requests that the Court find that
Defendants committed the violations alleged and:
I.
Temporary Restraining Order, Preliminary Injunction and Permanent Injunction
Issue a Temporary Restraining Order, a Preliminary Injunction and a Permanent
Injunction, restraining and enjoining: Defendants LottoNet, Gray, and Vitale, their officers,
agents, servants, employees, attorneys, and all persons in active concert or participation with
them, and each
of them, from violating Section 17(a) of the Securities Act, Section 10(b) and
Rule 10b-5(b)
of the Exchange Act, and Section 15( a)( 1) of the Exchange Act.
II.
Asset Freeze and Sworn Accountings
Issue an Order freezing the assets of all Defendants and Relief Defendants until further
Order
of the Court and requiring the Defendants and Relief Defendants to file sworn accountings
with this Court.
21

III.
Records Preservation
Issue an Order requiring all Defendants and Relief Defendants to preserve any records
related to the subject matter
of this lawsuit that are in their custody or possession or subject to
their control.
IV.
Disgorgement
Issue an Order directing all Defendants and Relief Defendants to disgorge all ill-gotten
gains, including prejudgment interest, resulting from the acts or courses
of conduct alleged in
this Complaint.
V.
Penalties
Issue an Order directing all Defendants to pay civil money penalties pursuant to Section
20(d)
of the Securities Act, 15 U.S.C. § 77t(d), and Section 21(d) of the Exchange Act, 15 U.S.C.
§ 78u(d).
VI.
Repatriation Order
Issue an Order directing Defendant LottoNet to repatriate any funds held at any bank or
other financial institution not subject to the jurisdiction
of the Court.
VII.
Appointment of a Receiver
Appoint a receiver over Defendant Lotto Net and all Relief Defendants.
22

VIII.
Officer and Director Bar
Issue an Order barring Defendant Gray from serving as an officer or director of any
public company pursuant
to Section 20(e) of the Securities Act, Sections 21(d)(2) and 21(d)(5)
of the Exchange Act, and Section 305(b)(5) of the Sarbanes-Oxley Act.
IX.
Further Relief
Grant such other and further relief as may be necessary and appropriate.
x.
Retention of Jurisdiction
Further, the Commission respectfully requests that the Court retain jurisdiction over this
action in order to implement and carry out the terms of all orders and decrees that it may enter, or
to entertain any suitable application or motion by the Commission for additional relief within the
jurisdiction
of this Court.
DEMAND FOR JURY TRIAL
The Securities and Exchange Commission hereby demands a jury trial in this case.
23

March 20, 2017 Respectfully submitted,
By: e
·i le rm
Amie Riggle Berlin, Esq.
Senior Trial Counsel
Florida Bar No.
630020
Direct Dial: (305) 982-6322
Direct email: [email protected]
Attorney for
Plaintiff
SECURITIES AND EXCHANGE COMMISSION
801 Brickell A venue, Suite 1800
Miami, Florida 33131
Telephone:
(305) 982-6300
Facsimile: (305) 536-4154
Katharine Zoladz
Of Counsel
24

JS 44 (Rev. 07/16) FLSD Revised 07/01/2016
CIVIL COVER SHEET
The JS 44 civil cover sheet and the information contained herein neither replace nor supplement the filing and service of pleadings or other papers as required by law, except as
provided by local rules
of court. This form, approved by the Judicial Conference of the United States in September 1974, is  required for the use of the Clerk of Court for the purpose
of initiating the civil docket sheet. (SEE INSTRUCTIONS ON NliXT PAGE OF 111/S FORM.) NOTICE: Attorneys MUST Indicate All Re-filed Cases Below.
I. (a) PLAINTIFFS SECURITIES ANDEXCHANGE DEFENDANTS LottoNet Operating Corp., David Gray, Joseeph
COMMISSION Vitale a/k/a Donovan Kelly, Oracle Marketing
II
(b) County of Residence of First Listed Plaintiff
(hXClil'rIN U.S. l'IAIN711'FCASb~\}
( C) Attorneys (Firm Name, Address, and Telephone Number)
Securities & Exchange Commission, Amie Riggle Berlin, Esq.
80 I  Briekell Ave. # 1800, Miami, FL 33131, 305-982-6322
Attorneys (If Known)
MAR 2 0 2017
(d)Check County Where Action Arose: D MIAMI-DADE D MONROE D BROWARD D PALM BEACH D MARTIN DST. LUCIE D INDIAN RIVER D OKEEC
II. BASIS OF JURISDICTION (Place an "X" in One Box Only)
Ill. CITIZENSHIP OF PRINCIPAL PARTIES
'1!'.I I U.S. Government
Plaintiff
D 2 U.S. Government
Defendant
03
04
Federal Question
(U.S. Government Not a Party)
Diversity
(lnd1cale Citizenship ~f Parties m Item Ill)
(For Diversity ( 'ases Only)
PTF DEF
Citizen of This State 0 I 0
Citizen
of Another State
02
0
Incorporated or Principal Place
of Business In This State
Incorporated
and Principal Place
of Business In Another State
Citizen
or Subject of a
Foreign
Country
03
0 3 Foreign Nation
D
05
D 6 D 6
IV. NATURE OF SUIT (Place an "X" in One Box Only)
CONTRAct TORTS
D I I 0 Insurance
D 120 Marine
D 130 Miller Act
D 140 Negotiable Instrument
D 150 Recovery of Overpayment
& Enforcement of Judgment
D 151 Medicare Act
D 152 Recovery of Defuulted
Stu
dent Loans
(Exel. Veterans)
D 153 Recovery of Overpayment
of Veteran's Benefits
D 160 Stockholders' Suits
D 190 Other Contract
D 195 Contract Product Liability
0
196 Franchise
REAL PROPERTY
0 210 Land Condemnation
0 220
Foreclosure
0 230 Rent Lease & Ejectment
0 240 Torts to Land
0
245 Tort Product Liability
0 290
All Other Real Property
PERSONAL INJURY
0 310 Airplane
0 315 Airplane Product
Liability
D 320 Assault, Libel &
Slander
0 330
Federal Employers'
Liability
D 340 Marine
0
345 Marine Product
Liability
0 350 Motor Vehicle
0 355 Motor Vehicle
Product Liability
0 360 Other Personal
Injury
0 362 Personal Injury -
Med. Malpractice
CIVIL RIGHTS
0 440 Other Civil Rights
0441 Voting
0 442 Employment
0
i~~~~d~;ions
0 445 Amer. w/Disabilities -
Employment
0 446 Amer. w/Disabilities -
Other
D 448 Education
PERSONAL INJURY
0 365 Personal Injury -
Product Liability
0 367 Health Care/
Pharmaceutical
Personal Injury
Product Liability
0 368 Asbestos Personal
Injury Product
Liability
PERSONAL PROPERTY
0 370 Other Fraud
0 371 Truth in Lending
0 380 Other Personal
Property Damage
0 385 Property Damage
Product Liability
PJUSOl\IER P&flTIONS
Habeas Corpus:
D 463 Alien Detainee
0 510 Motions to Vacate
Sentence
Other:
0 530 General
0 535 Death Penalty
D 540 Mandamus & Other
0
550 Civil Rights
0
555 Prison Condition
560 Civil Detainee -
0 Conditions
of
Confinement
FORFEITUUIPINALTY
0 625 Drug Related Seizure
of Property 21 use 881
0 690 Other
LABOR
0 710 Fair Labor Standards
Act
0 720 Labor/Mgmt. Relations
0 740 Railway Labor Act
0
751 Family and Medical
Leave Act
0 790 Other Labor Litigation
0 791 Empt. Rel. Inc.
Security Act
IMMIGRATION
0 462 Naturalization Application
0 465 Other Immigration
Actions
V. ORIGIN
.(J I Original
Proceeding
(Place an "X" in One Box Only)
O 2 Removed O 3 Re-filed O
from State (See VI
Court below)
4 Reinstated
or
Reopened
0 5
Transferred from
another district
(.'peqfY)
0 6 Multidistrict
Litigation
Transfer
BANKRUPTCY
0 422 Appeal 28 USC 158
0
423 Withdrawal
28
USC 157
PROPERTY RIGHTS
0 820 Copyrights
0830 Patent
0 840 Trademark
SOCIAL SECURITY
0 861 HIA (I 395tl)
0 862 Black Lung (923)
0 863 DIWC/DIWW (405(g))
0 864 SSID Title XVI
0
865 RSI (405(g))
FEDERAL TAX SUITS
D 870 Taxes (U.S. Plaintiff
or Defendant)
0
871 IRS-Third Party 26
USC 7609
OTHER STATUTES
0 375 False Claims Act
0 376 Qui Tam
(31 USC
3729
(a))
D 400 State Reapportionment
0 410 Antitrust
0 430 Banks and Banking
0 450 Commerce
0 460 Deportation
0 4 70 Racketeer Influenced and
Corrupt Organizations
0 480 Consumer Credit
0 490 Cable/Sat TV
!iii 850 Securities/Commodities/
Exchange
0 890 Other Statutory Actions
0
891 Agricultural Acts
0 893 Environmental Matters
0 895 Freedom
of Information
Act
0 896 Arbitration
D 899 Administrative Procedure
Act/Review
or Appeal of
Agency Decision
0
~i~u~~nstitutionality of State
D 7 Appeal to
District Judge
from Magistrate
Jud men!
D
D
9
Remanded from
8 Multidistrict Appellate Court
~it~ir~~~
File
VI. RELATED/
RE-FILED CASE(S)
(See instructions) a) Re-filed Case DYES ~NO
JUDGE:
b) Related Cases DYES ~NO
DOCKET NUMBER:
Cite the U.S. Civil Statute under which you are filing and Write a Brief Statement of Cause (J)o not citejurirdi«tional .rtatutes unless diversity)
VII. CAUSE OF ACTION l 5USC§788j(b); 15USC§77q(a)(l-3); 15USC§78o(b); 15USC§78o(a)(l);l 5USC78t(a); l 7CFR§240. I Ob-5(a-c)
VIII.
REQUESTED IN
COMPLAINT:
FOR OFFICE USE ONLY
RECEIPT#
LENGTH OF TRIAL via days estimated (for both sides to try entire case)
O CHECK IF THIS IS A CLASS ACTION DEMAND$
UNDER F.R.C.P. 23
CHECK YES only if demanded in complaint
0 Yes
iZ! No
AMOUNT
IFP
JUDGE
MAG JUDGE

Case 1:17-cv-21033-JAL   Document 1   Entered on FLSD Docket 03/20/2017   Page 1 of 24

UNITED STATES DISTRICT COURT 
SOUTHERN DISTRICT OF FLORIDA 

CASE NO.: 

SECURITIES AND EXCHANGE COMMISSION, 

Plaintiff, 

v. 

LOTTONET OPERATING CORP., 
DAVID GRAY, 
JOSEPH VITALE AIK/A DONOVAN KELLY, 

Defendants, and 

ORACLE MARKETING GROUP INC., 
CRM INTERACTIVE LLC, 
THE COUNCIL CLUB LLC, 

Relief Defendants. 

......... 

FILED by fl\ Jt/\ D.C. 

MAR 2 0 2017 
s~E:VEN M. LARIMORE 
CtERK U. $. DIST. CT. 
s. o. of FIA - MIAMI 

COMPLAINT FOR INJUNCTIVE AND OTHER RELIEF 

Plaintiff Securities and Exchange Commission alleges: 

I. INTRODUCTION 

1. The Commission brings this action to enjoin LottoNet Operating Corp. 

("LottoNet" or the "Company"), its CEO David Gray, and its sales person Joseph Vitale from 

continuing to defraud investors through the ongoing sale of securities in violation of the anti-

fraud and broker-dealer registration provisions of the federal securities laws. 

2. From no later than July 21, 2015 until present, the Defendants have sold securities 

in the fonn of shares in LottoNet, which purports to be in the business of facilitating the purchase 

of lottery tickets from lotteries in various states online. 

3. The LottoNet offering has thus far raised approximately $4.8 million from about 

138 investors nationwide. 

tamishashotwell
Case Number



Case 1:17-cv-21033-JAL   Document 1   Entered on FLSD Docket 03/20/2017   Page 2 of 24

4. To lure investors, the Defendants have knowingly or recklessly materially 

misrepresented how they would use investor funds. 

5. LottoNet and Gray have misused or misappropriated more than $2 million of the 

$4.8 million raised in a manner contrary to the representations to investors. 

6. For example, in its private placement memorandum ("PPM") and SEC filings, 

LottoNet and Gray represent that the Company will not pay sales agents any commission. 

7. This is false. In truth, LottoNet and Gray use investor proceeds to pay sales 

agents commissions of at least 3 5 percent of the amount raised from an investor. As of February 

28, 2017, Lotto Net has paid sales agents more than $1.1 million of the investor funds. 

8. Similarly, Vitale tells potential investors LottoNet will use investor proceeds to 

develop the company's business and technology, while failing to disclose LottoNet uses investor 

proceeds to pay Vitale, through his companies Relief Defendants Oracle Marketing Group Inc., 

CRM Interactive LLC, and The Council Club LLC. 

9. In addition, Gray, who has authority over LottoNet and runs the day-to-day 

operations, has misappropriated at least $464,000 of investor funds and an additional $121,000 

of investor funds have been siphoned off to pay for personal expenditures, including strip clubs 

and clothing. 

10. Contrary to Gray's representations in LottoNet's SEC filings that officer and 

director compensation would total about $200,000, LottoNet has paid its officers and directors, 

including Gray and others, more than three times that amount, or about $617,000. 

11. Through their conduct, LottoNet, Gray, and Vitale are violating the anti-fraud 

provisions of the federal securities laws, LottoNet and Vitale are violating the broker-dealer 

2 



Case 1:17-cv-21033-JAL   Document 1   Entered on FLSD Docket 03/20/2017   Page 3 of 24

registration provisions of the federal securities laws, and Gray is aiding and abetting the violation 

of the broker-dealer registration provisions of the federal securities laws. 

12. Based on the ongoing nature of their violations and the scienter the Defendants 

have demonstrated through their willful and wanton disregard for the federal securities laws, the 

Defendants have shown they will continue to violate the law unless the Court grants the 

injunctive and other relief the Commission seeks. 

II. DEFENDANTS AND RELIEF DEFENDANTS 

A. Defendants 

13. LottoNet is a Delaware corporation Gray formed on May 20, 2015 with its 

principal place of business in Pompano Beach, Florida. LottoNet is not registered with the 

Commission in any capacity. On October 21, 2015, LottoNet filed a Form D with the SEC to 

raise $5 million through a private offering, and filed an amended Form D on November 23, 

2015. 

14. Gray is a resident of Lighthouse Point, Florida. He is the Chief Executive 

Officer, President, and Chairman of the Board of Directors of LottoNet, and he owns more than 

half of LottoNet's common stock. He has ultimate authority over LottoNet and runs the day-to­

day operations. Gray is not registered with the Commission in any capacity. 

15. Vitale, a/k/a Donovan Kelly, is a resident of Boca Raton, Florida. Since no later 

than May 2016, Vitale has been a sales agent for Lotto Net. He is not currently registered with 

the Commission in any capacity. From 2006 until 2009, Vitale was a Series 7 and 63 licensed 

registered representative. On January 5, 2010, the Pennsylvania Securities Commission entered 

a cease-and-desist order against Vitale to prevent him from offering unregistered securities. In 

the Matter of LADP Acquisition, Inc., et al., Docket No. 2009-12-16, 2010 WL 428767 (Pa. Sec. 

3 



Case 1:17-cv-21033-JAL   Document 1   Entered on FLSD Docket 03/20/2017   Page 4 of 24

Com. Jan. 5, 2010). On October 19, 2011, the Financial Industry Regulatory Authority 

("FINRA") pennanently barred Vitale from acting as a broker or otherwise associating with 

firms that sell securities to the public. 

B. RELIEF DEFENDANTS 

16. Oracle Marketing Group Inc. ("Oracle") is a Florida corporation Vitale formed in 

March 2015. Vitale was Oracle's president from March 2015 until at least September 2016 

when the State of Florida administratively dissolved Oracle for failure to file annual reports. 

From August 28, 2015 until August 15, 2016, Lotto Net and Gray have paid their sales agent 

Vitale through at least 41 payments of investor funds to Oracle totaling at least $245,000. 

Without any legitimate basis, Oracle received investor proceeds emanating from the Defendants' 

securities fraud. 

17. CRM Interactive LLC is a Delaware company formed in 2016. Vitale is the 

signatory on CMR Interactive' s bank account and from August 30, 2016 until January 31, 2017, 

LottoNet has paid Vitale by making at least 14 payments of investor funds to CMR Interactive 

totaling at least $335,000. Without any legitimate basis, CRM Interactive has received investor 

proceeds emanating from the Defendants' securities fraud. 

18. The Council Club LLC is a Delaware company formed in 2015, and Vitale is its 

sole member. Vitale is the signatory on The Council Club's bank account and from June 3, 2016 

until September 14, 2016, LottoNet paid its sales agent Vitale by making at least at least 10 

payments of investor funds to The Council Club totaling at least $129,663. Without any 

legitimate basis, The Council Club has received investor proceeds emanating from the 

Defendants' securities fraud. 

4 



Case 1:17-cv-21033-JAL   Document 1   Entered on FLSD Docket 03/20/2017   Page 5 of 24

III. JURISDICTION AND VENUE 

19. The Court has jurisdiction over this action pursuant to Sections 20(b ), 20( d), and 

22(a) of the Securities Act of 1933 ("Securities Act"), 15 U.S.C. §§ 77t(b), 77t(d), and 77v(a); 

and Sections 2l(d), 21(e), and Section 27 of the Securitiys Exchange Act of 1934 ("Exchange 

Act"), 15 U.S.C. §§ 78u(d), 78u(e), and 78aa. 

20. This Court has personal jurisdiction over the Defendants and Relief Defendants, 

and venue is proper in the Southern District of Florida, because many of the Defendants' acts 

and transactions constituting or resulting from violations of the Securities Act and the Exchange 

Act occurred, and continue to occur, in the Southern District of Florida. LottoNet's principal 

place of business is in the Southern District of Florida, the Defendants reside in the Southern 

District of Florida, Gray manages LottoNet's operations from the Southern District of Florida, 

Vitale solicits investors from LottoNet's boiler room located in the Southern District of Florida, 

and LottoNet directs investors to make their investments by wiring funds to LottoNet's bank in 

Pompano Beach or by mailing checks to Lotto Net's office in Pompano Beach. 

21. In connection with the conduct alleged in this Complaint, the Defendants, directly 

and indirectly, singly or in concert with others, have made use of the means or instrumentalities 

of interstate commerce, the means or instruments of transportation and communication in 

interstate commerce, and the mails. 

IV. THE LOTTONET FRAUD 

A. The LottoNet Offering 

22. From approximately July 21, 2015 through present, LottoNet and Gray have 

offered and sold shares in the Company to the public. 

23. The terms of the offering are memorialized in a PPM dated July 1, 2015. 

5 



Case 1:17-cv-21033-JAL   Document 1   Entered on FLSD Docket 03/20/2017   Page 6 of 24

24. As set forth in the PPM, LottoNet seeks to raise $5 million by offering to sell 

40,000 shares of common stock in the Company for $125.00 per share. 

25. Gray is responsible for the representations in the PPM, which states: 

DG [Gray] has the power and authority to execute, deliver, and perform 
this Agreement and other agreements and instruments to be executed and 
delivered by them in connection with the transactions contemplated 
hereby, and DG [Gray] will have taken all necessary action to authorize 
the execution and delivery of this Agreement .... This Agreement is, and 
the other agreements and instruments to be executed and delivered by 
[Gray] in connection with the transactions contemplated hereby, when 
such other agreements and instruments are executed and delivered, shall 
be, the valid and legally binding obligations of Gray enforceable against 
Gray in accordance with their respective terms. 

26. LottoNet filed a Form D with the SEC on October 21, 2015, and an amended 

Form D with the SEC on November 23, 2015 ("Form D Filings"), stating LottoNet seeks to raise 

$5 million from investors. 

27. Gray, in his capacity as CEO, executed the Form D and Amended Form D on 

behalf of Lotto Net. 

28. In the Form D Filings, LottoNet and Gray state the offering will not last longer 

than one year. 

29. This representation is false, as the LottoNet offering continued beyond one year. 

30. In addition, LottoNet and Gray have launched a second securities offering, for 

LottoNet Peru, which LottoNet claims has an exclusive license to operate lotteries in Peru. 

31. LottoNet and its sales agents are raising funds for this new offering. 

32. On February 23, 2017, LottoNet transferred approximately $72,000 of LottoNet 

investor funds overseas to a LottoN et Peru account. 

6 



Case 1:17-cv-21033-JAL   Document 1   Entered on FLSD Docket 03/20/2017   Page 7 of 24

B. Solicitation of Investors 

33. From no later than July 21, 2015 until at least February 2017, Gray has solicited 

investor contributions for LottoNet by managing a boiler room in Pompano Beach where Gray 

has utilized unregistered sales agents to place cold calls to potential investors nationwide. 

34. LottoNet is seeking to hire an additional sales agent. Specifically, LottoNet is 

currently advertising on the website www.lndeed.com that it seeks to hire an additional "Private 

Placement Account Specialist," entailing"[ o ]utbound dialing fronting" for a commission. 

35. From no later than May 2016 until at least February 2017, Vitale has worked as 

an unregistered sales agent in the LottoNet boiler room. 

36. Gray and LottoNet provide the sales agents with scripts Vitale prepared to use 

during calls to solicit investors (the "Scripts"). 

37. From no later than July 2016 until at least February 2017, Vitale drafted the 

Scripts, and Vitale and Gray directed the sales agents to read them verbatim during calls to 

solicit investors in LottoNet. 

38. From no later than July 2016 until at least February 2017, the sales agents used 

the Scripts during calls to solicit investors. 

39. Pursuant to the Scripts, LottoNet sales agents tell investors that "you're looking at 

a monthly dividend payout of $8,500 every month" on a $25,000 investment if Lotto Net reaches 

1 % market share. 

40. LottoNet's PPM, executive summary, and proforma financial projections include 

similar figures touting the potential for enormous investment returns. 

7 



Case 1:17-cv-21033-JAL   Document 1   Entered on FLSD Docket 03/20/2017   Page 8 of 24

41. The Scripts also tout the purported safety of the investment, noting that there is a 

"minimum floor" paid to the investor in the event the company is acquired and a 60% return is 

the "worst case" in that scenario. 

42. As of February 28, 2017, Lotto Net has only paid a total of $10,525.43 to investors 

in investment returns in a Ponzi-like fashion, using funds from later investors to pay earlier 

investors. 

43. After Vitale and other LottoNet sales agents make cold-calls to potential investors 

by telephone, Vitale and the other LottoNet sales agents email the potential investors marketing 

materials that include a PPM, subscription agreement, investor questionnaire, pro fonna financial 

projections, marketing video, and executive summary ("Marketing Materials"). 

44. After the cold calls, Gray utilizes his sales agents to place additional telephone 

calls to potential investors to close the sales. 

45. To date, LottoNet has raised a total of more than $4.8 million from about 138 

investors. 

46. Vitale has personally raised at least $1.4 million of this amount by soliciting 

potential investors. 

C. Misrepresentations and Omissions in the LottoNet Offering 

47. In connection with LottoNet's offering, LottoNet, Gray, Vitale, and others have 

knowingly or recklessly made material misrepresentations and omissions about the use of 

investor funds, Gray's compensation, and commissions paid to LottoNet's sales agents. 

I. Defendants' Representations About The Use Of Investor Funds 

48. From no later than July 21, 2015 until at least February 2017, LottoNet and Gray 

have made materially false and misleading statements to potential investors in LottoNet's PPM. 

8 



Case 1:17-cv-21033-JAL   Document 1   Entered on FLSD Docket 03/20/2017   Page 9 of 24

49. The PPM states that investor proceeds will be used to pay for: 

"(i) the development cycle, which includes perfecting the software and hosting 
platform, (ii) for marketing; including online & offline advertising and the initial 
free ticket promotion; (iii) managerial and administrative expenses; (iv) legal 
expenses and consulting fees, including fees to take the company public." 

50. The PPM further estimates how much of the $5 million raised would be spent in 

each of these four categories, stating 15% of the total amount raised would be spent on 

management and administration. 

51. Similarly, in the executive summary Gray and Vitale distribute to potential 

investors, LottoNet asserts that the Company will use investor funds to "invest[] primarily into 

marketing a quality product," as well to pay for LottoNet software, management and 

administration, legal expenses including patents, and to go public. 

52. The PPM falsely assures potential investors that "no commissions or any other 

form ofremuneration will be paid on sales made directly to the public by the Company." 

53. The Form D and Amended Form D Gray executed and filed with the SEC on 

behalf of LottoNet falsely represents that LottoNet will not pay commissions to sales agents or 

promoters. 

54. In the LottoNet Form D and Amended Form D, Gray also falsely represents that 

the total compensation to officers and directors would be approximately $200,000. 

55. During telephone calls to solicit investors, Vitale and the sales agents have made 

materially misleading oral representations to potential investors about the use of investor funds. 

56. For example, one of the Scripts the sales agents read potential investors states that 

"we are only raising a small amount of 5 million dollars for advertising and Technical Support 

on the backside." 

9 



Case 1:17-cv-21033-JAL   Document 1   Entered on FLSD Docket 03/20/2017   Page 10 of 24

57. During telephone calls with potential investors, Vitale has also represented that 

LottoNet would use investor funds for technical development, including development of a 

cellular phone application, and the marketing of Lotto Net. 

58. As of February 28, 2017, LottoNet has only received about $4,075 from non-

investor sources. All other funds in the LottoNet accounts are from investors, totaling more than 

$4.8 million. 

59. The Defendants' representations about the use of investor funds are materially 

false. 

60. As set forth in more detail below, Gray and LottoNet have misused or 

misappropriated more than $2 million of the investor funds, contrary to the representations the 

Defendants made about the use of investor funds. 

2. Misappropriation of Investor Funds and Gray's Compensation 

61. Contrary to the LottoN et and Gray's representations about the use of investor 

funds in the PPM and during solicitation calls, from July 21, 2015 until at least February 28, 

2017, more than $464,000 of the investor funds have been transferred from LottoNet to Gray 

directly. Contrary to the representation in the PPM that Gray will receive $10,000 a month as 

compensation, Gray has directly received an average of $22,000 per month: 

Month and Year Amount 
August 2015 $16,097 
September 2015 $19,231 
October 2015 $22,776 
November 2015 $14.534 
December 2015 $17,852 
January 2016 $14,181 
February 2016 $15,202 
March 2016 $27,624 
April 2016 $16,815 
May 2016 $25,645 

10 



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June2016 $33,026 
July 2016 $40,731 
August 2016 $41,231 
September 2016 $32,538 
October 2016 $32,231 
November 2016 $21,731 
December 2016 $27,851 
January 2017 $26,453 

62. An additional $121,000 of investor funds have been used to pay for personal 

expenses, including strip clubs, clothing, and some of Gray's wedding-related expenses. 

63. Gray and LottoNet have not disclosed to investors the misappropriation and 

misuse of investor funds to pay personal expenses. 

64. The misappropriation and misuse of investor funds is omitted from the PPM, 

executive summary, Scripts, and other Marketing Materials. 

65. Contrary to the Amended Fonn D Gray filed with the SEC in which he 

represented officer and director compensation would be about $200,000, LottoNet has paid the 

officers and directors three times that amount - or about $617 ,000. 

3. Use of Investor Funds to Pay Undisclosed Commissions to Sales Agents 

66. LottoNet, Gray, and Vitale have failed to disclose to potential investors that 

LottoNet uses investor funds to pay commissions to sales representatives in exchange for selling 

the LottoNet shares to investors. 

67. Contrary to the Defendants' representations about the use of investor funds in the 

PPM, executive summary, and Form D filings, and contrary to Vitale's oral representations to 

potential investors, LottoNet and Gray have used investor funds to pay Vitale and other sales 

agents commissions in exchange for selling LottoNet shares to investors. 

68. In exchange for selling LottoNet shares, LottoNet and Gray pay sales agents at 

least 35 percent of each investor contribution they obtain through their solicitation efforts. 

11 



Case 1:17-cv-21033-JAL   Document 1   Entered on FLSD Docket 03/20/2017   Page 12 of 24

69. Lotto Net has paid more than $1.1 million of the investor funds to sales agents. 

70. The Defendants knowingly or recklessly conceal the commissions from potential 

investors. For example, in August 2016, Vitale told a potential investor LottoNet would use 

investor funds for the technical development and marketing of Lotto Net, while failing to disclose 

that he would receive a commission if the potential investor contributed funds. 

71. However, by August 2016, Vitale had received at least $245,000 in commissions 

from LottoNet. 

72. As of February 28, 2017, Vitale has received more than $710,000 of investor 

funds in the form of payments to his entities Relief Defendants Oracle, CRM Interactive, and 

The Council Club. 

73. Gray has further concealed the commissions by, among other things, telling at 

least one sales agent to refer to the commission he received as a "bonus," and paying 

commissions in installments so they would appear to be salaries. 

74. Additionally, in the PPM, LottoNet and Gray represent that "no commissions or 

any remuneration will be paid on sales of the shares," but that the Board of Directors "may 

authorize payment of commissions to licensed broker dealers who participate in the offer and 

sale of shares of common stock in this Offering." 

75. This is another lie. Not only did Lotto Net and Gray pay commissions on the sales 

of shares, but also they recruited and paid commissions to unlicensed broker-dealers, including 

Vitale. 

76. In fact, during the time he worked at LottoNet, Vitale was under a FINRA Order 

prohibiting him from affiliating with broker-dealers. 

12 



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D. The Scheme To Conceal Vitale's Background From Investors 

77. From no later than July 21, 2015 until approximately February 2017, Gray and 

Vitale engaged in a fraudulent scheme to knowingly or recklessly conceal from investors the 

negative regulatory history and sanctions previously imposed against Vitale for securities-related 

violations. 

I. The Pennsylvania Securities Commission Has Found Vitale Violated The Securities Laws 

78. On January 5, 2010, the Pennsylvania Securities Commission entered a Summary 

Order to Cease and Desist against Vitale arising from his violations of the Pennsylvania 

Securities Act in connection with a $10 million securities offering. 

79. Specifically, the Pennsylvania Securities Commission found Vitale was the CEO 

and president of an unregistered broker-dealer he operated to place cold calls to solicit 

unaccredited investors to invest in an unregistered securities offering. 

80. The Pennsylvania Securities Commission found Vitale violated Section 1-201 of 

the Pennsylvania Securities Act, which makes it unlawful to offer or sell unregistered securities, 

and Section 1-301(a) of the Act, which makes it unlawful to transact business as an unregistered 

broker-dealer. 

81. Based on Vitale' s violations of the Pennsylvania securities laws, the Pennsylvania 

Securities Commission entered an Order directing him to cease and desist his securities offering 

in Pennsylvania. 

2. FINRA Has Barred Vitale From Associating With Any Broker-Dealer 

82. In Spring 2009, FINRA initiated an investigation, including but not limited to, 

whether Vitale had engaged in excessive trading in a customer's account in violation of FINRA 

Conduct Rule 2010 and Procedural Rule 8210. 

13 



Case 1:17-cv-21033-JAL   Document 1   Entered on FLSD Docket 03/20/2017   Page 14 of 24

83. On October 14, 2010, the FINRA Department of Enforcement filed a Disciplinary 

Proceeding against Vitale for failing to respond to at least seven FINRA requests for information 

in connection with the investigation. 

84. The FINRA Hearing Officer found Vitale "frustrated FINRA's investigation into 

his misconduct, which had been protracted for over a year because of his obstructive tactics," 

and found his misconduct "renders him 'presumptively unfit for employment in the securities 

industry.'" 

85. On September 11, 2011, FINRA barred Vitale from associating with any FINRA 

member in any capacity. 

3. Vitale and Gray Tell LottoNet Investors Vitale Is "Donovan Kelly" 

86. To conceal Vitale's disciplinary history from potential investors, Gray and Vitale 

referred to Vitale as "Donovan Kelly." 

87. Vitale used the alias Donovan Kelly during his telephone calls to solicit potential 

investors to contribute to LottoNet. 

E. LottoNet and Vitale Acted As Unregistered Broker-Dealers, 
And Gray Aided And Abetted This Conduct 

88. From no later than May 2016 until at least February 2017, LottoNet, through 

Gray, retained Vitale and other unregistered sales agents to solicit investors for the LottoNet 

offering. 

89. Gray and LottoNet agreed to pay Vitale and other unregistered sales agents for 

raising investor funds directly and through an unregistered boiler room where Gray managed at 

least 13 individuals to assist him with investor solicitation. 

14 



Case 1:17-cv-21033-JAL   Document 1   Entered on FLSD Docket 03/20/2017   Page 15 of 24

90. In exchange for soliciting investors, LottoNet and Gray used investor funds to pay 

the unregistered sales agents and others commissions totaling at least 35 percent of the amount 

raised from investors, broken down as follows: 

• 10-15% commission to "fronters," who placed the initial cold calls to solicit potential 
investors; and 

• 20% commission to "closers," who followed up with the potential investors to close 
the deals and obtain the investor funds. 

91. Lotto Net has paid the sales agents at least $1.1 million of investor funds. 

92. Neither the boiler room nor Vitale or the other sales agents used to sell the 

LottoNet shares were registered as broker-dealers, as required by the federal securities law. 

COUNT I 

Fraud in Violation of Section lO(b) and Rule 10b-5(a) of the Exchange Act 
Against LottoNet, Gray, and Vitale 

93. The Commission repeats and realleges paragraphs 1 through 92 of its Complaint. 

94. LottoNet and Gray, beginning no later than July 2015, and Vitale, beginning no 

later than May 2016, directly or indirectly, by use of the means and instrumentalities of interstate 

commerce, or of the mails, in connection with the purchase or sale of securities, knowingly or 

recklessly have employed devices, schemes or artifices to defraud in connection with the 

purchase or sale of securities. 

95. By reason of the foregoing, LottoNet, Gray, and Vitale, directly or indirectly 

violated, and, unless enjoined, are reasonably likely to continue to violate, Section 1 O(b) of the 

Exchange Act [15 U.S.C. § 78j(b)] and Exchange Act Rule 10b-5(a) [17 C.F.R. § 240.1 Ob-5(a)]. 

15 



Case 1:17-cv-21033-JAL   Document 1   Entered on FLSD Docket 03/20/2017   Page 16 of 24

COUNT II 

Fraud in Violation of Section lO(b) and Rule 10b-5(b) of the Exchange Act 
Against LottoNet, Gray, and Vitale 

96. The Commission realleges and incorporates paragraphs 1 through 92 of this 

Complaint. 

97. LottoNet and Gray, beginning no later than July 2015, and Vitale, beginning no 

later than May 2016, directly or indirectly, by use of the means or instrumentalities of interstate 

commerce, or of the mails, in connection with the purchase or sale of securities, knowingly or 

recklessly made untrue statements of material facts or omitted to state material facts in order to 

make the statements made, in the light of the circumstances in which they were made, not 

misleading. 

98. By reason of the foregoing, LottoNet, Gray, and Vitale, directly or indirectly 

violated, and, unless enjoined, are reasonably likely to continue to violate, Section 1 O(b) of the 

Exchange Act [15 U.S.C. § 78j(b)] and Exchange Act Rule 10b-5(b) [17 C.F.R. § 240.10b-5(b)]. 

COUNT III 
Fraud in Violation of Section lO(b) and Rule 10b-5(c) of the Exchange Act 

Against LottoNet, Gray, and Vitale 

99. The Commission repeats and realleges paragraphs 1 through 92 of this Complaint. 

100. LottoNet and Gray, beginning no later than July 2015, and Vitale, beginning no 

later than May 2016, directly or indirectly, by use of the means or instrumentalities of interstate 

commerce, or of the mails, in connection with the purchase or sale of securities, knowingly or 

recklessly engaged in acts, practices, and courses of business which have operated, are now 

operating, and will operate as a fraud upon the purchasers of such securities. 

16 



Case 1:17-cv-21033-JAL   Document 1   Entered on FLSD Docket 03/20/2017   Page 17 of 24

101. By reason of the foregoing, LottoNet, Gray, and Vitale, directly or indirectly 

violated, and, unless enjoined, are reasonably likely to continue to violate, Section 1 O(b) of the 

Exchange Act [15 U.S.C. § 78j(b)] and Exchange Act Rule 10b-5(c) [17 C.F.R. § 240.1 Ob-5(c)]. 

COUNT IV 

Fraud in the Offer or Sale of Securities in 
Violation of Section 17(a)(l) of the Securities Act 

Against LottoNet, Gray, and Vitale 

102. The Commission repeats and realleges paragraphs 1 through 92 of this Complaint 

as if fully restated herein. 

103. LottoNet and Gray, beginning no later than July 2015, and Vitale, beginning no 

later than May 2016, directly or indirectly, in the offer or sale of securities, by the use of means 

or instruments of transportation or communication in interstate commerce or of the mails have 

knowingly or recklessly employed devices, schemes or artifices to defraud. 

104. By reason of the foregoing, Lotto Net, Gray, and Vitale, directly or indirectly 

violated, and, unless enjoined, are reasonably likely to continue to violate, Section 17(a)(l) of the 

Securities Act [15 U.S.C. § 77q(a)(l)]. 

COUNTV 

Fraud in the Offer or Sale of Securities in 
Violation of Section 17(a)(2) of the Securities Act 

Against LottoNet, Gray, and Vitale 

105. The Commission repeats and realleges paragraphs 1 through 92 of this Complaint. 

106. LottoNet and Gray, beginning no later than July 2015, and Vitale, beginning no 

later than May 2016, directly or indirectly, in the offer or sale of securities, by the use of means 

or instruments of transportation or communication in interstate commerce or of the mails have 

negligently obtained money or property by means of untrue statements of material facts and 

17 



Case 1:17-cv-21033-JAL   Document 1   Entered on FLSD Docket 03/20/2017   Page 18 of 24

omissions to state material facts necessary in order to make the statements made, in the light of 

the circumstances under which they were made, not misleading. 

107. By reason of the foregoing, LottoNet, Gray, and Vitale, directly or indirectly 

violated, and, unless enjoined, are reasonably likely to continue to violate, Section l 7(a)(2) of the 

Securities Act [15 U.S.C. § 77q(a)(2)]. 

COUNT VI 

Fraud in the Offer or Sale of Securities in 
Violation of Section 17(a)(3) of the Securities Act 

Against LottoNet, Gray, and Vitale 

108. The Commission repeats and realleges paragraphs 1 through 92 of this Complaint. 

109. LottoNet and Gray, beginning no later than July 2015, and Vitale, beginning no 

later than May 2016, directly or indirectly, in the offer or sale of securities, by the use of means 

or instruments of transportation or communication in interstate commerce or of the mails have 

negligently engaged in transactions, practices, or courses of business which operated or would 

have operated as a fraud or deceit upon the purchasers. 

110. By reason of the foregoing, Lotto Net, Gray, and Vitale, directly or indirectly 

violated, and, unless enjoined, are reasonably likely to continue to violate, Section l 7(a)(3) of the 

Securities Act [15 U.S.C. § 77q(a)(3)]. 

COUNT VII 

Unregistered Broker-Dealer Conduct in Violation of Section lS(a)(l) of the Exchange Act 
Against LottoN et and Vitale 

111. The Commission repeats and realleges paragraphs 13, 15-18, 20, 22, 24, 33-46, 

88-92 of this Complaint. 

112. LottoNet, beginning no later than July 2015, and Vitale, beginning no later than 

May 2016, directly and indirectly by the use of the means and instrumentalities of interstate 

18 



Case 1:17-cv-21033-JAL   Document 1   Entered on FLSD Docket 03/20/2017   Page 19 of 24

commerce, while acting as a broker or dealer engaged in the business of effecting transactions in 

securities for the accounts of others, effected transactions in securities, or induced or attempted 

to induce the purchase and sale of securities, without registering as a broker-dealer in accordance 

with Section 15(b) of the Exchange Act, 15 U.S.C. § 78o(b). 

113. By reason of the foregoing, LottoNet and Vitale, directly or indirectly, violated 

and, unless enjoined, will continue to violate Section 15(a)(l) of the Exchange Act [15 U.S.C. 

§ 78o(a)(l)]. 

COUNT VIII 

Aiding And Abetting LottoNet and Vitale's Unregistered 
Broker-Dealer Conduct in Violation of Section 15(a)(l) of the Exchange Act 

Against Gray 

114. The Commission repeats and realleges paragraphs 13-18, 20, 22, 24, 33-46, 88-92 

of this Complaint. 

115. LottoNet, beginning no later than July 2015, and Vitale, beginning no later than 

May 2016, directly or indirectly, by the use of the means and instrumentalities of interstate 

commerce, while acting as a broker or dealer engaged in the business of effecting transactions in 

securities for the accounts of others, effected transactions in securities, or induced or attempted 

to induce the purchase and sale of securities, without registering as a broker-dealer in accordance 

with Section 15(b) of the Exchange Act, 15 U.S.C. § 78o(b). 

116. Gray knowingly or recklessly provided substantial assistance to LottoNet and 

Vitale in connection with their violations of Section 15(a)(l) of the Exchange Act. 

117. By reason of the foregoing, Gray and aided and abetted, and unless enjoined, is 

reasonably likely to continue to aid and abet LottoNet and Vitale's violations of Section 15(a)(l) 

of the Exchange Act. [15 U.S.C. § 78o(a)(l)]. 

19 



Case 1:17-cv-21033-JAL   Document 1   Entered on FLSD Docket 03/20/2017   Page 20 of 24

COUNT IX 

Aiding And Abetting LottoNet's Unregistered 
Broker-Dealer Conduct in Violation of Section 15(a)(l) of the Exchange Act 

Against Vitale 

118. The Commission repeats and realleges paragraphs 13-18, 20, 22, 24, 33-46, 88-

92 of this Complaint. 

119. LottoNet, beginning no later than July 2015, directly or indirectly, by the use of 

the means and instrumentalities of interstate commerce, while acting as a broker or dealer 

engaged in the business of effecting transactions in securities for the accounts of others, effected 

transactions in securities, or induced or attempted to induce the purchase and sale of securities, 

without registering as a broker-dealer in accordance with Section 15(b) of the Exchange Act, 15 

U.S.C. § 78o(b). 

120. Vitale knowingly or recklessly provided substantial assistance to LottoNet in 

connection with its violation of Section 15(a)(l) of the Exchange Act. 

121. By reason of the foregoing, Vitale and aided and abetted, and unless enjoined, is 

reasonably likely to continue to aid and abet LottoNet's violation of Section 15(a)(l) of the 

Exchange Act. [15 U.S.C. § 78o(a)(l)]. 

COUNTX 

Section 20(a) - Control Person Liability 
Against Gray 

122. The Commission repeats and realleges paragraphs 1 through 92 of this Complaint. 

123. Beginning no later than July 2015, Gray has been, directly or indirectly, a control 

person of Lotto Net for purposes of Section 20(a) of the Exchange Act. [ 15 U .S.C. § 78t(a)). 

124. Beginning no later than July 2015, LottoN et violated Section 1 O(b) and Rule 1 Ob-

5 of the Exchange Act. 

20Case 1:17-cv-21033-JAL   Document 1   Entered on FLSD Docket 03/20/2017   Page 21 of 24

125. As a control person of LottoNet, Gray is jointly and severally liable with and to 

the same extent as LottoNet for each of its violations of Section lO(b) and Rule lOb-5 of the 

Exchange Act. 

126. By reason of the foregoing, Gray directly and indirectly violated, and unless 

enjoined, is reasonably likely to continue violating, Section 1 O(b) and Rule 1 Ob-5 of the 

Exchange Act. [ 15 U.S.C. § 78j(b) and § 78t(a), and 17 C.F.R. § 240.1 Ob-5). 

RELIEF REQUESTED 

WHEREFORE, the Commission respectfully requests that the Court find that 

Defendants committed the violations alleged and: 

I. 

Temporary Restraining Order, Preliminary Injunction and Permanent Injunction 

Issue a Temporary Restraining Order, a Preliminary Injunction and a Permanent 

Injunction, restraining and enjoining: Defendants LottoNet, Gray, and Vitale, their officers, 

agents, servants, employees, attorneys, and all persons in active concert or participation with 

them, and each of them, from violating Section 17(a) of the Securities Act, Section 10(b) and 

Rule 10b-5(b) of the Exchange Act, and Section 15( a)( 1) of the Exchange Act. 

II. 

Asset Freeze and Sworn Accountings 

Issue an Order freezing the assets of all Defendants and Relief Defendants until further 

Order of the Court and requiring the Defendants and Relief Defendants to file sworn accountings 

with this Court. 

21 



Case 1:17-cv-21033-JAL   Document 1   Entered on FLSD Docket 03/20/2017   Page 22 of 24

III. 

Records Preservation 

Issue an Order requiring all Defendants and Relief Defendants to preserve any records 

related to the subject matter of this lawsuit that are in their custody or possession or subject to 

their control. 

IV. 

Disgorgement 

Issue an Order directing all Defendants and Relief Defendants to disgorge all ill-gotten 

gains, including prejudgment interest, resulting from the acts or courses of conduct alleged in 

this Complaint. 

V. 

Penalties 

Issue an Order directing all Defendants to pay civil money penalties pursuant to Section 

20(d) of the Securities Act, 15 U.S.C. § 77t(d), and Section 21(d) of the Exchange Act, 15 U.S.C. 

§ 78u(d). 

VI. 

Repatriation Order 

Issue an Order directing Defendant LottoNet to repatriate any funds held at any bank or 

other financial institution not subject to the jurisdiction of the Court. 

VII. 

Appointment of a Receiver 

Appoint a receiver over Defendant Lotto Net and all Relief Defendants. 

22 



Case 1:17-cv-21033-JAL   Document 1   Entered on FLSD Docket 03/20/2017   Page 23 of 24

VIII. 

Officer and Director Bar 

Issue an Order barring Defendant Gray from serving as an officer or director of any 

public company pursuant to Section 20(e) of the Securities Act, Sections 21(d)(2) and 21(d)(5) 

of the Exchange Act, and Section 305(b)(5) of the Sarbanes-Oxley Act. 

IX. 

Further Relief 

Grant such other and further relief as may be necessary and appropriate. 

x. 

Retention of Jurisdiction 

Further, the Commission respectfully requests that the Court retain jurisdiction over this 

action in order to implement and carry out the terms of all orders and decrees that it may enter, or 

to entertain any suitable application or motion by the Commission for additional relief within the 

jurisdiction of this Court. 

DEMAND FOR JURY TRIAL 

The Securities and Exchange Commission hereby demands a jury trial in this case. 

23 



Case 1:17-cv-21033-JAL   Document 1   Entered on FLSD Docket 03/20/2017   Page 24 of 24

March 20, 2017 Respectfully submitted, 

By: e ·i le rm 
Amie Riggle Berlin, Esq. 
Senior Trial Counsel 
Florida Bar No. 630020 
Direct Dial: (305) 982-6322 
Direct email: [email protected] 

Attorney for Plaintiff 
SECURITIES AND EXCHANGE COMMISSION 
801 Brickell A venue, Suite 1800 
Miami, Florida 33131 
Telephone: (305) 982-6300 
Facsimile: (305) 536-4154 

Katharine Zoladz 
Of Counsel 

24 



Case 1:17-cv-21033-JAL   Document 1-1   Entered on FLSD Docket 03/20/2017   Page 1 of 1
JS 44 (Rev. 07/16) FLSD Revised 07/01/2016 CIVIL COVER SHEET 
The JS 44 civil cover sheet and the information contained herein neither replace nor supplement the filing and service of pleadings or other papers as required by law, except as 
provided by local rules of court. This form, approved by the Judicial Conference of the United States in September 1974, is required for the use of the Clerk of Court for the purpose 
of initiating the civil docket sheet. (SEE INSTRUCTIONS ON NliXT PAGE OF 111/S FORM.) NOTICE: Attorneys MUST Indicate All Re-filed Cases Below. 

I. (a) PLAINTIFFS SECURITIES ANDEXCHANGE DEFENDANTS LottoNet Operating Corp., David Gray, Joseeph 
COMMISSION Vitale a/k/a Donovan Kelly, Oracle Marketing II 

(b) County of Residence of First Listed Plaintiff 

(hXClil'rIN U.S. l'IAIN711'FCASb~\} 

( C) Attorneys (Firm Name, Address, and Telephone Number) 

Securities & Exchange Commission, Amie Riggle Berlin, Esq. 
80 I Briekell Ave. # 1800, Miami, FL 33131, 305-982-6322 

Attorneys (If Known) 

MAR 2 0 2017 
(d)Check County Where Action Arose: D MIAMI-DADE D MONROE D BROWARD D PALM BEACH D MARTIN DST. LUCIE D INDIAN RIVER D OKEEC 

II. BASIS OF JURISDICTION (Place an "X" in One Box Only) Ill. CITIZENSHIP OF PRINCIPAL PARTIES 

'1!'.I I U.S. Government 

Plaintiff 

D 2 U.S. Government 
Defendant 

03 

04 

Federal Question 

(U.S. Government Not a Party) 

Diversity 
(lnd1cale Citizenship ~f Parties m Item Ill) 

(For Diversity ( 'ases Only) 
PTF DEF 

Citizen of This State 0 I 0 

Citizen of Another State 02 0 

Incorporated or Principal Place 
of Business In This State 

Incorporated and Principal Place 
of Business In Another State 

Citizen or Subject of a 

Foreign Country 
03 0 3 Foreign Nation 

D 05 

D 6 D 6 

IV. NATURE OF SUIT (Place an "X" in One Box Only) 

CONTRAct TORTS 
D I I 0 Insurance 
D 120 Marine 
D 130 Miller Act 
D 140 Negotiable Instrument 
D 150 Recovery of Overpayment 

& Enforcement of Judgment 
D 151 Medicare Act 
D 152 Recovery of Defuulted 

Stu dent Loans 
(Exel. Veterans) 

D 153 Recovery of Overpayment 
of Veteran's Benefits 

D 160 Stockholders' Suits 
D 190 Other Contract 
D 195 Contract Product Liability 
0 196 Franchise 

REAL PROPERTY 
0 210 Land Condemnation 
0 220 Foreclosure 

0 230 Rent Lease & Ejectment 

0 240 Torts to Land 

0 245 Tort Product Liability 

0 290 All Other Real Property 

PERSONAL INJURY 
0 310 Airplane 
0 315 Airplane Product 

Liability 
D 320 Assault, Libel & 

Slander 
0 330 Federal Employers' 

Liability 
D 340 Marine 
0 345 Marine Product 

Liability 
0 350 Motor Vehicle 
0 355 Motor Vehicle 

Product Liability 
0 360 Other Personal 

Injury 
0 362 Personal Injury -

Med. Malpractice 
CIVIL RIGHTS 

0 440 Other Civil Rights 
0441 Voting 

0 442 Employment 

0 i~~~~d~;ions 
0 445 Amer. w/Disabilities -

Employment 
0 446 Amer. w/Disabilities -

Other 
D 448 Education 

PERSONAL INJURY 
0 365 Personal Injury -

Product Liability 
0 367 Health Care/ 

Pharmaceutical 
Personal Injury 
Product Liability 

0 368 Asbestos Personal 
Injury Product 
Liability 

PERSONAL PROPERTY 
0 370 Other Fraud 
0 371 Truth in Lending 
0 380 Other Personal 

Property Damage 
0 385 Property Damage 

Product Liability 

PJUSOl\IER P&flTIONS 
Habeas Corpus: 

D 463 Alien Detainee 
0 510 Motions to Vacate 

Sentence 

Other: 

0 530 General 

0 535 Death Penalty 
D 540 Mandamus & Other 
0 550 Civil Rights 
0 555 Prison Condition 

560 Civil Detainee -
0 Conditions of 

Confinement 

FORFEITUUIPINALTY 
0 625 Drug Related Seizure 

of Property 21 use 881 
0 690 Other 

LABOR 
0 710 Fair Labor Standards 

Act 
0 720 Labor/Mgmt. Relations 
0 740 Railway Labor Act 
0 751 Family and Medical 

Leave Act 
0 790 Other Labor Litigation 
0 791 Empt. Rel. Inc. 

Security Act 

IMMIGRATION 
0 462 Naturalization Application 
0 465 Other Immigration 

Actions 

V. ORIGIN 
.(J I Original 

Proceeding 

(Place an "X" in One Box Only) 

O 2 Removed O 3 Re-filed O 
from State (See VI 
Court below) 

4 Reinstated 
or 
Reopened 

0 5 Transferred from 
another district 
(.'peqfY) 

0 6 Multidistrict 
Litigation 
Transfer 

BANKRUPTCY 
0 422 Appeal 28 USC 158 
0 423 Withdrawal 

28 USC 157 

PROPERTY RIGHTS 
0 820 Copyrights 
0830 Patent 
0 840 Trademark 

SOCIAL SECURITY 
0 861 HIA (I 395tl) 
0 862 Black Lung (923) 
0 863 DIWC/DIWW (405(g)) 
0 864 SSID Title XVI 
0 865 RSI (405(g)) 

FEDERAL TAX SUITS 
D 870 Taxes (U.S. Plaintiff 

or Defendant) 

0 
871 IRS-Third Party 26 
USC 7609 

OTHER STATUTES 
0 375 False Claims Act 
0 376 Qui Tam (31 USC 

3729 (a)) 
D 400 State Reapportionment 
0 410 Antitrust 
0 430 Banks and Banking 
0 450 Commerce 
0 460 Deportation 
0 4 70 Racketeer Influenced and 

Corrupt Organizations 
0 480 Consumer Credit 
0 490 Cable/Sat TV 
!iii 850 Securities/Commodities/ 

Exchange 
0 890 Other Statutory Actions 
0 891 Agricultural Acts 
0 893 Environmental Matters 
0 895 Freedom of Information 

Act 
0 896 Arbitration 
D 899 Administrative Procedure 

Act/Review or Appeal of 

Agency Decision 

0 ~i~u~~nstitutionality of State 

D 7 Appeal to 
District Judge 
from Magistrate 
Jud men! 

D D 9 Remanded from 
8 Multidistrict Appellate Court 

~it~ir~~~ 
File 

VI. RELATED/ 
RE-FILED CASE(S) 

(See instructions) a) Re-filed Case DYES ~NO 
JUDGE: 

b) Related Cases DYES ~NO 
DOCKET NUMBER: 

Cite the U.S. Civil Statute under which you are filing and Write a Brief Statement of Cause (J)o not citejurirdi«tional .rtatutes unless diversity) 

VII. CAUSE OF ACTION l 5USC§788j(b); 15USC§77q(a)(l-3); 15USC§78o(b); 15USC§78o(a)(l);l 5USC78t(a); l 7CFR§240. I Ob-5(a-c) 

VIII. REQUESTED IN 
COMPLAINT: 

FOR OFFICE USE ONLY 
RECEIPT# 

LENGTH OF TRIAL via days estimated (for both sides to try entire case) 

O CHECK IF THIS IS A CLASS ACTION DEMAND$ 
UNDER F.R.C.P. 23 

CHECK YES only if demanded in complaint 

0 Yes iZ! No 

AMOUNT IFP JUDGE MAG JUDGE