The allegations read: The securities and exchange commission (the commission), for its complaint against defendants gopala krishnan (krishnan), manivannan shanmugam (shanmugam), sakthivel palani gounder (gounder), nanban ventures llc (ventures), gsm eternal llc, aka northstars fintech (gsm), himalayan fintech llc, (himalayan), and centum fintech llc, aka sunshines fintech (centum) (collectively, defendants), alleges that from at least april 16, 2021 to the present, krishnan, shanmugam, and gounder (founders), acting through their controlled "nanban" companies, have raised at least approximately $129.7 million from over 360 investors in fraudulent securities offerings targeting members of the indian community in the dfw-area, including approximately $89.8 million for five nanban branded private investment funds that ventures offered to retail investors, and $39.9 million from selling high-yield promissory notes to so-called friends and family investors through gsm, himalayan, and centum (companies). To raise additional investments and keep their fraudulent enterprise afloat, the defendants have been overstating the profitability of the investments and paying investors and themselves millions of dollars in fake profits using, in substantial part, other investor funds (ponzi payments). To raise investor funds in the first instance, defendants made misrepresentations and omissions to investors. Defendants told the fund and note investors that they would invest their money using gk strategies, which krishnan (who goes by "gk") falsely claimed is a proprietary options trading method that never loses money and outperforms the stock market. In reality, krishnan and the other founders grossly misrepresented the nature and performance of gk strategies to lure investors. Defendants also misrepresented the funds' investments and concealed conflicts of interest. Ventures then provided fund investors a statement of investments purporting to show that most of the funds' assets were invested in three fintech companies. But, the so called fintech companies were actually simply other nanban companies that the founders control and disguised to appear as third-party fintech companies. In fact, ventures and the founders did not invest the majority of the funds' assets as represented. Instead, they purportedly invested most of the assets in unsecured promissory notes issued by the related-party companies - companies that are not engaged in fintech business and have little or no assets other than investor funds or assets purchased with investor funds. Ventures and the founders also acted as investment advisers to the funds, and, therefore, owed a fiduciary duty to the funds. They blatantly breached this duty by putting the founders' interests ahead of the funds' interests, engaging in and profiting from undisclosed conflicts of interest, and misusing fund assets in a manner that was inconsistent with the fund documents, including by entering into the related-party notes and taking excess compensation. Between july 29, 2021 and june 20, 2023, the founders, acting through the companies, paid themselves at least approximately $6 million from commingled investor funds, including payments of approximately $3.3 million to krishnan, $1.8 million to gounder, and $900,000 to shanmugam. In addition, the venture capital funds (vc funds) transferred approximately $2 million in compensation to the vc funds' general partner entities and management entities, including ventures. These payments were not authorized by the vc funds' documents and were also made, at least in substantial part, using investor funds. By their misconduct, defendants violated, and unless enjoined will continue to violate section 10(b) of the exchange act and rule 10b-5 thereunder and section 17(a) of the securities act. Krishnan, shanmugam, gounder, and ventures have violated, and unless enjoined will continue to violate, sections 206(1), (2), (3) and (4) of the advisers act and rule 206(4)-8 thereunder.
