Wwebnet, CEO Face Suit for Disclosure Failings

The US Securities and Exchange Commission has filed a civil action against Wwebnet, Inc. and its chief executive officer over allegations of faulty disclosure to investors in Wwebnet.

The SEC’s complaint alleges that, between 2005 and 2008, Wwebnet, a video software company, and Robert Kelly made false and misleading statements and omissions to investors, including:

(1) failing to disclose and misrepresentations concerning the existence of a related-party transaction, which enabled Kelly to funnel at least $2.1 million of investor funds to himself, including approximately $2 million which was sent to his personal options trading account in the Cayman Islands;

(2) misrepresentations that Wwebnet had been generating revenue pursuant to contracts with entertainment companies when Wwebnet had never generated any such revenue;

and (3) misrepresentations concerning Kelly’s effective compensation by failing to disclose that Wwebnet paid approximately $180,000 ($9,000 per month) in rent on Kelly’s personal luxury apartment in Manhattan.

The SEC wants the defendants to pay civil penalties and disgorgement of ill-gotten gains plus prejudgment interest, and imposing a penny stock bar and an officer and director bar against Kelly.