A federal judge has ordered a Christian music promoter to pay back nearly $1.6 million in investor funds he promised would be used to put on Christian music festivals but instead used to pay down debt.
In a 23-page judgment Tuesday, U.S. District Judge John H. Rich III of Maine said 56-year-old Jeffrey Wall and his company, The Lighthouse Events LLC, are liable for the disgorgement of over $1,589,815 in profit gained from defrauding investors.
Additionally, the judge ordered the payment of over $200,000 in interest and imposed civil penalties of $1,589,815 against both Wall and Lighthouse Events.
Lighthouse Events, which came to existence as a limited liability corporation in 2015, described itself as a Christian ministry that promoted, organized and hosted Christian music conferences and festivals throughout the New England area. Wall is its founder and sole member.
The company allegedly operated in an unincorporated fashion for seven years before 2015.
But in April 2019, the U.S. Securities and Exchange Commission charged Wall and Lighthouse of defrauding nearly 150 investors solicited to become "financial partners” of the company.
SEC alleged that from January 2014 through October 2018, Wall and Lighthouse fraudulently raised over $3.1 million in unregistered offerings from over 149 investors to promote Christian music concerts in the region.
In its complaint, the SEC said Wall and Lighthouse falsely told potential investors that their funds would be used only to promote and host Christian music concerts and even guaranteed repayment of their investments without informing them of Lighthouse’s financial struggles due to high interest from short-term loans and declining ticket sales.
According to the SEC, investor funds were used for other expenses such as paying Lighthouse’s existing debt and making payments to earlier investors using new investor funds.
Wall and Lighthouse were accused by the SEC of violating anti-fraud provisions of the Securities Act of 1933 and the Securities Act of 1934.
As part of the judgment, Wall and Lighthouse are barred from “participating in the issuance, purchase, offer or sale of any security” except when it comes to Wall’s personal accounts.
“[Wall and Lighthouse] cast a wide net in trolling for potential investors, indiscriminately inviting anyone with access to the internet and an interest in Christian music to fall victim to their fraudulent scheme,” Rich wrote in his judgment. “This ban, which does not deprive Mr. Wall of his living or the opportunity to purchase and sell securities for his own personal account, maximizes the protection available to the unsuspecting public from any similar such endeavor by Mr. Wall or Lighthouse again.”
According to the SEC, in 2014 Wall began borrowing money from cash-advance lending companies as an individual and on behalf of Lighthouse Events.
Wall was said to have borrowed a total of $700,000 from about a dozen different cash-advance companies. According to the legal filing, the repayment of the cash advances with interest cost about $1.1 million from 2014 to 2018.
However, the SEC said Wall was unable to repay all of the cash advances and five cash-advance companies obtained court orders requiring Wall individually or on behalf of the company to repay over $142,000.
The companies began garnishing proceeds from Wall’s bank accounts, ticket sales and cash borrowings.
According to the judgment, Wall began soliciting promissory note investors through electronic and in-person means, including concerts and festivals. According to the court document, the Lighthouse website at one point included a tab titled “Become an Investor.”
Lighthouse also used email blasts to solicit investors from New England, Mid-Atlantic and southern states.
According to the judge, a typical Lighthouse email pitch drafted by Wall reads: “Become a financial partner with our summer festivals. Help us create the message of Christ plus earn 20 percent on your investment.”
For some investors, their promissory notes specified certain dates or events that their funds would be used for. But according to the judgment, no mechanism was ever implemented by Lighthouse to ensure that the funds were used for their stated purposes.
Rich’s judgment explained that Wall used one bank account to deposit all Lighthouse revenues and pay all the company’s expenses. As profitability from concerts decreased and as cash borrowing increased, the judge found that investor funds were used for payments of daily remittances and court-ordered judgments to cash advance companies as well as payments to earlier investors.
“Mr. Wall ‘guaranteed’ the repayment of the promissory notes in monthly installments with a fixed annual return ranging from 10 percent to 25 percent,” the judgment explains. “Mr. Wall told prospective investors that the promissory notes were ‘secured,’ explicitly stating to some investors that repayments of principal plus interest was not dependent on the success of any concert or music festival.”
Although Wall claimed that all prior investors had been repaid 100 percent of the money invested, the judge ruled that Wall and Lighthouse failed to fully repay some investors and also failed to pay a single installment to others by 2016.
The SEC argued that Wall and Lighthouse obtained the investor funds through misstatements and omissions and that the promissory note offering through Lighthouse was never registered with the SEC.
Wall received a notice from the state of Maine in 2018 warning him to cease issuing unregistered promissory notes. But according to the judgment, Wall continued to execute more promissory notes and deposit the investments despite the state’s warning.
Although Wall and Lighthouse raised over $3 million from nearly 150 investors, they still owe $1,589,815 to 90 investors, according to the court document.
“The SEC’s evidence suffices to establish that Mr. Wall and Lighthouse made material misstatements and omissions with scienter in connection with the purchase and sale of securities in interstate commerce,” Rich concluded. “There is, accordingly, no genuine dispute that the defendants committed securities fraud.”
Last November, the SEC Office of Investor Education and Advocacy and the Retail Strategy Task Force published an “Investor Alert” to help investors avoid fraud that targets members of shared faith communities.
“Having something in common is a great way to strike up a conversation and to gain someone’s trust, and the tendency to trust someone may be especially strong when that person appears to share your beliefs and values,” the alert reads. “But sometimes fraudsters try to take advantage of that trust by targeting people of faith — the fraudster may even be (or pretend to be) part of the very group they are trying to cheat. We urge you to be on the lookout for investment fraud, even in your faith-based community.”
The Lighthouse Events website is no longer active. According to the Better Business Bureau, Lighthouse Events is no longer in business.
The Christian Post reached out for comment on the judge’s order via the Lighthouse Events’ Facebook page. A response is pending.