SEC v Andrew DeFrancesco Fair Fund

If you purchased or acquired Cool Holdings Inc. common stock (the “Security”) during the period between September 16, 2018 and October 26, 2018, inclusive, (“Relevant Period”), you may be entitled to a Distribution Payment from the SEC v Andrew DeFrancesco Fair Fund.

Background:

On January 6, 2023, the SEC filed a Complaint against Andrew DeFrancesco (“DeFrancesco”), Marlio Mauricio Diaz Cardona (“Diaz”), Carlos Felipe Rezk (“Rezk”), Nikola Faukovic (“Faukovic”), and Catherine DeFrancesco (collectively, the “Defendants”). In the Complaint, the SEC alleged that beginning in March of 2018, Defendants DeFrancesco, Diaz, and Rezk, officers and directors of Cool Holdings, Inc. (Cool Holdings”), orchestrated a fraudulent scheme to deceive the investing public about the operations and prospects of their company through repeated, materially false and misleading misstatements and omissions in SEC filings and in a promotion campaign. From March 2018 through early June 2019, Cool Holdings made materially false and misleading statements and omissions in its SEC filings including about its critical business relationship with Apple Inc. Certain Defendants signed Cool Holdings’ false and misleading quarterly reports, annual reports, and registration statement and amendments. The registration statement, which never became effective, sought to offer and sell up to $25,000,000 worth of securities.

The Defendants also orchestrated a “pump and dump” of Cool Holdings’ stock which included secretly funding a series of fraudulent articles promoting Cool Holdings as a profitable and expanding company. The false news released during mid-September 2018 caused Cool Holdings’ share price and trading volume to spike during the week the articles were published and to remain elevated for a period of weeks after. Id. 4. During the promotional campaign, DeFrancesco secretly sold, through accounts controlled by nominee entities and nominally controlled by his ex-wife Catherine DeFrancesco, millions of shares of Cool Holdings 2generating proceeds of more than $11.5 million. Id. 5-7. Diaz, Faukovic, and Rezk also sold Cool Holdings stock while the company was disseminating false and misleading information in its SEC filings. Id. 8. As a result of the false information published during the promotional campaign, investors overpaid for shares of Cool Holdings and suffered losses when the share price collapsed.

On June 15, 2023, the Court entered final judgments as to Catherine DeFrancesco and Faukovic. Final J. Def. Catherine DeFrancesco. The Court found Catherine DeFrancesco liable for a civil penalty of $122,782.00 and found Faukovic liable for disgorgement of $11,779.43, prejudgment interest of $2,570.89, and a civil penalty of $111,614.00 for a total of $125,964.32. On July 5, 2023, the Court entered a final judgment as to Andrew DeFrancesco and ordered him liable for disgorgement of $1,034,051.52, prejudgment interest of $242,018.97, and a civil penalty of $1,737,224.52 for a total of $3,013,295.01. On November 21, 2023, the Court entered final judgments as to Diaz and Rezk and ordered them each liable for a civil penalty of $223,229.

On July 22, 2024, the Court entered an order establishing a Fair Fund, including post-judgment interest and any future funds collected from the Defendants in the Fair Fund. The Commission holds $2,283,537.34 collected from the Defendants pursuant to the Final Judgments. As of January 28, 2025, the Fair Fund balance is $2,400,755.96. The Fair Fund has been deposited in an SEC-designated account at the United States Department of the Treasury, and any accrued interest will be added to the Fair Fund. The Court approved the Plan in its entirety on May 2, 2025.