The Securities and Exchange Commission (SEC) has filed fraud charges against Canopy Financial, a provider of healthcare banking technology, and frozen the assets of its co-founder who allegedly provided investors with forged financial statements to lure them into a $75 million investment scheme.
According to the SEC, between October 2008 and this August, Jeremy Blackburn, who resigned earlier this month as president and COO, allegedly got investors to hand over $75 million in a private placement offering in the firm by misrepresenting its financial position.
Investors in the group include Foundation Capital, GGV Capital and Spectrum Equity Investors.
Blackburn is accused of providing them with bank and financial statements containing false and misleading information as well as a falsified audit report purportedly from accounting firm KPMG.
Blackburn moved at least $1.7 million from the offering into his personal bank accounts, says the watchdog.
A court has now granted the SEC a temporary restraining order and asset freeze against Blackburn. The FBI is also investigating the company.
The alleged fraud came to light when KPMG discovered that Canopy had been claiming that its financial statements for 2007 and 2008 were audited by the accounting firm. KPMG issued a cease-and-desist letter to Canopy demanding that it stop the unauthorised use of its name and the audit report purportedly issued by it.
Last week it filed for Chapter 11 bankruptcy in Illinois. An affidavit revealed that an investigation by a committee formed of outside directors, attorneys and forensic accountants found that two people at the company were involved in the alleged fraud and were removed from management and placed on unpaid leave.