FINRA suspended former IndieVest Securities, Inc. President and Chief Compliance Officer Wade Harlow Bradley of Carlsbad, California for false representations in connection with contingent offerings and failure to enforce supervisory procedures.
Disciplinary Proceeding #2011025780101
According to the findings, in 2009, IndieVest attempted to secure funding for a motion picture entitled "Knights of Badassdom," which was represented by the company "The Knights of Badassdom, LLC" and its associated offering. A June 9, 2009 private placement memorandum ("PPM") for the offering specified a minimum sales amount or "mini-max part-or-none" of $5,550,000 and a maximum of $18.5 million.
After raising just $600,000 through September 4, 2009, however, IndieVest Pictures decided to change strategy and formed a new company, KOB1, designed to finance the movie through a Regulation D offering operating on the "mini-max" basis. KOB1's minimum was $7.5 million with a maximum of $20.6 million. According to the KOB1 PPM, if the minimum was not reached by a deadline of March 31, 2010, KOB1 would refund subscribers' funds.
By March 31, 2010, fundraising only reached $1,775,000 and KOB1 extended the offering until September 27, 2010.
On June 7, 2010, IndieVest told KOB1 investors that escrow would break on June 15 at just $4.5 million instead of the previously advertised $7.5 million because KOB1 achieved "material savings" on the film's budget and would not need as much funding after all. Accordingly, investors were asked to sign and return via fax an amendment of PPM form consenting to this $3 million decrease in the minimum sales amount to $4.5 million.
In an apparent attempt to portray the financial health of the project, on July 2, Bradley allegedly signed a letter to "confirm" that IndieVest had agreed to lend $1.608 million to KOB production; FINRA believes this letter was false as no such loan was ever discussed or effected.
Though Escrow broke in July at just $2.875 million—$1.6 million less than the $4.5 million minimum—Bradley allegedly continued to offer and sell KOB1 units through and past the termination date of September 27, 2010, when funds reached just $3.175 million—still over $1 million short of the $4.5 million minimum.
Nonetheless, Bradley still allegedly solicited KOB1 sales, even though PPMs specified that subscriber funds should have been returned to investors since KOB1 did not meet its minimum upon the termination date—FINRA determined that Bradley even created a second amendment after that date, changing the KOB1 expiration date to June 1, 2012.
At this point, at least one KOB1 investor objected, though Bradley allegedly did not refund or offer to refund that subscriber's investment.
Because Bradley allegedly solicited and sold KOB1 even though he knew or recklessly failed to know that the minimum was not raised by each of the multiple termination dates, FINRA charged him with rendering the KOB1 PPMs false and misleading.
As the Chief Compliance Officer of IndieVest, FINRA believes that Bradley did not meet his obligation to enforce the firm's Written Supervisory Procedures, specifically by failing to terminate the KOB1 offering by its termination date when the minimum was not raised and by failing to return investor funds when the offering failed to meet its minimum contingency prior to termination date.
As for the cult comedy horror film itself, "Knights of Badassdom" ran into film industry problems known as "creative differences" in 2010, as director Joe Lynch expressed dismay at creating a movie that resembled "'Braveheart' with foam swords."
At the time, Bradley assured the public that distribution companies expressed "a tremendous amount of interest" in buying the film, adding that FINRA's complaint is "completely false."
Nonetheless, Bradley's assertion did not prevent him from consenting to FINRA's findings above, without confirming or denying the specific claims.
If you have invested with Wade Harlow Bradley's IndieVest pictures or with any broker or firm that has willfully failed to comply with an offering's contingencies such as minimum sales amounts or has repeatedly amended or attempted to improperly change investment rules after you have invested, and such misconduct has proven harmful to your financial interests, please call The Law Offices of Jonathan W. Evans & Associates at (800) 699-1881 for an investigation and consultation.