The Securities and Exchange Commission (SEC) has initiated legal proceedings against two Florida men, accusing them of defrauding investors out of $125,000 through a litigation finance scheme. The SEC filed a complaint on September 6, 2024, against Michael Chhabra and his father, Vineet “Vincent” Chhabra in a federal court in Washington. The agency alleges that the Chhabras misappropriated funds intended for a purported litigation finance company to cover personal expenses.
According to the SEC, the Chhabras formed Tort Fund LLC in April 2019 with the intention of lending money to law firms engaged in mass tort litigation against manufacturers of household products and specific medical devices. Despite promises to investors of lucrative returns and interest from these loans, the funds were allegedly diverted for personal expenses such as rent, food, and travel, as well as to pay off debts from other ventures.
The Chhabras engaged in fundraising activities through specialty purpose vehicles and promoted the investment opportunities on social media platforms such as Facebook. However, the SEC claims that Tort Fund LLC failed to provide any funding to law firms and did not enter into any agreements to do so. The SEC also reports that attempts by investors to seek information on their investments were ignored, and the company ceased maintaining an active website and functioning email address.
The SEC is seeking a court order for the Chhabras and their company to disgorge any profits obtained through the scheme and to pay civil penalties. Additionally, the agency is requesting a permanent ban on the Chhabras from holding officer or director positions in any companies required to file reports under the Exchange Act. Further information on the SEC’s actions can be found in the Bloomberg Law report.
The case, titled Securities and Exchange Commission v. Chhabra et al, is filed under D.D.C., 24-cv-02561. This lawsuit follows another recent SEC complaint targeting a California woman accused of defrauding over 20 primarily Filipino American investors in a Ponzi scheme. More details on the latter are available here.