CHARLOTTE – A federal jury has convicted the chief executive officer and founder of a startup company of conspiracy, wire fraud, securities fraud and money laundering for his role in defrauding investors of more than $25 million.
Robert M. Boston, 54, of Hickory, North Carolina, defrauded franchisees, investors and lenders of start-up company Zloop, the jury ruled. Through the fraud, Boston and co-defendant Robert LaBarge obtained millions of dollars, much of which was spent on expensive personal real estate, a private plane, and the racing career of Boston’s son.
Boston and LaBarge founded Zloop, an electronic waste recycling firm, in 2012 and began marketing Zloop franchises the same year.
Court records show that Boston concealed crucial information from franchisees, including that Boston’s former company had filed bankruptcy, that Boston had filed personal bankruptcy, that Boston had a judgment against him for fraud, and that Boston had been held liable in an action alleging that he had knowingly submitted false financial documentation to a bank to obtain a $2.9 million line of credit.
When Boston was warned that concealing this information from the franchisees of Zloop would be fraud, he wrote, “It is my decision how I want to move forward.”
Zloop
In late 2012, Boston and LaBarge sent a misleading private placement memo to investors who invested millions in Zloop. The memo contained material half-truths and omissions, including the omission of the litigation and bankruptcy history of Boston, that Zloop planned to use the investors’ money to pay off a $4 million debt that it owed to a prior lender, and that Boston and LaBarge had already caused Zloop to spend more than $1.5 million on their personal real estate.
Boston promised investors that their money would be held until the offering closed, but he instead spent their money on the same day that much of it came in.
In addition, when Zloop investors sought the return of their money in or about the middle of 2013, Zloop sought a loan from an unnamed individual. To do so, Boston repeatedly falsified emails to make the company look more attractive.
Zloop went out of business in 2016 after filing for bankruptcy court protection. A bankruptcy court judge approved its liquidation in October 2016.
LaBarge pleaded guilty to conspiracy to commit wire fraud on Nov. 2.
The penalty for each of the conspiracy, wire fraud and securities fraud charges carry a maximum term of 20 years in prison. The maximum penalty for the money-laundering conspiracy charge is 10 years in prison.
A sentencing date has not been set.
Note: This story is from the North Carolina Business News Wire, a service of the UNC-Chapel Hill School of Media and Journalism
