Founders Of Defunct Hickory E-Waste Company Defrauding Victims of At Least $25 Million

[nitpicker]

https://www.justice.gov/usao-wdnc/pr/federal-indictment-charges-founders-defunct-hickory-e-waste-company-defrauding-victims

Department of Justice
U.S. Attorney’s Office
Western District of North Carolina

FOR IMMEDIATE RELEASE
Friday, May 5, 2017

Federal Indictment Charges Founders Of Defunct Hickory E-Waste Company With Defrauding Victims of At Least $25 Million

CHARLOTTE, N.C. – Today, a criminal indictment was unsealed in federal court, charging Robert M. Boston, 53, and Robert S. LaBarge, 50, both of Hickory, N.C., with conspiracy relating to a fraud totaling at least $25 million, to include wire fraud, securities fraud, bank fraud, and money laundering, announced Jill Westmoreland Rose, U.S. Attorney for the Western District of North Carolina.
(snip)

According to allegations contained in the indictment, Boston and LaBarge defrauded franchisees, investors, and lenders of their company, Zloop. The indictment alleges that, through their fraud, the defendants 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.

The indictment alleges that Boston and LaBarge founded Zloop, an electronic waste recycling firm, in 2012 and began marketing Zloop franchises in or about July 2012. Federal law requires potential franchisors, like Zloop, to disclose certain litigation and bankruptcy matters in a franchise disclosure document. As alleged in the indictment, Zloop franchise disclosure documents omitted required information, including that Boston’s former company had filed bankruptcy, that Boston had filed personal bankruptcy, and that Boston had been held liable in an action alleging that he had knowingly submitted false financial documentation to obtain a $2.9 million line of credit.

The indictment further alleges that, beginning in or about December 2012, Boston and LaBarge caused Zloop to raise money through the sale of equity. To sell equity in the company, the indictment alleges that Boston and LaBarge caused a misleading private placement memo (“PPM”) to be sent to investors who ultimately invested approximately $2.5 million in Zloop. According to the indictment, the PPM contained material half-truths and omissions, including the omission of the litigation and bankruptcy history of Boston, and the fact that Boston and LaBarge had already caused Zloop to spend more than $1.5 million on their personal real estate.

When Zloop investors sought the return of their money in or about the middle of 2013, the indictment alleges that Zloop sought to repay them with a loan from an individual identified as Victim 1. In doing so, Boston allegedly induced Victim 1 to provide a $3 million loan by offering to file a lien on Zloop’s equipment for Victim 1’s benefit. Instead, after Victim 1 provided the loan used to repay Zloop’s other investors, LaBarge allegedly sent a fraudulent financing statement that purportedly was filed with the North Carolina Secretary of State.

The indictment also alleges that, after receiving the fraudulent UCC financing statement, Victim 1 agreed to secure a multi-million line of credit from Patriot Bank, a federally insured financial institution. After Boston and LaBarge caused Zloop to draw approximately $3.5 million from the Patriot Bank line of credit, the indictment alleges that they promptly spent hundreds of thousands of dollars on, among other things, a private plane, a new Corvette, and a new Grand Cherokee. After Zloop subsequently drew an additional $1.3 million from the credit card line, the indictment alleges that more than $500,000 was spent on racing-related expenditures and approximately $79,808 on a suite at a professional football stadium.
(snip)

[nitpicker]

1. More from E-Scrap News- more lawsuits

https://resource-recycling.com/e-scrap/2015/11/05/processor-with-broad-hopes-now-mired-in-bankruptcy-and-lawsuits/

(snip)

A review of Zloop’s bankruptcy filings by E-Scrap News shows creditors both inside and outside the recycling industry claim the company owes them money. Its top 20 unsecured creditors together have claims totaling more than $25 million against Zloop.

Founded by Boston and Robert LaBarge in 2012, Zloop provides e-scrap processing, on-site and off-site audited data destruction services and plastics recovery services, according to the company’s website. Zloop landed a $7 million contract to recycle millions of Keurig coffee machines, court records show. It had also acquired a location in the Reno, Nev. area for materials processing, and it had at one time sold 15 franchises in deals worth millions of dollars.

Now, the company is looking to sell its Nevada land, sell and lease back its Hickory, N.C. headquarters and sell several 53-foot trailers, according to bankruptcy documents. And the deal to recycle Keurig machines ended in 2014 when an investor sued Zloop, The Wall Street Journal reported in September.
(snip)

Beyond the equipment lawsuits, one investor has sued Zloop seeking nearly $80 million. In 2012 and 2013, Zloop sold three franchises in North Carolina, eight in Texas, three in Louisiana and one in West Virginia, according to an affidavit filed by Boston. All of the Texas and Louisiana franchises were purchased by Kendall Garrett Mosing. Mosing is a member of the family controlling the oil services company Frank’s International, according to the Lafayette, La.-based publication IND Monthly. He has sued seeking nearly $80 million, claiming $26.5 million in actual damages with the rest making up penalties under the Louisiana Unfair Trade Practices Act.

Kyle Busch Motorsports (KBM) is also suing Zloop and Boston’s son, Justin Boston, alleging they missed $650,000 in payments as part of their $3.2 million annual deal that allowed Justin Boston to compete as a KBM driver, ESPN has reported. Under a racing deal signed by Zloop, Justin Boston, Justin Boston Racing LLC and KBM, Zloop paid KBM more than $1.5 million in early 2014 for a vehicle and pit crew so Justin Boston could drive in NASCAR Camping World Truck Series races, court documents showed. Zloop, the sponsor, then stopped paying KBM, which currently claims it’s owed more than $4 million.
(snip)