PALMDALE — The Securities and Exchange Commission filed suit against SHE Beverage Company Inc., a women-owned company based in Lancaster that markets beverages to female customers, for allegedly defrauding more than 2,000 investors out of million of dollars, half of which financed a luxurious lifestyle for company executives, according to a complaint filed Tuesday by the SEC.
In the 29-page complaint, the SEC said SHE Beverage Co. raised more than $15 million between 2017 and 2019 from unregistered stock sales to more than 2,000 investors across the country. The suit named SHE Beverage co-founders, CEO Lupe L. Rose, 52, and Chief Financial Officer Sonja F. Shelby, 58, both of Palmdale, along with Chief Operations Officer Katherine E. Dirden, of Lancaster as defendants.
The SEC said SHE Beverage overstated revenue and falsely represented to investors that they would use 30% of proceeds to purchase beverage inventory.
“In fact, they spent only 2% of the monies raised on beverages. In the meantime, they misappropriated roughly half of the offering proceeds — at least $7.5 million — in cash withdrawals and to pay personal expenses such as cars and trucks, rent, luxury retail goods, and trips to casinos,” the suit said.
SHE Beverage’s Instragram account identifies itself as “a celebrity driven beverage company that sells several products.” A local phone number listed on the company’s website says the number is not in service when dialed.
“We have reviewed the complaint and we look forward to correcting the record and proving that the allegations are inaccurate in open court,” Jonathan Bletzacker, a lawyer for the company and the executives, wrote in an email to Reuters on Wednesday.
Bletzacker had no further comment when reached by email Friday by the Antelope Valley Press.
The SEC is seeking permanent injunctions, surrender of any profits as a result of the alleged fraud, and civil penalties against Rose, Shelby, and Dirden.
The complaint say Rose, Shelby and Dirden carried out aggressive fundraising by falsely promoting the company as being successful in a variety of ways since its inception.
“Defendants claimed the company had launched its own brewery, whereas it had not even completed its construction. They falsely touted the company’s bottled water as ‘proprietary’ and ‘FDA approved,’” when it was neither,” the suit said.
Rose and Shelby co-founded and began working on the concept for SHE Beverage in or around 2009, Rose subsequently incorporated SHE Beverage in or around 2015, according to the complaint.
The SEC also said Rose, Shelby and Dirden claimed the company had received acquisition offers ranging from $120 million to $500 million, when in reality, it had no such offers. In addition, the defendants claimed to have millions of their own money invested in the company, whereas their investments were much more modest.
“They frequently represented that the company’s planned initial public offering was imminent, when they had not yet even filed a registration statement with the SEC,” the suit said. “SHE Beverage’s fraudulent stock offering was not registered with the SEC; thus investors lacked important information about the company’s financial condition.”
In addition, the SEC said the company engaged in general solicitation over the Internet and solicited investors to deposit by cash, checks, credit cards and electronic payment processor, at times offering referral, two-for-one and other bonuses, and frequently hyping investors’ last chance to invest pre-IPO.
“The only Form S-1 registration statement ever filed by the Defendants, in January 2020, never went effective and was declared abandoned in 2021,” the suit said.