Investors who backed a California company that they were told was establishing an online auction house for Hollywood and sports memorabilia fell victim to a $6.1 million investment fraud.
The company, Collector’s Coffee Inc. (dba Collector’s Café), raised $23 million in total as owner Mykalai Kontilai, formerly Michael Contile, of Las Vegas, made representations that an SEC investigation established were materially false and misleading.
An investigation that began in 2017 found that Kontilai told investors that the online auction house would trade third-party collectibles, that he had invested millions of dollars of his own money in the venture, and that he did not take a salary.
Investors were also led to believe that the company would make a TV program featuring celebrities discussing their collections and the original business plan also included brick and mortar coffee shops displaying some of the memorabilia listed on the auction website, although this element was scrapped shortly after the company launched.
But the investigation found that approximately $6.1 million of the investors’ funds had been used by Kontilai for personal expenses including buying luxury goods, apartments, and vehicles.
Kontilai was found to have obstructed the SEC’s investigation by lying under oath and falsifying documents but was charged in 2020. However, before he was charged he fled the United States to Russia, later visiting Germany where he was arrested under an Interpol Red Notice and returned to the US.
He pleaded guilty this month to one count of wire fraud and is scheduled to be charged on December 4. A separate investigation was conducted by the District of Colorado but the government will move to dismiss this case as part of the plea agreement in the SEC case.
The FBI and IRS have been involved in the investigation into Kontilai’s conduct while the Justice Department’s Office of International Affairs provided significant assistance in securing his extradition from Germany.
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