He sold investors on a new app, but spent the money on cars, his Malibu mansion and yacht, feds say
After a nine-day trial, Bernhard Eugen Fritsch, 63, was found guilty of one count of wire fraud and faces a sentence of up to 20 years in prison, according to the U.S. Department of Justice. The jury found him not guilty of a second wire fraud count.
Fritsch remains free on bond and is set to appear at a sentencing hearing in the coming months. An attorney for him did not immediately respond to a request for comment Friday.
From 2014 to 2017, prosecutors say, Fritsch raised more than $20 million from investors for his Santa Monica-based tech company StarClub. He claimed the money was to build an application called StarSite that would help celebrities and influencers monetize their fame through sponsored social media advertisements.
Prosecutors say he lured investors by telling them that major media companies and a global investment banking firm had already put money into his company, which he asserted had made $15 million in revenue in 2015. He also claimed he was on the verge of closing a commercial deal with Disney.
However, none of these statements were true, prosecutors said — nor was his promise to put their money into his tech company.
'Instead, Fritsch used much of the investor money to enrich himself and support his luxurious lifestyle, including by purchasing luxury cars such as a McLaren and a Rolls-Royce, fixing up his yacht, and renovating his Malibu mansion, located near Carbon Beach,' the Justice Department said in a statement.
Prosecutors estimate those caught up in the scheme lost around $25 million. One would-be investor contributed more than $20 million and introduced Fritsch to others who gave millions more, prosecutors said.
Law enforcement have seized the yacht and luxury vehicles.
In additional to the federal trial, Fritsch has been sued in L.A. County Superior Court three times over allegations of fraudulent financial schemes.
Record industry executive Haqq Islam and his company sued StarClub and Fritsch in 2013, claiming breach of contact and fraud. Islam alleged that Fritsch owed him $750,000 for helping get celebrities such as Jessica Simpson to meet with Fritsch and consider participating in StarClub's business ventures, according to reporting by Courthouse News Service.
Then in 2017, Eugene McBurney and Bermuda-based hedge fund Harrington Global Opportunities, both of which were investors in StarClub, sued Fritsch on claims of breach of contract and fraud, court records show.
This lawsuit alleges that employees of StarClub 'obtained over $35 million in cash from investors on the basis of false representations, presenting their social media company as 'the next big thing.'' A trial setting conference for this lawsuit is scheduled for June 25.
Fritsch was sued last year by Marc Montgomery, who alleges that Fritsch — his cousin — owes him more than $593,000 in loans and interest that Fritsch used to cover his mortgage, car payments and utilities, according to the complaint. This case is still pending.
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