According to the Complaint, filed April 28, 2020, Aegis Capital Corp. and the other defendants allegedly made the following misrepresentations to investors:
- Given [El-Batrawi’s] history of securities violations and upon information and belief, NASDAQ refused to permit a listing of [YayYo]’s shares unless Mr. El-Batrawi resigned and relinquished all authority and control over [YayYo] prior to the Effective Date of its Offering.
- In order to comply with the NASDAQ requirements, the Underwriters (including Aegis Capital Corp.) represented to investors . . . [El-Batrawi], our founder and former Chief Executive Officer and former director, agreed to sell 12,525,000 of its 15,425,000 shares of common stock . . . [and] entered into a Voting Trust Agreement pursuant to which the voting power of all of his remaining 2,900,000 shares of common stock will be controlled by a trustee . . .
- The Underwriters (including Aegis Capital Corp.) [also] represented to investors . . . El-Batrawi resigned as Chief Executive Officer . . . [and] from all positions with the Company as a condition for being approved for listing on The Nasdaq Capital Market.
In reality, according to the Complaint:
- The Underwriters (including Aegis Capital Corp.) knew, and/or should have known, that, despite the NASDAQ requirements, Mr. El-Batrawi continued, directly and/or indirectly, to exercise supervision, authority and control over YAYO, and was intimately involved, on a day-to-day basis, with the business, operations and finances of the Company.
- The Underwriters (including Aegis Capital Corp.) knew, and/or should have known, that, despite the NASDAQ requirements, Mr. El-Batrawi continued, directly and/or indirectly, to exercise supervision, authority and control over the Initial Public Offering of the Company’s securities, and was intimately involved, on a day-to-day basis, with the decision-making as relating to the Offering, on behalf of the Company.
With El-Batwari still at the helm, Aegis Capital Corp. and the other defendants sought $10 million of additional investor funds required to complete the IPO by promising immediate payback of invested funds from the IPO proceeds which, according to the suit, constituted a material misrepresentation to the investors as well as securities fraud.
Based on this alleged conduct, the plaintiff accused Aegis Capital Corp. of violating federal securities laws and committing fraud, negligence, and conspiracy.
Aegis Capital Corp.’s Role As Underwriter
As underwriter, Aegis’ role was generally to determine the initial offering price of the securities, buy the securities from YayYo, and then sell the securities to investors through Aegis’ distribution network. Underwriters such as Aegis make money based on the proceeds from sales of the securities to investors. In selling the securities, Aegis owes various duties to prospective investors, including to accurately represent information about YayYo, its background, and controlling individuals.
Did You Own Shares In YayYo?
Silver Law Group represents investors in stockbroker misconduct cases involving allegations of negligence, breach of fiduciary duty, failure to supervise and other causes of actions. These claims are frequently submitted to FINRA which administers the largest arbitration forum for investor disputes. We handle these cases on a contingency fee basis.
Silver Law Group represents the interests of investors who have been the victims of investment fraud. Our attorneys represent investors in class actions against issuers and in securities arbitration claims against brokers for misconduct like the allegations against Aegis. Scott Silver, managing partner of Silver Law Group, is the chairman of the Securities and Financial Fraud Group of the American Association of Justice and represents investors nationwide in securities investment fraud cases. Please contact Scott Silver for a no cost consultation at ssilver@silverlaw.com or toll free at (800) 975-4345.