The Securities and Exchange Commission last Tuesday charged financier Craig Berkman, a former Oregon gubernatorial hopeful, with defrauding investors by promising them access to pre-initial-public- offering shares of Facebook Inc. and other social-media companies.
SEC enforcers allege that Mr. Berkman, who now lives in Odessa, Fla., falsely claimed that he had special access to scarce shares in social-media stocks including Facebook, Groupon Inc., LinkedIn Corp. and Zynga Inc., a pitch that allowed him to raise at least $13.2 million from 120 investors, which he used for his own benefit.
In a related criminal action, authorities arrested Mr. Berkman last Tuesday at home and charged him with raising at least $8 million from the scheme and misappropriating the money.
He appeared in U.S. District Court for the Middle District of Florida in Tampa last Tuesday, according to the U.S. Attorney's Office for the Southern District of New York and the U.S. Postal Inspection Service.
The SEC also charged John B. Kern of Charleston, S.C., with participating in the fraud as legal counsel to some of Mr. Berkman's companies.
Mr. Berkman's lawyer, Marc Blackman of Ransom Blackman LLP, didn't return a call seeking comment.
A call to Mr. Kern's law firm also wasn't returned.
The SEC's order paints Mr. Berkman as a recidivist.
In 2001, Oregon regulators issued a cease-and-desist order and levied a $50,000 fine against him for selling promissory notes without a license, according to the SEC's order.
In June 2008, an Oregon jury found Mr. Berkman liable for various charges arising from his involvement with a series of venture capital funds known as Synectic Ventures.
The court entered a $28 million judgment against him, the SEC said.
In March 2009, Synectic filed a bankruptcy claim against Mr. Berkman in Florida for the unpaid money arising from the 2008 judgment.
He agreed to pay $4.75 million in that case, but the SEC now alleges that he paid the debt with proceeds from his social-media stock fraud.
The SEC also claims that Mr. Berkman used funds from the fraud to make “Ponzi-like-payments” to investors and to fund personal expenses.
Mr. Berkman was the chairman of Oregon's Republican Party from 1989 to 1993 and placed second in the GOP's 1994 gubernatorial primary, according to Willamette Week, a Portland, Ore., news site.
djamieson@investmentnews.com Twitter: @dvjamieson
