On May 10, 2024, the Securities and Exchange Commission (SEC) charged Robert Tye Cournoyer and the two entities he controlled for their alleged misappropriation of investor funds and false and misleading statements to investors.

Case Summary

COMPLAINT

The Plaintiff, Securities and Exchange Commission (the "SEC"), files this Complaint against Robert Tye Cournoyer ("Cournoyer"), Green Equity Group, LLC ("Green Equity"), and RS Group Holdings, LLC ("RS Group") (collectively, "Defendants"), and alleges as follows:

SUMMARY OF COMPALINT

Cournoyer, through his controlled entities, Green Equity and RS Group, raised over $1.2 million from numerous investors. Contrary to his promises, he misappropriated at least $755,000 of those funds. Except for a single $5,000 payment, the investors have not been repaid.

Cournoyer, the sole manager of Green Equity and RS Group, assured investors that their money would be invested in various projects, including a bottling plant, hemp and CBD products, and hand sanitizer production. Instead, he used a substantial portion of the investor funds for personal expenses, such as gambling, rent, and luxury items like designer watches and clothing, and also made significant cash withdrawals.

Cournoyer, through Green Equity's offering and marketing documents provided to investors, made other false and misleading statements. He falsely claimed to have graduated from the University of Florida's law school and touted his industry experience without disclosing that the SEC had previously charged him with fraud and that a court had sanctioned him for that conduct. Additionally, Cournoyer misrepresented that Green Equity was operational when it had been defunct since 2019.

As a result of the described conduct, the Defendants have violated, and unless restrained and enjoined, will continue to violate Section 17(a) of the Securities Act of 1933 ("Securities Act") and Section 10(b) of the Securities Exchange Act of 1934 ("Exchange Act") and Rule 10b-5 thereunder.

The SEC seeks the following against all Defendants: (i) permanent injunctions; (ii) disgorgement of all ill-gotten gains from the unlawful activities detailed in this Complaint under Sections 21(d)(3), (5), and (7) of the Exchange Act [15 U.S.C. § 78u(d)(3), (5), and (7)] together with prejudgment interest; (iii) civil penalties under Section 20(d) of the Securities Act and Section 21(d)(3) of the Exchange Act; and, with respect to Cournoyer, (iv) an order barring him from serving as an officer or director of a public company pursuant to Section 20(e) of the Securities Act and Section 21(d) of the Exchange Act; and (v) an injunction prohibiting him from participating in the issuance, purchase, offer, or sale of any security in an unregistered offering by an issuer pursuant to Section 20(b) of the Securities Act and Sections 21(d)(1) and 21(d)(5) of the Exchange Act.

Defendants

1. ROBERT TYE COURNOYER

Robert Tye Cournoyer, age 56, is the sole managing member of Green Equity and RS Group. From approximately May 2018 to May 2020, he lived in Dallas, Texas, and from May 2020 to May 2023, in Southlake, Texas.

As of December 2023, his last known residential address was in Arlington, Texas. In 2004, Cournoyer was enjoined from violating certain federal securities laws and from participating in any offering of penny stock (SEC v. GetAnswers, Inc., No. 03-cv-20048 (S.D. Fla., filed Jan. 2003)). Additionally, the SEC barred him from associating with any broker or dealer (In the Matter of Robert Cournoyer, Exchange Act Release No. 34-49720 (May 18, 2004)).

He filed for bankruptcy in September 2022 and did not respond to valid subpoenas issued by the SEC seeking information relevant to this investigation.

2. GREEN EQUITY GROUP, LLC

Green Equity Group, LLC is a Colorado limited liability company ("LLC") formed in November 2017, with principal places of business in Walsenburg, Colorado, and Dallas, Texas. Green Equity ceased operations in 2019 and did not respond to a valid subpoena issued by the SEC seeking information relevant to this matter.

3. RS GROUP HOLDINGS, LLC

RS Group Holdings, LLC is a Nevada LLC formed in July 2018 with a principal place of business in Dallas, Texas. RS Group ceased operations in 2020 and did not respond to a valid subpoena issued by the SEC seeking information relevant to this matter.

Facts

I. BACKGROUND

Cournoyer established Green Equity in November 2017 to explore opportunities in the hemp industry. Shortly after, he partnered with a Colorado-based hemp business (the "Colorado Business"). The Colorado Business agreed to identify hemp-related opportunities that Cournoyer, through Green Equity, would fund by attracting and soliciting investors.

In October 2018, the Colorado Business acquired a non-operational bottling facility (the "Bottling Plant") with plans to convert it into a bottling facility for CBD-infused products. This conversion was to be financed by Green Equity investors. While Green Equity contributed to the purchase of the Bottling Plant in 2018, the facility remained owned by the Colorado Business.

Despite some initial efforts to make the plant operational, Green Equity and the Colorado Business abandoned the Bottling Plant project in 2019, and the facility never became operational.

II. GREEN EQUITY AND RS GROUP RAISED MONEY FROM INVESTORS

Between March 1, 2019, and February 2, 2022, Cournoyer, through Green Equity and RS Group, raised approximately $1,277,000 from around 38 investors via investment contracts and notes, both of which qualify as "securities" under the Securities Act and the Exchange Act.

During this period, Cournoyer was the sole manager of Green Equity and RS Group and the sole signatory on the bank accounts where the investors' funds were deposited. Investors were entirely dependent on Green Equity's efforts to generate returns, with Cournoyer maintaining control over Green Equity, not the investors.

From at least January 2019 to July 2020, Green Equity offered and sold securities in the form of "membership units" (or portions of units), including "Founder Units," "Common Units," and "C Units," which were convertible to shares of common stock in a future public entity. Green Equity claimed it would use the funds for various projects, including the Bottling Plant, a CBD extraction facility, and hemp biomass purchases.

Investors provided money in exchange for Green Equity membership units. Subscription agreements signed by Cournoyer on behalf of Green Equity directed at least some investors to make payments to an RS Group bank account for their Green Equity investments. Investor funds were pooled in Green Equity (and RS Group) bank accounts, and their fortunes were collectively tied to Green Equity's efforts and expertise, including the Bottling Plant.

In addition to funds received from Green Equity investors, RS Group offered and sold "Cash Forward Contracts" to at least six investors between December 2019 and February 2020. These contracts purported to sell an interest in a certain number of acres of hemp biomass, which RS Group promised to process and sell, then repay the investor principal along with 100% interest.

Investors provided money in exchange for an interest in returns generated from the processed hemp biomass. These investor funds were pooled together by RS Group and Cournoyer.

RS Group investors relied solely on RS Group's efforts and expertise to generate profits. RS Group's cash forward contracts were debt instruments through which investors reasonably expected significant profit (i.e., 100% interest) based solely on RS Group's efforts.

III. THE DEFENDANTS ENGAGED IN FRAUDULENT AND DECEPTIVE ACTS BY MISAPPROPRIATING INVESTOR MONEY FOR PERSONAL USE

Instead of using investor funds as promised for corporate projects, the Defendants misappropriated these funds for Cournoyer's personal use. Between March 1, 2019, and February 2, 2022, Green Equity and RS Group received approximately $1,277,000 from investors. Of this amount, Cournoyer misappropriated at least $755,000, using investor money for personal expenses such as gambling, rent for his personal residence, luxury purchases like designer watches and clothing, and substantial cash withdrawals. Additionally, Cournoyer transferred part of the $755,000 to another entity he controls, using those funds for similar personal expenses.

Cournoyer began gambling full-time in 2019 or 2020. Often, cash withdrawals, gambling expenses, residential lease payments, and luxury purchases occurred very close to (and sometimes on the same day as) investor deposits. In multiple instances, investor funds were deposited into bank accounts with a near-zero balance and were then spent within the same month on personal expenses. For example, on June 1, 2019, a Green Equity bank account had a balance of $501.37. That month, the account received at least $90,000 in investor deposits, which Cournoyer spent at locations such as the Mirage and the Bellagio in Las Vegas, Panerai luxury boutique in Las Vegas, Hugo Boss in Dallas, and for his personal residence's lease payment and personal credit card payments. By June 30, 2019, the account had an ending balance of $8,955.12.

Throughout this period, Cournoyer was the sole signatory on the bank accounts where Green Equity and RS Group investor funds were deposited, and he was the sole manager of these entities. During this time, Cournoyer did not have a personal bank account, indicating that he was using the corporate accounts for personal expenses.

Cournoyer knew, or was reckless in not knowing, that he was deceiving investors by falsely representing that their funds would be used for corporate endeavors when he actually intended to use a significant portion of those funds for personal expenses. This intent is evidenced by instances in which he spent investor funds on personal expenses soon after their deposit.

Cournoyer's fraudulent intent (scienter) can be imputed to Green Equity and RS Group because he was their sole manager. The amounts misappropriated were material because a reasonable investor considers the use of their money important to their investment decision. Here, investors believed that their funds would be used for business ventures as represented by Cournoyer, not for his personal expenses.

IV. THE DEFENDANTS MADE FALSE AND MISLEADING STATEMENTS

A. Defendants Made False and Misleading Statements about the Use of Investor Funds

Cournoyer, through Green Equity and RS Group, misled investors by stating that their funds would be used for corporate projects. These statements were false and misleading because, as alleged above, the Defendants misappropriated a significant portion of investor funds for personal use.

Specifically, regarding the use of proceeds from selling Green Equity’s "C units," at least two 2020 Green Equity subscription agreements stated: "The company will use proceeds of this purchase for the benefit of expanding the bottling plant, [and] for general expenses for corporate endeavors. In addition, if necessary, proceeds will be used to pay for expenses incurred for corporate operations." Similarly, a 2019 Green Equity investor presentation, which Cournoyer sent to at least one investor, claimed that the "Founders Units" and "Common Units" would be used to purchase a 127-acre Colorado property with the Bottling Plant on site, "pursue a public entity," and "secure biomass."

RS Group’s cash forward contracts, offered and sold between at least December 2019 and February 2020, sold an interest in "acres of hemp biomass" and promised to repay investors their "principal amount with an interest of 100%" after RS Group processed and sold the hemp biomass. Cournoyer told at least one RS Group investor that funds raised through these contracts would be the seed money needed to enter into agreements with farmers in Montana to grow hemp.

These statements about the use of investor funds were false and misleading. As alleged above, between at least March 1, 2019, and February 2, 2022, the Defendants misappropriated a significant portion of investor funds for Cournoyer’s personal expenses instead of using the funds as described.

Cournoyer knew, or was reckless in not knowing, that his statements about the intended use of investor funds were false and misleading at the time they were made to investors and potential investors. As the sole manager of Green Equity and RS Group and the sole signatory on their bank accounts, he had direct knowledge of how the funds were used.

Cournoyer signed the Green Equity subscription agreements and the RS Group cash forward contracts on behalf of each entity and transmitted them to investors using a Green Equity email address. His fraudulent intent (scienter) can be imputed to Green Equity and RS Group because he was their sole manager.

The statements about the use of investor funds were material to investors because reasonable investors would consider it important that the Defendants did not use their funds on the Bottling Plant and other CBD-related projects but instead used a significant portion for personal expenses.

B. Cournoyer and Green Equity Made False and Misleading Statements About Green Equity’s Business

Despite the Bottling Plant project being abandoned in 2019 and never becoming operational, and Green Equity not conducting any business activities since 2019, Cournoyer continued to mislead investors and solicit investments by making false and misleading statements about Green Equity’s business activities after 2019.

Specifically, between January 2019 and July 2020, Cournoyer, through Green Equity, sold securities in the form of membership units via Green Equity subscription agreements that he signed and sent to investors, claiming the funds would be used “for the benefit of expanding the bottling plant, [and] for general expenses for corporate endeavors.” Further, in April 2020, Cournoyer emailed potential investors, stating that additional funds were needed to “get our facility up and running,” which would temporarily “produc[e] high grade hand sanitizer” in response to the Coronavirus pandemic, promising investors that they would “see revenues almost immediately.”

In January 2021, Cournoyer emailed an investor, claiming that “sanitizer production [was] underway” at the Bottling Plant and that he was working to partner with casinos to sell hand sanitizer and provide CBD coffee. These statements about Green Equity’s ongoing business activities were false and misleading because the company had not conducted any business since 2019.

Cournoyer knew, or was reckless in not knowing, that his statements about Green Equity’s business activities were false and misleading at the time they were made to investors and potential investors, given that he had not worked with the Colorado Business on the Bottling Plant project since 2019. Cournoyer's fraudulent intent (scienter) can be imputed to Green Equity because he was its sole manager.

The statements about Green Equity’s business activities were material to investors because reasonable investors considering investments in Green Equity after 2019 would find it important to know that Green Equity had not conducted any business since 2019.

C. Cournoyer and Green Equity Made False and Misleading Statements Regarding Cournoyer’s Background

Cournoyer and Green Equity also provided false and misleading information to investors about Cournoyer’s educational background and industry experience.

In June 2019, Cournoyer emailed a 2019 Green Equity investor presentation to at least one investor, claiming that he had obtained a Juris Doctor degree from the University of Florida. This statement was false, as Cournoyer did not hold a Juris Doctor degree from the University of Florida.

The 2019 presentation also asserted that Cournoyer had “over twenty-five years of experience in private equity,” including on Wall Street, and that he held Series 3, 7, and 63 licenses. These claims were misleading because the presentation omitted the crucial facts that Cournoyer had been barred by the SEC and enjoined by a federal court for violating federal securities laws.

Cournoyer knew, or was reckless in not knowing, that his statements about his education and industry experience were false and misleading. He was aware that he did not have a law degree from the University of Florida and knew about his own disciplinary history.

These misrepresentations about Cournoyer’s background were material to investors because reasonable investors would consider it important to know that Cournoyer did not have a law degree from the University of Florida and that he had previously been enjoined by a court and sued and barred by the SEC for securities law violations.

V. GREEN EQUITY AND RS GROUP OFFERED AND SOLD SECURITIES

According to Section 2(a)(1) of the Securities Act and Section 3(a)(10) of the Exchange Act, a "security" encompasses “any note, stock,” and “investment contract.” An investment contract involves: (i) an investment of money, (ii) in a common enterprise, (iii) with an expectation of profits derived from the efforts of others.

A. Green Equity Membership Units Are Securities

Green Equity membership units qualify as investment contracts because:

1. Investors made an investment of money in exchange for the units.
2. Green Equity investors’ funds were pooled in Green Equity (and RS Group) bank accounts, linking their fortunes to Green Equity’s efforts and expertise in various projects, including the Bottling Plant.
3. Investors relied entirely on Green Equity’s efforts to generate returns.

B. RS Group’s Cash Forward Contracts Are Securities

RS Group’s cash forward contracts also qualify as investment contracts because:

1. Investors made an investment of money in exchange for returns generated from processed hemp biomass.
2. Investor funds were pooled together to enable RS Group to enter into hemp biomass agreements with Montana farmers.
3. Investors depended solely on RS Group’s efforts and expertise for the purchase, processing, and sale of the hemp biomass.

Additionally, RS Group’s cash forward contracts are considered notes because they were understood to be debt instruments. RS Group investors reasonably expected a significant profit (i.e., 100% interest) based solely on RS Group’s efforts.

VI. THE DEFENDANTS’ ACTIONS INVOLVED THE OFFER, SALE, AND PURCHASE OF SECURITIES USING INTERSTATE COMMERCE

The misstatements described here were made by the Defendants to persuade investors to buy the aforementioned securities. These false statements were included in written communications soliciting investments, such as agreements, emails, and investor presentations provided to potential investors.

Thus, the Defendants’ actions, including their material misstatements and Cournoyer’s deceptive conduct, occurred in the offer or sale of securities as defined by Section 2(a)(1) of the Securities Act and in connection with the purchase or sale of securities as defined by Section 3(a)(10) of the Exchange Act.

In connection with the conduct outlined in this Complaint, the Defendants, either directly or indirectly and individually or in concert with others, utilized methods or instruments of transportation or communication in interstate commerce, including emails containing false and misleading statements, and used interstate commerce to solicit and obtain funds from investors.

Claims For Relief

1. FIRST CLAIM FOR RELIEF: FRAUD—VIOLATION OF SECTION 10(B) OF THE EXCHANGE ACT AND RULE 10B-5 THEREUNDER (AGAINST ALL DEFENDANTS)

The SEC reasserts and incorporates by reference paragraphs 1 to 69, as if fully set forth herein.

Through their conduct described above, the Defendants, directly or indirectly, in connection with the purchase or sale of a security, and by means of interstate commerce, mail, or the facilities of a national securities exchange, knowingly or with severe recklessness:

• Employed devices, schemes, or artifices to defraud;
• Made untrue statements of a material fact or omitted to state a material fact necessary to make the statements made, in light of the circumstances under which they were made, not misleading;
• Engaged in acts, practices, or courses of business that operated or would operate as a fraud or deceit upon any person.

By these actions, the Defendants violated, and unless restrained and enjoined, will continue to violate Section 10(b) of the Exchange Act and Rule 10b-5 thereunder.

2. SECOND CLAIM FOR RELIEF: FRAUD—VIOLATION OF SECTION 17(A) OF THE SECURITIES ACT (AGAINST ALL DEFENDANTS)

The SEC reasserts and incorporates by reference paragraphs 1 to 72, as if fully set forth herein.

Through the conduct described above, the Defendants, directly or indirectly, in the offer or sale of securities using means or instruments of transportation or communication in interstate commerce, or by use of the mails:

• Employed devices, schemes, or artifices to defraud;
• Obtained money or property by means of untrue statements of a material fact or by omitting to state a material fact necessary to make the statements made, in light of the circumstances under which they were made, not misleading;
• Engaged in transactions, practices, or courses of business which operated or would operate as a fraud or deceit upon the purchaser.

Regarding violations of Section 17(a)(1), the Defendants acted intentionally, knowingly, or with severe recklessness. For violations of Sections 17(a)(2) and 17(a)(3), the Defendants acted at least negligently.

By these actions, the Defendants violated, and unless restrained and enjoined, will continue to violate Section 17(a) of the Securities Act.

Relief Sought

I

Find that the Defendants committed the violations alleged in this Complaint;

II

Issue an injunction, in accordance with Rule 65(d) of the Federal Rules of Civil Procedure, permanently restraining and enjoining the Defendants from violating, directly or indirectly, the laws and rules they are alleged to have violated in this Complaint;

III

Order the Defendants to disgorge any and all ill-gotten gains, together with pre-judgment interest, derived from the improper conduct described in this Complaint;

IV

Order the Defendants to pay civil penalties pursuant to Section 20(d) of the Securities Act and Section 21(d)(3) of the Exchange Act in an amount to be determined by the Court, plus post-judgment interest;

V

Prohibit Cournoyer from acting as an officer or director of a public company pursuant to Section 20(e) of the Securities Act and Section 21(d) of the Exchange Act;

VI

Issue an injunction permanently restraining and enjoining Cournoyer from directly or indirectly, including, but not limited to, through any entity owned or controlled by him, participating in the issuance, purchase, offer, or sale of any security in an unregistered offering by an issuer, provided that such injunction would not prevent him from purchasing or selling securities for his own personal account;

VII

Grant any other relief that this Court may deem just or appropriate.

Key Takeaways For Investors

1. DUE DILIGENCE IS CRUCIAL

Investors should thoroughly investigate the backgrounds of company executives and the history of the business. In this case, false claims about Cournoyer’s education and experience misled investors, highlighting the importance of verifying such information independently.

2. SCRUTINIZE THE USE OF FUNDS

Ensure that there is clear, verifiable information on how invested funds will be used. The misappropriation of funds for personal use by Cournoyer underscores the need for transparency and accountability in fund allocation.

3. BEWARE OF UNREALISTIC PROMISES

High returns with minimal risk are often red flags. RS Group’s promise of 100% interest on cash forward contracts should have been a warning sign. Investors should be cautious of investments that seem too good to be true.

4. LEGAL AND REGULATORY COMPLIANCE

Understanding securities laws and ensuring that the investment vehicles comply with regulations is critical. The case shows that Cournoyer’s actions violated several securities laws, which ultimately harmed investors.

5. MONITOR ONGOING BUSINESS ACTIVITIES

Regular updates and evidence of progress in the company's projects are vital. The false claims about the bottling plant’s operations and other business activities after 2019 highlight the need for investors to demand regular, detailed progress reports.

6. KNOW THE MANAGEMENT’S INTEGRITY

The integrity of those managing the investments is paramount. Cournoyer’s deceptive practices and personal misuse of funds illustrate the risks associated with dishonest management. Investors should look for signs of integrity and honesty in the leadership team.

7. UNDERSTAND THE INVESTMENT STRUCTURE

Knowing whether the investment constitutes a security and the associated legal protections can provide a layer of safety. Both Green Equity’s membership units and RS Group’s cash forward contracts were securities, and their mismanagement led to significant legal repercussions.

8. LEGAL RECOURSE AND PROTECTIONS

Being aware of the legal recourses available if fraud is suspected is essential. The SEC's involvement and the subsequent legal actions against Cournoyer and his entities show that regulatory bodies can and do take action against fraudulent activities.

By keeping these key takeaways in mind, investors can better protect themselves from potential fraud and make more informed investment decisions.

Key Takeaways for Financial Market Practitioners and Management

1. IMPORTANCE OF TRANSPARENCY AND HONESTY

Maintaining transparency and honesty in all communications with investors is crucial. Cournoyer’s false statements about his background and the use of funds led to significant legal consequences. Practitioners and management must ensure all disclosures are accurate and truthful.

2. RIGOROUS COMPLIANCE WITH SECURITIES LAWS

Adhering strictly to securities laws and regulations is essential. The violations of Section 10(b) of the Exchange Act and Section 17(a) of the Securities Act in this case underscore the importance of compliance. Ensuring all securities offerings and communications meet legal requirements protects both the company and its investors.

3. EFFECTIVE USE OF INVESTOR FUNDS

Properly managing and utilizing investor funds as promised is a fundamental responsibility. Misappropriating funds for personal use, as seen with Cournoyer, not only breaches trust but also violates legal obligations. Management must establish and follow stringent controls over the use of funds.

4. REGULAR AND ACCURATE REPORTING

Providing investors with regular, detailed, and accurate updates on business activities is vital. False claims about ongoing projects and business activities can lead to loss of investor confidence and legal actions. Accurate reporting helps maintain transparency and trust.

5. ETHICAL LEADERSHIP AND INTEGRITY

The integrity of the leadership team is paramount. Cournoyer’s deceptive practices highlight the risks associated with unethical behavior. Leaders must demonstrate high ethical standards and integrity to foster a trustworthy environment.

6. INVESTOR EDUCATION AND PROTECTION

Educating investors about the risks and realities of investments can help prevent misunderstandings and build trust. Practitioners should ensure that investors have a clear and accurate understanding of what they are investing in and the associated risks.

7. ADEQUATE INTERNAL CONTROLS AND AUDITS

Implementing strong internal controls and regular audits can help detect and prevent misappropriation of funds. Ensuring that there are checks and balances in place can protect the company and its investors from fraudulent activities.

8. RESPONSIBILITY TO ADDRESS MISCONDUCT

Promptly addressing any misconduct within the organization is essential. Ignoring or failing to address fraudulent activities can lead to severe legal and financial repercussions. Practitioners and management must take immediate action to rectify any issues.

9. CONSEQUENCES OF NON-COMPLIANCE

Understanding the severe consequences of non-compliance with securities laws is critical. The legal actions and penalties faced by Cournoyer and his entities highlight the importance of adhering to legal and ethical standards in all business operations.

By learning from these takeaways, financial market practitioners and management can enhance their practices, foster investor trust, and ensure compliance with legal and ethical standards.

MAY 13, 2024