Tequila entrepreneur arrested over fabricated salesBy Nicola Carruthers
Joseph Cimino, founder of 6 Degree Tequila, has been arrested for security and wire fraud after allegedly spending US$472,000 of investor funds on personal expenses and falsely inflating the company’s sales.
The US Attorney’s Office for the Southern District of New York announced yesterday (17 February) that it had arrested Cimino and charged him with one count of security fraud and one count of wire fraud due to his ‘fraudulent solicitation of investments’ for 6 Degree Tequila. Each charge carries a maximum sentence of 20 years in prison. The 56-year-old entrepreneur was presented in White Plains federal court yesterday.
The allegations, which were unsealed yesterday, claim Cimino raised approximately US$935,000 from at least 25 investors to fund a Tequila company from 2014 to 2018. According to his LinkedIn page, Cimino founded 6 Degree Tequila in the third quarter of 2015.
Cimino allegedly used the funds for personal expenses, including groceries, pet supplies and entertainment. During the four-year period, Cimino is accused of transferring approximately US$472,000 of investor money from the Tequila company into his personal bank account, and reportedly used a significant portion of that sum for personal living expenses.
Audrey Strauss, US attorney for the Southern District of New York, said: “Joseph Cimino allegedly raised nearly US$1 million in investor funds for his start-up Tequila company by lying about the company’s finances, and then spent a significant portion of that money to finance his own lifestyle. Now Cimino faces the sobering reality of federal securities and wire fraud charges.”
From 2014 to 2018, Cimino allegedly made a number of fabricated and misleading representations in a bid to attract and maintain investors. One example highlighted was Cimino’s apparent false inflation of the amount of capital raised from other investors for the Tequila firm, which was communicated to potential backers. Furthermore, he allegedly told prospective backers that certain individuals were investors in the Tequila firm when they were not.
In addition, Cimino was accused of fabricating or falsely inflating the Tequila company’s sales in a number of investor communications.
In December 2015, the entrepreneur is accused of falsely implying over email to an investor that the Tequila company already had sales, but the company’s initial sales did not start until 2017.
Further allegations include in July 2017, when Cimino apparently presented an investor report and quarterly profit-and-loss statement that said the Tequila company’s year-to-date sales totalled 3,410 cases. It was in fact only 350 cases.
For the firm’s year-to-date sales in October 2017, Cimino is thought to have said sales reached 6,035 cases, but in reality it only made up 20% of that number. That same month, he told investors the firm would receive repayment for 800 cases of Tequila that were allegedly destroyed at a distributor’s warehouse in Puerto Rico due to Hurricane Maria. But the Tequila firm had no insurance and none of its inventory had been destroyed in the hurricane.
William F Sweeney Jr, FBI assistant director in charge, said: “Through falsely inflating capital, misleading investors, and lying about other aspects of his Tequila company, Cimino, as alleged, raised nearly US$1 million in furtherance of his fraudulent scheme. While his alleged illegal activity continued over a period of four years, today’s arrest has effectively shattered any hopes he may have had of continuing to scam innocent investors.”
US government body the Securities and Exchange Commission (SEC) has also launched a civil action suit against Cimino in the US District Court in White Plains. The SEC had assisted the US Attorney for the Southern District of New York in the investigation.
The Spirits Business has approached 6 Degree Tequila for comment.