Main Line startup fail: SEC says it’s fraud, Josh Verne’s lawyer blames ‘market factors’

A federal judge is mulling another delay in the deadline for entrepreneur Josh S. Verne to respond to civil fraud charges filed last June by the Securities and Exchange Commission over investments in his failed rental start-up because Verne could also face criminal charges.

“Mr. Verne has been informed that he is the subject of a parallel [Department of Justice] federal criminal investigation into the same conduct which is the subject of the SEC’s civil complaint,” his lawyer, Joe Kohn, wrote in a memo that followed his Jan. 16 motion to postpone proceedings pending possible criminal charges.

The Inquirer reported last summer that the FBI had been talking to investors in Verne’s former firm, Ownable, which promised investors a “Billion Dollar Opportunity” to rent smartphones and laptops — a business model successfully used by enterprises such as Philadelphia-based Perpay. But Ownable failed to deliver, and the SEC says Verne spent at least $9 million on personal and family expenses.

“An ongoing investigation, running concurrently with the SEC, has been in progress for some time,” Kohn told The Inquirer in a statement.

For his twist on the rent-a-device concept, Verne, an heir to the Vernekoff family furniture business, raised $31 million from investors including Fanatics owner Michael Rubin, Sixers arena developer David Adelman, and area developers, lawyers, bankers, doctors, and tech company officials.

The SEC alleged in its complaint in June that Verne, formerly of Gladwyne, spent much of the money on himself, hiding shortfalls in “Ponzi-like” payments to early investors, which were actually funded by cash other investors had been assured would go to the business.

In his statement on behalf of Verne, Kohn cited outside causes for investors’ losses. “These allegations stem from a small group of investors who are unhappy due to financial losses resulting from many market factors beyond our control,” Kohn wrote.

The SEC says Verne also raised money from the state-funded Ben Franklin Technology Partners investment program and dozens of Main Line millionaires, many of whom considered Verne a friend active in local Jewish groups.

Kohn took over the case in November and promptly asked for an extension of time for Verne to respond to the civil charges beyond the deadline that month. Verne had won a previous extension after he failed to file a response by September. The court agreed to put Verne in default for that failure but vacated that order when Verne asked for more time.

Federal prosecutors often work closely with the SEC and other financial watchdog agencies. The SEC does not file criminal complaints but refers them to law enforcement agencies for separate criminal cases.