[Photo: Cold Caller]

by Howard Haykin

You received a cold call promoting Toon Goggles, Inc., a Los Angeles-based company that marketed itself as “YouTube or Netflix for kids.” Thousands of people were called - you and 400 other individuals invested a total of $19 million for the chance to “get in on the ground floor” of this company. For some investors, this seemed like a once-in-a-lifetime opportunity.

WHAT YOU WERE TOLD.    Ira Warkol, the company founder, and his team of cold callers who operated out of a boiler room, said that Toon Goggles was an "on-demand entertainment service that offered online streaming of cartoons, live-action shows, games and music through its ToonGoggles website and mobile applications.”

WHAT YOU WEREN’T TOLD.    wAmong other things: (i) all sales were illegal; (ii) from 2012 through 2016, the company was not profitable, and its revenues never exceeded $200,000 a year; (iii) Toon Goggles didn’t keep accurate records of its sales, and to this day doesn’t know the total number of investors or the total amount of capital raised; and, (iv) a large chunk of the funds went to pay for sales compensation to Warkol and his sales agents.

INVESTORS BEWARE OF COLD CALLING ... a technique in which salespersons contact individuals – typically by phone or telemarketing - who have not previously expressed interest in the offered products or services. While cold calling can be annoying, it’s not illegal.

That said, cold-call promotions are risky and should be avoided. Potential investors likely know next-to-nothing about the caller or the company, or if any comprehensive appraisal - i.e, due diligence - was ever conducted on the issuer, its business and its current need for funds.

[For further details on this case, click on SEC Litigation Case or SEC Complaint.]