A judge on Tuesday denied an Antelope Valley woman's motion to modify the terms of her release on federal charges that she raised more than $13.5 million from at least 1,000 investors for her beverage company and spent much of it on casinos, luxury items and home rentals.
Lupe L. Rose, 54, of Palmdale, is charged with 38 counts of securities fraud and one count of making false statements to federal investigators, according to the U.S. Attorney's Office.
Rose pleaded not guilty at his arraignment in Los Angeles federal court in February, and a judge ordered him released on $20,000 bail. His trial is scheduled for September 17.
In recent months, Mr. Rose has asked the government to agree to modify the terms of his release to allow him to travel to California and Nevada for business purposes, and prosecutors have responded by demanding information about his business and supporting documentation.
However, according to court documents, Rose failed to explain the exact nature of his business and why he needed to travel to Las Vegas and stay at casinos to accomplish his objectives.
At the end of a bail review hearing on Tuesday, U.S. District Judge Pedro Castillo denied Rose's request for bail, finding she was too vague about who she would meet and what she would be doing during her trip.
According to the indictment, Rose founded Lancaster-based beverage company Sea Beverage in 2009 and served as its president, CEO and chairman of the board. Rose promoted Sea Beverage as a woman-owned beverage company and targeted primarily female consumers, selling beer, wine, bottled water and other products that purported to cater to women's needs.
According to court documents, Rose solicited more than $13.5 million in investments for Sea Beverage from more than 1,000 investors across the country between 2017 and December 2020. Specifically, Rose caused the company to offer its shares through a prospectus at $2.50 a share. Rose also hosted in-person meetings for existing and potential investors, some of which were livestreamed to far-flung investors, the indictment alleges.
Prosecutors allege that Rose promoted Sea Beverage as a successful company, when in fact he personally used much of the $13.5 million it raised from investors to enrich himself, his family and his friends. According to the indictment, Rose also used victim-investor funds to “purchase” shell companies to create the false impression that Sea Beverage was expanding.
Contrary to a written promise that he would spend 30% of investor funds on inventory, Rose allegedly spent just 2.5% of investor funds on inventory between 2015 and 2021. According to the indictment, between 2016 and 2021, Rose misappropriated $6 million in victim investor funds raised in the company's initial public offering for the benefit of himself and friends.
According to the U.S. Attorney's Office, she spent more than $1 million in company funds at casinos, and also used company funds to buy cars and trucks for family and friends, pay rent on a house she rented, and buy luxury clothing from retailers such as Gucci and Louis Vuitton.
According to the indictment, Rose lied to investors, telling them the company “generated approximately $4 million to $5 million in revenue” in 2018, when in fact Sea Beverage sold less than $263,000 in goods that year.
Prosecutors noted that if convicted on all charges, Rose could face up to 20 years in federal prison on each count of securities fraud and up to five years in federal prison on each count of false statements.
In September 2021, the U.S. Securities and Exchange Commission sued Rose for fraudulently raising millions of dollars from Sea Beverage investors across the U.S. On January 16, U.S. District Judge Christina Snyder ruled that Rose, Sea Beverage, and two other companies were jointly and severally liable for disgorgement of approximately $12 million, the net profit from the fraud, as well as $738,774 in prejudgment interest.
