She Beverage Co. accused of defrauding investors to fund casino sprees

Quick Intro

In a significant legal development, the She Beverage Co., a California-based company that marketed itself as catering specifically to women with its range of beverages, has been slapped with a hefty $14 million in penalties. This punitive measure comes as a consequence of allegations that the company’s founders engaged in deceptive practices, misleading investors, and misappropriating funds for personal indulgences, including lavish casino sprees and extravagant purchases.

Background of the Case

The She Beverage Co., positioning itself on its Instagram page as a “celebrity-driven beverage company,” attracted attention not for its purported celebrity endorsements—which were notably absent—but for the egregious financial misdeeds uncovered by regulatory scrutiny. Last week, the company’s three proprietors, Lupe L. Rose, 54, Sonja F. Shelby, 60, from Palmdale, California, and Katherine Dirden, 48, from Lancaster, California, were mandated by the U.S. District Court for the Central District of California to repay the full penalty amount within a 30-day window.

Financial Misconduct Unveiled

The Securities and Exchange Commission (SEC) initiated legal action against the trio in September 2021, following revelations that, between 2017 and 2019, She Beverage had amassed over $15 million from upwards of 2,000 investors under pretenses that have since been discredited. The company had purportedly assured investors that 30% of the raised funds would be allocated towards beverage procurement. Contrary to these claims, a mere 2% was actually directed towards inventory, with the women diverting at least $7.5 million towards personal luxuries, including vehicles, high-end retail items, and notably, casino visits.

Extravagance and Deceit

A breakdown of the misappropriated funds includes approximately $1.2 million gambled away in casinos, over $180,000 expended on personal vehicles, $100,000 for leasing a residential property, and another $50,000 splurged on luxury brands like Gucci and Louis Vuitton. The SEC’s findings also highlighted false representations by the defendants regarding their personal financial contributions to the venture, the status of a supposedly operational brewery, and the exclusivity and regulatory approval of their bottled water product. Furthermore, they were found to have grossly exaggerated the company’s market position, falsely claiming that it was on the verge of acquisition for sums reaching into the hundreds of millions.

Public Response and Denial

In an unusual move, Lupe Rose took to YouTube to publicly address the SEC’s allegations, casting herself as the victim of a discriminatory campaign against her efforts to advance women’s roles in sports, entertainment, and entrepreneurship. Rose’s video portrayed her as a pioneering figure unjustly targeted by regulatory authorities, a stance that starkly contrasts with the serious financial and ethical violations laid out by the SEC.

This case stands as a cautionary tale about the perils of misleading investors and the severe consequences that can follow. As the legal proceedings unfold, the broader implications for the beverage industry and investor trust remain to be seen, with the She Beverage Co. facing not only financial repercussions but also a significant tarnish to its reputation.