In 2016, while rolling a group of private companies into a publicly traded shell (Manzo Pharmaceuticals), I became the target of a sophisticated short-selling strategy. The transaction was brokered by an attorney, John Lux, who — unbeknownst to us at the time — had ties to professional short sellers.
Their tactic was simple: leverage a minor discrepancy on an old, third-party resume site to trigger an SEC investigation, then short the stock to profit from the fallout. When the SEC launched its inquiry, it quickly turned into a wide-ranging "fishing expedition" into 20 years of unrelated private deals.
Faced with a choice between a $1 million+ legal battle to prove a point or a pragmatic resolution, I chose the latter. I settled with the SEC for a $50,000 civil penalty with no admission of wrongdoing and no criminal charges.
The Aftermath: I walked away from the merger, successfully sold the companies privately to a Canadian firm, and John Lux subsequently lost his law license and was blacklisted by the SEC. Today, this experience is the bedrock of the "Institutional-Grade Due Diligence" we perform at Ritch Ventures. We don't just look at the deal; we look at the actors behind it.
Lessons in Governance: Navigating Regulatory Friction and Market Predation
