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The Securities and Exchange Commission today charged two former executives of SITO Mobile, Ltd., a mobile advertising provider based in Jersey City, New Jersey, with fraudulently using corporate funds to pay for personal expenses.

The SEC’s complaint, filed in the U.S. District Court for the District of New Jersey, alleges that SITO’s former CEO, Gerard F. Hug, and SITO’s former CEO, Kurt W. Streams, improperly used more than $300,000 to pay non-business related expenses. As alleged, Hug expensed at least $100,000 worth of personal charges, including family trips and designer clothes, on SITO’s corporate charge card and concealed the expenses from accounting personnel by coding them as legitimate business expenses. Similarly, the complaint alleges Streams fraudulently used SITO funds to pay for at least $200,000 of personal living expenses, including his Netflix and Amazon Prime subscriptions, pet groomers, eyewear and vacations. The complaint further alleges that Streams improperly withdrew cash from a SITO account to pay for personal expenses.

The SEC’s complaint alleges that the executives’ personal use of corporate funds were inaccurately recorded as business expenses in SITO’s books and records. As a result, SITO’s annual reports and definitive proxy statements failed to disclose these payments to Hug and Streams as compensation. The complaint further alleges Hug and Streams falsely certified that SITO’s annual reports contained no material misstatement or omission and provided false management representation letters to SITO’s independent auditors.

The SEC’s complaint alleges that Hug and Streams violated the antifraud provisions of Sections 17(a)(1) and (3) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder; the internal controls and books and records provisions of Section 13(b)(5) of the Exchange Act and Rule 13b2-1 thereunder; the Sarbanes-Oxley certification provision of Exchange Rule 13a-14; and the lying to the auditors provision of Exchange Act Rule 13b2-2. The complaint further alleges that Hug and Streams aided and abetted SITO’s violations of the reporting, internal controls, books and records, and proxy statutory provisions of Sections 13(a), 13(b)(2)(A), 13(b)(2)(B), and 14(a) of the Exchange Act, and Rules 12b-20, 13a-1, 14a-3, and 14a-9 thereunder. The SEC’s complaint seeks as relief from Hug and Streams permanent injunctions, disgorgement with prejudgment interest, civil penalties, and officer and director bars.

Separately, the SEC also instituted a settled proceeding against SITO. Without admitting or denying the SEC’s findings, SITO agreed to an order finding it violated the reporting, internal controls, books and records, and proxy statutory provisions of the federal securities laws and ordering it cease and desist from future violations. In determining to accept SITO’s offer and not impose a penalty, the Commission considered SITO’s significant remediation and cooperation in its investigation.

The SEC’s investigation was conducted by Patrick L. Feeney and was supervised by Kevin Guerrero and Antonia Chion. The litigation will be led by Gregory Miller and Mr. Feeney, and supervised by Fred Block.