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Investments

‘YouTube or Netflix for Kids’ - Promoting with Cold Calls

October 29, 2019

[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.” Out of thousands of people 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 also seemed like a once-in-a-lifetime opportunity.

 

 

YOU LEARNED … from Ira Warkol, the company founder, and his team of cold callers who operated out of a boiler room, 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.”

 

Promotional materials further claimed that Toon Goggles had: (i) the ability to track visitors to its website; (ii) the technology to permit cartoon rights holders to upload their cartoons effortlessly onto its platform; and, (iii) developed mobile applications to allow its streaming services to be taken with anyone anywhere and to be accessed on almost any mobile device.

 

 

WHAT YOU WEREN’T TOLD … was that: (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 knows nothing about the caller or the company, and if any due diligence (comprehensive appraisal) was conducted on the issuer, its business and its current need for funds.

 

Before committing, have a trusted friend, adviser or financial watchdog review the deal, as well as your financial situation. It'll be better to reject a possible once-in-a-lifetime deal than to suffer from a deal that goes sour.

 

 

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