It seemed innovative at the time: Start an online campaign to purchase the iconic Pabst Brewing Co. and sell shares on Facebook and Twitter to cover the $300 million cost. Michael Migliozzi II and Brian William Flatow found 5 million people (all hipsters, we presume) who said they would invest a total of $200 million. But they forgot one tiny detail and major violation of federal law—they neglected to register the public offering with the Securities and Exchange Commission. The men, who never collected any money, agreed to stop selling shares to the public, the SEC says.
The case spotlights a growing challenge for regulators, who must patrol business online ventures and ferret out scams disguised as stock offerings. The SEC has an entire enforcement unit, the CyberForce, devoted to Internet surveillance with a staff of more than 200 people looking for violations. Migliozzi, 45, and Flatow, 41, started the site BuyaBeerCompany.com in November 2009 and received $14.75 million in pledges the first three weeks through Facebook and Twitter promotion. (Can't get enough PBR? Click to read about about tech start-up Hipster's unique compensation for interns.)