Lawsuit: Crowd-Funded Skully Liked Lap Dances More than Helmets

The former book-keeper for Skully, the futuristic motorcycle helmet maker, filed a lawsuit this week claiming the company squandered $2.5 million on exotic cars and lap dances, casting doubt on Silicon Valley claims that crowd-funding would bury Wall Street.

Skully was the 2013 brainchild of the CEO Marcus Weller and his co-founder/brother Mitch Weller, and wanted to produce motorcycle helmets with digital heads-up display visors that could show speed, RPM, GPS directions and a rearview camera, in the style made famous by Stark Industries in the Ironman movies.

Forming what was supposed to be a Silicon Valley tech startup, Skully produced a “rad” YouTube video to hype a $2,446,824 crowd-funding effort from about 1,000 “Indie GoGo” backers to mass-produce the helmets. T

he company announced repeated delays in shipping its $1,400 digitally augmented AR-1 helmets over the next two years. With the money gone, Skully shut down and filed for bankruptcy on August 5.

Isabelle Faithhauer, a former executive assistant to the Weller brothers, filed a lawsuit claiming that the Wellers “used the corporate entities of Skully in such a fraudulent manner as to render the corporate entity a sham.”

Faithhauer alleges that the Wellers “routinely demanded [she] engage in fraudulent bookkeeping practices designed to defraud investors in Skully into believing that Skully funds were being used for business purposes, when in fact, the funds were being used to pay the personal expenses of the Wellers,” according to the LaneSplitter.com.

The former executive assistant claims that she was instructed to hide “personal expenses” that included personal rent, a weekend Lamborghini rental; a Dodge Viper; a second Dodge Viper, after wrecking the first one; and a $2,000 tab at a strip club.

Faithhauer is demanding big bucks for an array of labor violations related to the Wellers’ alleged refusal to pay her overtime, and then firing her.

Following the bankruptcy, the Wellers sent out an email, stating, “Over the past several weeks our management team has worked feverishly to raise additional capital but unforeseen challenges and circumstances, beyond our control, made this effort impossible. What this means now is that SKULLY will no longer be able to ship AR-1 Units or process refunds directly.” They added, “We realize there are many unanswered questions and that this is a very upsetting situation. We are truly sorry.”

Silicon Valley crowd-funding platforms like Indiegogo and Kickstarter have been able to avoid external regulatory oversight, and were successful in gaining massive legal legitimacy when President Obama signed the JOBS Act in 2012 to allow “non-accredited investors,” also known as middle class families, to make stock purchases in small businesses.

Referred to as “Reg A+”, the United States Securities and Exchange Commission issued regulations that allow equity funding from “non-accredited investors” of up to $50 million in any twelve-month period for small and micro start-up businesses. Expectations were high. One article in CrowdFundBeat proclaimed: “New Regulation A+ Rules Will Rock the Crowdfunding World”.

But critics have warned that the new SEC rules do not require crowd-funding sites to “provide any background information on the team or the production company.”

Liz Logan, writing for Smithsonian.com last year, pointed out that the crowd-funding audience is exploding as more money flows to projects and sponsors that disclose only limited information about company principals.

One successful crowd-funding creator, despite his success in raising money for his design firm, told Logan, “I believe we’re dealing with a ticking time bomb. A high-profile project is going to fall totally flat on one of these platforms and there’s going to be a big, public fallout.”


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