UPDATED, 10:35 AM: Three LA-area men have been arrested and a local woman has agreed to surrender in a scheme to defraud hundreds of people who invested in a company called Gigapix Studios that claimed to be producing a 3D animated version of The Wizard Of Oz. A federal grand jury handed down a 36-count indictment on May 15, and they were unsealed yesterday. The FBI arrested Christopher Blauvelt, 58, of Woodland Hills, David Pritchard, 66, of Malibu, and Gregory Pusateri, 49, of Woodland Hills; and Cheri Brown, 65, of Studio City will turn herself in soon. The charges include mail fraud, wire fraud, attempted wire fraud and offering for sale unregistered securities. If convicted, the defendants face decades in federal prison. Details of the case are below. Read the FBI’s press release about the indictments and arrests at the bottom of the original post.
PREVIOUSLY, MAY 14, 2013: The FBI in Los Angeles is conducting an investigation involving investments made with Gigapix Studios Inc and OZ3D LLC between 2002 and the present for a scam to remake The Wizard Of Oz as a computer-animated feature film. The feds are “seeking victims” of financial fraud in the private offerings and is trying to find the “large number of investors” who were fleeced. Here’s the announcement on the FBI website:
Gigapix Studios, Inc. claims to be using investor capital to purchase rights to intellectual property in the entertainment industry, with a focus on family-friendly films, arête films, and reality television. According to its private placement memorandum dated May 17, 2010, Gigapix Studios, Inc. is focusing on high yield industry indentifiable segments, such as targeted production of modest budgeted theatrical films and controlling theatrical distribution foremost, in addition to other ventures. They claim that they are in the process of developing, acquiring, and producing several films and other creative concepts.
OZ3D, LLC claims to be using investor capital to finance and produce the proposed computer generated animation motion picture “The Wizard of Oz,” and the manager of the entity is Gigapix Studios, Inc. The private placement memorandum for OZ3D, LLC, dated May 5, 2008, stated that the company was trying to raise $20 million for the project.
In the process of raising money for their offerings, Gigapix Studios, Inc. Chief Executive Officer Chris Blauvelt and others have received cease and desist orders from numerous state regulatory agencies, including in Oregon, Alabama, Washington, Colorado, and California.
There’s a lot more behind this story, according to Courthouse News. Gigapix raised upward of $8M+ for the film, but it never got made. Arc Productions in Canada was going to produce the animation and has filed a claim against Gigapix as well. So have some investors, like Daniel Zucker who has sued Gigapix Releasing, OZ3D, Gigapix Studios, and its president David Pritchard, in LA Superior Court. In his complaint, Zucker claims the defendants sweet-talked him out of $700,000 by offering him 1.5% of the profits. He claims that Pritchard told him he would earn 10 to 20 times the amount of his loan to Gigapix which promised to repay him no later than June 29, 2012. But he hasn’t seen a single dime, Zucker says.
Here is the FBI press release on the indictments and arrests:
LOS ANGELES – Three men were arrested today for their roles in a scheme involving a company calledGigapix that allegedly defrauded hundreds of victims by promising large returns on movie investments and a production company’s imminent public offering, announced United States Attorney André Birotte Jr. and Bill L. Lewis, Assistant Director in Charge of the FBI in Los Angeles.
Two defendants were arrested this morning –, who has recently been staying with a friend in Hollywood – and are scheduled to be arraigned this afternoon in United States District Court.
A third defendant in the case –– was arrested this afternoon in Goleta, California. He is expected to be arraigned tomorrow in federal court in Los Angeles.
The fourth defendant in the case – Cheri Brown, 65, of Studio City – has agreed to surrender to authorities.
The four defendants were charged in a 36-count indictment returned under seal by a federal grand jury on May 15th. The indictment, which was unsealed this morning, accuses the defendants of mail fraud, wire fraud, attempted wire fraud and offering for sale unregistered securities.
The case centers on a company called Gigapix that was founded by Blauvelt in 2002 and took on Pritchard as a partner in 2006. The indictment alleges that between 2006 and 2012, Blauvelt and Pritchard hired telemarketers to solicit potential investors, who were told that Gigpix was an animation company similar to Pixar Animation Studios, and that Gigapix was developing projects expected to generate large profits when the company went public. Brown and Pusateri were among the top salespeople for Gigapix, according to the indictment.
The indictment alleges that telemarketers – known as “fronters” – used lead lists purchased by the defendants to find potential investors and then used scripts touting the supposed merits of Gigapix. When investors expressed an interest, materials about the investment were mailed to them. At that time, the potential investor was turned over to Brown and Pusateri – who were known as “closers” – to collect their money.
In or around 2008, the defendants allegedly shifted their focus to raise funds to produce a movie titled “OZ3D,” while continuing to solicit funds for Gigapix. In soliciting money for Gigapix and “OZ3D,” the indictment alleges that the defendants made numerous misrepresentations to potential investors and withheld material facts. For example, the indictment alleges that investors were told that Gigapix was a financially successful company, that they would receive high returns on their investments in less than 18 months, and that the investments carried little or no risk. Investors were also told there was an urgency to invest in Gigapix and “OZ3D” because the window of opportunity to invest and the number of shares available were limited.
Investors were told that a minimum of 65 percent of the money investesd in “OZ3D” would be used to produce and distribute the movie, and that only a small percentage of investor money would be used to pay commissions and finder’s fees. However, the indictment alleges that less than 5 percent of the investors’ money was used to finance the film. The indictment alleges that of the millions raised for the Gigapixinvestment, less than 20 percent of those funds were spent on the production of movies or television shows. The majority of the money raised from investors was spent on salaries, commissions and overhead, according to the indictment.
Approximately 750 victims lost virtually all of the money – approximately $22.6 million – that they invested inGigapix and “OZ3D,” according to the indictment.
If convicted, the defendants would face decades in federal prison. The mail fraud and wire fraud counts, for example, carry statutory maximum penalties of 20 years in prison for each count.
An indictment contains allegations that a defendant has committed a crime. Every defendant is presumed to be innocent until proven guilty in court.
This investigation was conducted by the Federal Bureau of Investigation.