The SEC has reached a deal with defunct Destiny Robotics after investors lost all their capital when the startup failed to produce the promised product.
Destiny Robotics launched in 2021 and pledged to build an AI-powered holographic assistant, due out in 2022, and a full humanoid robot the following year. In March 2023, the startup reported it raised $141,455 from 145 investors on Wefunder but the SEC asserts CEO Megi Kavtaradze wasn't developing a viable product and didn't disclose her personal relationship with a lead investor.
"Defendants told investors that their products would be capable of forming 'deep and meaningful relationship with humans' and assist with complex tasks such as crisis-management, psychological therapy, and childcare," the SEC says in its complaint [PDF].
"On the company’s own webpage, defendants even offered the option to reserve a place on a waiting list to purchase a robot by paying $12 for a preorder. However, defendants had no real possibility of delivering a hologram or a robot as represented to consumers, much less in the time frame they represented."
In 2022, Destiny Robotics released a video purporting to show an AI-powered holographic assistant, which the SEC found was built using off-the-shelf language processing software. Internally, the agency claims, the robotics start up abandoned the project, but still told potential investors that it was being developed.
In February 2023, the startup announced its first humanoid robot in another video. Far from the design that was promised, the prototype was a simple plastic head and shoulders that again used commercial software for language processing, the Commission says.
"In order for this prototype to power on and perform its basic functions at inception, an individual needed to operate a separate device to provide the prototype its code through remote connectivity software," the complaint reads. "This separate device was not included in images or descriptions disseminated to the public."
Investigators found that after shooting the video, the robot was placed in storage and no further work was carried out on it, although this is not what investors were told, the SEC states. The following month, the same claim about the robot prototype was used to promote another crowdfunding round - this time on TruCrowd, but this was called off after Kavtaradze was informed that the company was under investigation by the Financial Industry Regulatory Authority.
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Kavtaradze doesn't seem to be that invested in the company itself. The agency reports that she misused $13,000 in capital on personal expenses, including her application fees for six US MBA programs, and last autumn moved to California to pursue her academic career, the SEC reports.
The SEC was also peeved that, on the original crowdfunding round, Kavtaradze didn't disclose that she was engaged to one of the lead investors. She was also accused of hyping up her own resume, although that's hardly uncommon in the tech space.
"Defendants also made material misrepresentations in Destiny Robotics’ webpage touting Kavtaradze’s experience and qualifications as CEO, stating that Kavtaradze was an 'experienced technology executive' and had experience being 'responsible for managing large-scale projects and leading diverse teams,'" the complaint states.
"These misrepresentations were also made in social media and included in the company’s Wefunder webpage. In truth, Kavtaradze had no significant experience as an executive in a technology company rendering these statements materially misleading. Prior to Destiny Robotics, Kavtaradze never served as CEO or executive in a functioning tech company."
To settle the case, while not admitting or denying the allegations, Kavtaradze has offered to pay $12,990.63 plus prejudgment interest of $1,394.06, and a civil penalty of $50,000. According to her LinkedIn page, she is currently enrolled in the UC Berkeley Haas School of Business and has just completed an internship at Adobe.
"The company is not operational anymore therefore there will be no new product schedule," she told The Register. ®