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Growth Capitalist (https://www.growthcapitalist.

com/2017/03/altavistas-clients-speak/)

AltaVista’s Clients Speak Out (Part 3 of 3)


By Teri Buhl and Brett Goetschius | March 9, 2017

Growth Capitalist interviewed four founders of startups that have filed Reg A offerings this year through AltaVista Capital Markets, a year-
old Los Angeles-based firm founded by a securities promoter recently banned from the industry that has been involved in a flurry of recent
filings by companies seeking to raise capital via Reg A.

Each of the CEOs had signed “underwriting agreements” with AltaVista, despite the fact that neither the firm nor any of its senior executives
hold securities licenses, which set the terms of their engagement with the firm: $5,000 to $10,000 in upfront fees, as much as $75,000 in
additional fees, and 4% to 5% of the issued shares.

AltaVista told the issuers they’d get investors through the 17 “venture funds” the firm managed. Additionally, issuers were promised their
investors would have an exit strategy because the stock would be able to trade in AltaVista’s proprietary secondary markets, the Nanocap
Market and the Microcap Market, according to the CEO’s of StreamNet, NorthWest Trout Farms and Zipmesh.

The NanoCap Market website (#http://www.nanocapmarket.com) , until late last month, highlighted the notion it was a registered alternative trading
system. But a check on the SEC’s current list of ATS, dated February 1, doesn’t show NanoCap, Microcap, or AltaVista as being registered
with the regulator for secondary trading.

Approached Through Angel Group

An Oregon-based trout farmer, Dennis Fletcher, told Growth Capitalist Steven Muehler found him in the summer of 2016 through a listing
on his local angel investor group and solicited him with a promise to help raise capital through the newly introduced Reg A+ offering
exemption. Fletcher did a simple name search on the internet and quickly learned Muehler had a checkered past and declined to work with
him.

In October, a new man with a similar offer came calling. His name was Koorosh “Danny” Rahimi. Dennis was wooed with the idea of very
little money down upfront to get the offering ready and approved for sales to the public. Fletcher also agreed to pay AltaVista 4% of funds
raised via the company’s Tier 1 offering. Fletcher worked with a board member and local Portland attorney to review the offering
documents.

Fletcher said Rahimi told him the company would have its broker-dealer license approved by
FINRA in February.

In early February, AltaVista’s disclaimer on the NanoCap Market webpage stated, “AltaVista
Private Client, LLC is currently registering FINRA Broker Dealer. AltaVista Private Client, LL
anticipates that the Registration as a Registered Investment Advisory Firm and Broker Dealer
will be completed in January of 2017.”

Fletcher was advised by AltaVista to register the sale of securities in New York first. New York
is a “notice-only” state which does not conduct detailed merit reviews of Tier 1 offerings.

“New York is an outlier in that it is a ‘notice-only’ state, which is, I presume, why Muehler chose
it,” said Sara Hanks of the KHLK law firm. “The other states will review the offering circular filed
as part of a Tier 1 offering. ‘Disclosure’ states will say things like ‘make the relationship
between X and Y more clear’ while ‘merit’ states will say things like ‘you need to have Dennis Fletcher, NorthWest Trout Farms

independent directors to offer in our state.’ New York just checks that the filing forms have been
completed properly.”

Fletcher said he was told by Rahimi that he’d be able to sell “nationwide” by April and was under the impression his Tier 1 offering would be
approved by the SEC within 30 days. Rahimi’s promise to help move the offering through the SEC comment process appears to have fallen
flat. NorthWest Trout Farms’ Form 1-A, which was filed on January 27, has not been qualified by the SEC, nor has the company shown any
activity through follow-on filings as of press time.

When Fletcher learned that Muehler had likely never even submitted the broker-dealer application and check to FINRA and that Rahimi
was not registered as an advisor, he immediately contacted his attorney, J.P. Voilleque of Immix Law.

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Voilleque tried to reassure him in an emailed response. “My memory of the representations is the same as yours,” he said. “The new Reg A
is not yet a year old, so it's not surprising that everyone's scrambling to get registered. They are massively on the hook with the SEC if they
don't go by the book on your offering (and all the others), and I can't see them making the equity-for-services deal that they offered you if
they didn't intend to be around long-term.” Voilleque refused to comment further on the extent of his due diligence work for NorthWest Trout
Farms’ offering, saying he was “not authorized” to speak for his client.

After Growth Capitalist began asking Muehler and Rahimi questions in mid-February about the true status of the firm’s broker-dealer
registration, AltaVista’s main website (http://webcache.googleusercontent.com/search?q=cache:rwPo9sgqltMJ:www.altavista-cap.com/venture-
capital+&cd=1&hl=en&ct=clnk&gl=us) was edited to remove references to it being licensed to sell and trade securities. In late February the site was
taken offline entirely.

All of the Tier 1 offerings Growth Capitalist has identified as filed through AltaVista indicate the issuers chose New York to register with first,
and listed the estimated cost of the offering at $75,000.

NorthWest Trout’s Fletcher said he thought the $75,000 was for AltaVista to pay state Blue Sky fees. Attorney Hanks told Growth Capitalist
that the total cost for Blue Sky fees in all 28 states that require them would only be around $10,000. Fletcher said he believes that he
doesn’t have to start paying the $75,000 to AltaVista until the offer is qualified and selling – which, with a single-state filing in New York, is
automatic. A copy of an “underwriting agreement” from AltaVista indicates that the $75,000 is due when the “first round of funding is
completed” and is in addition to the several thousand dollars in filing fees the firm charged Fletcher and other clients.

After reading part one of this series, Fletcher told Growth Capitalist, “I think I’m going to cry. I am so pissed.”

Fees Upon Fees

The CEO of an online farm-to-table delivery business in Sacramento, Calif., was also wooed by AltaVista’s promise of low fees and
investors ready to commit. Felipe Neuwald said he had been approached by other investment professionals to help raise capital for his
company, Zipmesh, through new crowdfunding offerings and choose AltaVista this fall. The company filed its Tier 1 offering February 2.

Neuwald told Growth Capitalist he’s already paid AltaVista $10,000 to structure and prepare the
securities offering and shepherd the offering through the SEC review process. ZipMesh also
committed to pay monthly fees as AltaVista markets the securities during the offerings selling
phase. Neuwald said his contact person at AltaVista was Danny Rahimi.

In its 2015 enforcement action (https://www.sec.gov/litigation/admin/2015/34-75996.pdf) against Steven


Muehler (SEC v. Steven Muehler, Alternative Securities Market Group and Bluecoast Securities),
the SEC said that he would “falsely state that customer fees are used to pay SEC filing fees and
that the SEC plans to dramatically increase its filing fees”. The agency noted that it does not charge
fees for Reg A filings.

Darryl Payne, a producer of soul music and record label


owner, said he was “hounded” by Steven Muehler through Felipe Neuwald, Zipmesh
email solicitations to help him raise money through Reg A
in the summer of 2016. Payne had founded StreamNet,
from the rights to music and concerts he owned, as a
Netflix-style streaming biz for music lovers.

Payne told Growth Capitalist in a telephone interview he


didn’t want to do business with Muehler at first because he
had read about the earlier SEC case. Payne says Muehler
told him he had some trouble with the SEC in the past but
had paid his fine and was now on the straight and narrow.
What Muehler left out was the industry-wide ban he Darryl Payne, StreamNet
agreed to when he settled with the regulator on June 21,
2016. Payne said he paid AltaVista $850 a month as a fee to get his offer through the SEC qualification process, spending around $5,000
to $6,000 total.

“The Reg A offering was filed on August 3, 2016, and Muehler was slow to get back to the SEC as the offering went through the comment
process,” said Payne in an interview. With each month that the offering languished in SEC review, AltaVista could charge Payne more fees.

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StreamNet’s offer was qualified to begin sales of 20,000 shares of stock on November 23. In Muehler’s pitch to Payne he said there was a
promise of $10 million from investors in the “AltaVista Entertainment and Media Fund” within 30 days of being qualified, and that the fund
had at least $53 million of asset under management. The contract AltaVista signed with Payne said the firm would charge $75,000 for cost
of finding investors, according to Payne.

When the money didn’t come in the beginning of the year, Payne told Growth Capitalist he realized there likely never was any money in
AltaVista’s entertainment fund. Payne was able to confirm the lack of money in the venture funds from Rahimi in February after reaching
out to him via LinkedIn. Rahimi told Payne he thought Muehler was using Rahimi’s AltaVista email to communicate with issuers.

Risks for Issuers

One of the risks to issuers is that by AltaVista not being a registered broker-dealer, issuers that accept capital from investors brought to
them by the firm could be liable for rescission if the investors later sue. In rescission, a company is required to return any capital acquired
through a non-compliant securities offering. AltaVista is in effect acting like a non-registered “finder”; a term that was the subject of the
Small Business Advisory Committee meeting with the SEC on February 15.

Attorney Hanks, who is co-chair of the committee, talked about the importance of finders' status as brokers being clarified, because she
said, “if an issuer uses a finder that should have been a registered broker-dealer and wasn't, any funds raised by that finder might have to
be returned to the investors in the case of a lawsuit.”

Steven Muehler’s and AltaVista’s names don’t appear on any of the Reg A filings by the companies interviewed for this story, and none of
the executives at the companies say they have received any real offers of investment from AltaVista. StreamNet’s Darryl Payne, whose
offer was qualified at the end of 2016, said the SEC hasn’t told him yet that there is any issues related to AltaVista that would invalidate its
approval of his offering. But he admits it has been tough finding a portal to help sell the deal.

Attorney David Feldman, partner at Duane Morris, said, “Rule 262 under Reg A makes clear that the involvement of ‘bad actors’ in a Reg
A issuer can disqualify the company from using Reg A. However the rule only applies if certain individuals are bad. That includes officers,
directors, and 20% owners or promoters. It also covers any person to be paid, directly or indirectly, for soliciting purchasers in the offering.”

“There also could be an issue if someone is paid a commission and was not a registered broker-dealer. There is also an ‘out’ where a
company would not be disqualified if the issuer ‘establishes that it did not know, and in the exercise of reasonable care, could not have
known’ that the disqualification existed,” said Feldman.

Growth Capitalist was told by a person who has provided professional services to the CEO of NorthWest Trout Farms, and reviewed in
detail AltaVista’s business practices and offerings, that he submitted a whistleblower tip to the SEC.

On the evening of March 3, after first of this three-part series ran, Muehler called Payne for the first time in several weeks. Payne says
Muehler told him the SEC ban doesn’t mean he can’t still get registered with FINRA. Payne also said the Los Angeles office of the SEC told
him Muehler has never paid his $400,000 fine from the ASMG case. The SEC press office confirmed that the fines against Alternative
Securities Market Group remain outstanding.

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