Santa Monica Startup's Fraudulent App Pitch Funded Rolls-Royce, Yacht Repairs

SANTA MONICA, CA — A man who defrauded investors out of more than $20 million by lying about his Santa Monica company's performance and using the cash to buy luxury cars and fix his yacht was found guilty of federal wire fraud on Thursday.

Bernhard Eugen Fritsch, 63, of Malibu, was found guilty in downtown Los Angeles of one count of wire fraud after a nine-day trial, according to the U.S. Attorney's Office.

Fritsch, the founder and CEO of Santa Monica-based StarClub Inc., from 2014 to 2017 raised more than $20 million from investors to build out the company's app — also known as StarSite — claiming celebrities and influencers would use the advertising technology to post content on social media and those high-profile creatives would get a cut of the revenue, according to prosecutors.

Fritsch wooed one potential investor by claiming he had "sold the technology that became iTunes and the iPad to Steve Jobs for $300 million," according to the criminal complaint obtained by Patch.

Fritsch falsely claimed that StarClub was on the verge of entering deals with or receiving buyout offers from major media companies including Disney, prosecutors said.

The criminal complaint quotes a 2016 email to Fritsch to an investor who had grown suspicious of Fritsch's promises.

"'I don't understand where all the money has gone,'" the investor wrote. "'It's been 2 plus years since we invested in this company and nothing has happened but millions have been spent. Where is Spotify, Disney, Bertelsmann and the rest? They haven't bought it because the system isn't build and [it] isn't what is advertised. Tell me I am wrong.'"

The CEO told investors he would use their money to build out the company, but he instead used the funds to support a luxurious lifestyle: He bought a McLaren and a Rolls-Royce, fixed his yacht and renovated his Carbon Beach mansion, prosecutors said.

Police seized the boat and two cars, prosecutors said.

One victim invested more than $20 million in StarClub in response to Fritsch's false statements. The victim also introduced Fritsch to other victims who invested millions in the company. Prosecutors estimate that Fritsch caused at least nearly $25 million in victim losses.

The jury found Fritsch not guilty of a second wire fraud count.

Fritsch, a German national and green-card holder, remains free on bond. He's due back in court for sentencing in the coming months and faces up to 20 years in federal prison, according to prosecutors.