The US Securities and Exchange Commission (SEC) has announced that it has settled charges against CQC Impact Investors LLC, commonly known as C-Quest, for a scheme involving manipulation and misrepresentation of data related to the company’s business operations. This scheme culminated in a fraudulent $250 million offering that misled investors. C-Quest has admitted to the allegations outlined in the SEC’s order, acknowledging its violation of federal securities laws and agreeing to a cease-and-desist order.
According to the SEC’s order, the fraudulent activities began in the spring of 2022 when C-Quest, a developer of carbon credit projects responsible for sponsoring, financing, managing, and overseeing carbon credit generation, began marketing its equity to institutional investors. However, former senior personnel at C-Quest had previously devised a scheme to artificially inflate the amount of carbon credits produced by the company’s projects.
During this offering, C-Quest circulated misleading materials, including teasers, offering memoranda, financial projections, and due diligence questionnaires, all of which contained manipulated data. As a result, investors were deceived regarding C-Quest’s past and future ability to profitably and sustainably originate carbon credits. Ultimately, this fraudulent effort led to the sale of $250 million worth of C-Quest shares in early 2023.
The SEC’s order has determined that C-Quest violated Section 17(a) of the Securities Act and Section 10(b) of the Exchange Act, along with Rule 10b-5. In response, C-Quest has consented to the entry of a cease-and-desist order.
The SEC’s investigation is ongoing and is being conducted by Zachary Sturges and George Carotenuto, with supervision from Joshua Brodsky and Osman Nawaz of the Division of Enforcement’s Complex Financial Instruments Unit. The SEC has expressed gratitude for the assistance provided by the U.S. Attorney’s Office for the Southern District of New York, the FBI, and the Commodity Futures Trading Commission.