Thoughts on Scuderi Group SEC violations

When John emailed me the Green Car Congress article about the SEC issuing a cease and desist order to the developer of the Scuderi Split Cycle Engine, I was shocked.  There really are two major kinds of violations here.  When a private company raises money by issuing un-registered securities (in other words, the company has not done an IPO and follows requirements to issue all sorts of information to inform and protect investors) they must ensure that their investors are what the SEC calls “accredited investors”.  This is to protect the public from scams or other malfeasance of companies soliciting investments.  Turns out they raised $80 million dollars, a number that floored me given the limited progress Scuderi has made, and much of that from non-accredited investors way beyond any exceptions that a company can claim.  Not only that, but they actively tried to hide these violations from the SEC, which means it is not just a case of not knowing the law but a premeditated effort to get away with breaking the law.

The second violation is even worse. Salvatore Scuderi used millions of dollars that he raised from investors to fund personal expenditures of family members who provide no services to the company.  These payments have been characterized as loans, however there is no documentation stating the term of the loan, the interest rate, or any collateral to secure the loans.  Mr. Scuderi is subject to a $100K fine, and the SEC is requiring the Scuderi Group to define the terms of the loans and to disclose these non-company related use of funds over the last 12 months (but apparently not earlier violations) to new investors.

This seems to me like an absurdly light slap on the wrist for these kinds of activities.  I am saddened by these revelations for a number of reasons.  The history of novel alternative architecture engine developers has several instances of inventors promoting performance that violates the laws of thermodynamics.  Any legitimate engine developer often has to overcome this history in building credibility with potential partners and collaborators.  Now we must deal with one of the most highly promoted and well-known alternative engine developers actively scamming their investors.  I hope the fallout with this is limited mostly to Scuderi and not other companies and individuals working hard and ethically to solve huge complicated problems.

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76 thoughts on “Thoughts on Scuderi Group SEC violations

  1. So I guess this guy won’t drive a car witha scuderi engine under the hood. Seems petty. Gm, ford, and others give us gas guzzlers. And we bail them out time and again. their ceo’s make too much and score even more from stock options. Please!

  2. as an early Scuderi investor I can say the actions of the Scuderi management is absolutely appalling, and dishonest. And has left their investors with empty promises while they profited from the trust investors placed in them.

    • Tom – Sorry this happened to you. It’s one thing for an entrepreneur to fail despite his/her best efforts. That comes with the territory. This kind of behavior is a terrible betrayal.

      • Thanks Ed, It was a risky investment, and I knew that getting in. As an entrepreneur myself, I understand dealing with other people money and their trust. Most of the Scuderi investors I know were very excited at the upside return potential but were also very proud that they had help to fund an engine that could have a major impact for the positive on our planet. I don’t think any of us ever thought for a minute the the Scuderis would spend over $3.2MM of our investment dollars for their own benefit and then spend another $2MM of our money on lawyer fees to defend themselves from their own misappropriation of funds… Total disgrace. You read about these things in the news but to actual be apart of it is a real eye opener. I hope someone can invent something that actually does reduce the consumption of fossil fuels..

  3. I heard that the Scuderi Group are raising money from new investors to potentially pay back for old investors (hmmmm, what does this sounds like?)

  4. I have spoken to many investors, who support the SG 100 percent, they are extremely happy about the recent progress of the company. These investors also feel the S.E.C. ruling was minimal and were glad to see it come to a conclusion. Furthermore, based on how this article was written, the author has minimal information on the technology and minimal knowledge of the overwhelming interest from the automotive OEM’s and power gen industries, if he did, he never would have portrayed the Scuderi Group in the way he did. Something is very fishy about this article, it’s about old news being rehashed, at a time when in my opinion could not be better for the Scuderi Group and it’s investors..

    • I would be very surprised if many investors were not deeply troubled by this. Can you imagine the public outrage if it had been the CEO of Goldman Sachs caught doing this? I do not know on what you base your claim that I have minimal information on the technology since I did not discuss the technology in this post, only the behavior of management. This is hardly old news as the SEC only issued their cease and desist order just over a month ago. Regarding “overwhelming interest” from the auto OEM’s, I have not seen that for Scuderi or any other alternative architecture engine startup yet. An press release about an MOA from an unnamed company is not evidence of that. In order to get a high level of interest, an engine will have to demonstrate in an undeniable way a huge efficiency gain over the state-of-the-art. Diesel engines in cars today are at 42% BTE. Cummins is claiming they have tested an engine with a heat recovery system already close to 50%. Scuderi’s own data from 2012 is promoting a peak efficiency number of 35% (that’s 235g/kW-hr in the data sheet a commenter linked to above) and they have stated that simulations that include a waste heat recovery system suggest 44% can be achieved. In addition to efficiencies well in excess of 50%, we will have to demonstrate that the engine is reliable and is cost effective to manufacture and maintain. This is a very tall order. As to your comment below, Scuderi is a company I have been aware of for quite some time and have even praised for being one of the few companies willing to step outside the constraints of the Otto and Diesel cycles to find efficiency, a step I think is necessary for meaningful gains. Therefore I was truly shocked when I heard this news, and it is very relevant and important to all of us developing new engines. Therefore, I felt it appropriate as the subject of a blog post.

      • Thanks for your response Ed,
        Citibank and Goldman Sachs have issues with the S.E.C. all the time, both have paid multi-million dollar fines in the past and that’s with having unlimited resources to fight their cases. The SG with their limited resources felt it was no longer prudent to continue fighting the S.E.C. claims and decided to settle. As I have mentioned before most of the many investors I have spoken too, are glad the SG has put the S.E.C. ordeal behind them and now they can move on to bigger and better things. Regarding your comment about their being no evidence of an MOU from a major OEM, in view of the recent S.E.C. investigation, do you really think the SG would make this up, then distribute it to the entire world if it was not 100% accurate? As far as the technology goes, I’m not qualified to discuss technical terms with you, however the potential of the Scuderi Split Cycle engine has to be evident by the overwhelming interest from the OEM’s throughout the world. One other side note, the Scuderi Split Cycle engine is the only known engine that has the “capabilities of producing and storing energy” and this has opened up many new doors of opportunity for the SG and it’s investors.

  5. This is so weird, why would a company looking to develop a new engine technology stick their nose in the affairs of another engine technology company? Very strange indeed, the only thing I could come up with is Motiv engines feels they are in competition with the Scuderi Engine and this is an act to try in discredit them. The technology speaks for itself, their are several automotive OEM’s interested in doing joint ventures. with the SG, and a memorandum of understanding has been received from a major engine company who’s intent is to engage in a Joint Venture project with the SG. Furthermore I barely touch on the overwhelming interest the SG has been trying their best to keep up with. As an investor I couldn’t be any happier to be in the position I am today.

  6. “As an investor I couldn’t be any happier to be in the position I am today ”

    Really? Are you f-ing serious?

  7. To who ever you are?
    First of all I’m not a paid anything, but I’ll take your comment as a compliment. Second of all, have you received the last 2 or 3 investor updates, there are “many” reasons to be excited today.
    Then again your probably not even an investor, just some one who hides behind his computer
    with nothing better to do.

  8. em·bez·zle (m-bzl)
    tr.v. em·bez·zled, em·bez·zling, em·bez·zles
    To take (money, for example) for one’s own use in violation of a trust.

  9. You’ve got to ask yourself why SG began their current raise with a share price of $5.60 with no warrants included. Then they sweetened the pot by adding 1 warrant to new E series investors and 2 warrants for previous D Series investors, and now they have sweetened the pot by doubling the established warrant offers once again. If everything is going so great, why do they feel the need to give away more and more of the company for less and less money???? Isn’t this just like the 3-day old bread that is being marked down before it ends up in the dumpster?

    • I have a different take, with recent overwhelming interest in their Power Gen technology, the SG no longer wants to allocate much time into this E series raising, their time can be better used closing PPA deals, JV, and consortium’s. In my opinion they only need to raise 5 to 10 million dollars to bridge them to the IPO.

  10. Do any of these signs look familiar?

    The following can be in the Massachusetts Securities Enforcement Section found at: http://www.sec.state.ma.us/sct/sctenf/enfidx.htm

    Ten Warning Signs:
    1. Large payments over a short period of time.
    • Sign of Pyramid or Ponzi scheme.

    2. Lack of information
    • If little information is given, and you find out nothing by contacting the company, you should be skeptical. Legitimate companies should not ask you to keep secrets, and should not keep secrets from you.

    3. Zero-risk investments
    • All investments carry some risk.

    4. Extremely high rates of return
    • If it seems impossible then it probably is.

    5. Matrix programs
    • Sign of a Pyramid or Ponzi scheme. Legitimate matrix programs will have an actual product for sale, but make sure it is not grossly overvalued.

    6. Gifting programs
    • Sign of Pyramid or Ponzi scheme

    7. Chat room or bulletin board investment opportunities
    • Scam artists love bulletin boards because they can easily post false information. Advertising the fraudulent opportunities is free.

    8. Message board touters
    • Be skeptical of any information (positive or negative) posted on securities message boards.

    9. “Good Samaritan” emails
    • If the deal were so good, why would they tell you?

    10. Urgency to invest
    • Stable companies would not insist that you sign up for something immediately.

    • So what’s your point, the Federal Government (S.E.C.) does a 2 1/2 year investigation on the SG, turns up every stone possible, and they end up settling on a minimal fine. What does this have anything to do with your definition? I’ll answer that one, absolutely nothing, good try to discredit the SG buckwheat or whatever your name is, you only discredit yourself.
      I would address the other numskull above if he actually had a name or brought anything to this blog worth talking about.

  11. sounds like they are going to try to buy back the shares from all the disgruntled investors. i don’t want my money back, i want the technological advancements my money funded. then we can take them and go forward with legitimate leaders, real honest businessmen. people with conviction. all of that is lacking right now.

  12. WOW! What an opportunity, I get to repeat your famous quote “Are you f-king serious”
    You admit to being a disgruntled investor, and then you don’t want a refund on your investment.
    Your second quote says it all “Again are you f-king serious”

  13. The following can be found in the Massachusetts Securities Enforcement Section found at: http://www.sec.state.ma.us/sct/sctenf/enfidx.htm

    Scam Pre-IPOs: These purported issuers offer and/or sell shares of their company through the Internet to investors based on the premise that they are going public in a very short time. Obviously this is an exploitation of the ordinary investors eagerness to join in the IPOs that have become commonplace financial news. Some of these companies don’t exist or are marginally successful and are not financially ready to go public.

    • Your statement has nothing to do with the Scuderi Group, they have never offered and/or sold any shares of their company over the internet. As far as the SG existing call Southwest Research there is an engine running there
      with hundreds of patents or youi can call the office, they have always been available for any questions regarding any concers you might have.

      • I beg to differ–Scuderi Group is inviting investment into the company using the internet. “These purported issuers offer and/or sell”–the last investor letter specifically stated what the offer is and described what you would get if you decided to invest. By doing it via email, they are using the internet.

      • If you read the explanation the 4.3% spent really wasn’t a big deal. I have spoken to several large investors the all look at it as the normal course of running a business. Also the S.E.C. didn’t think it was that big deal either, after all it was a minimal fine imposed and the SG was approved for the next round of raising for both accredited and non accredited investors.

  14. Paul,

    are you sure that the Scuderis don’t have a problem finding investors? The frequency of investor emails and the obscure content full of excitement, promises and surprising developments (Mexican casinos?) reminds me more of a “penis enlargement medication spam” than of an engine development company to go public in a year!

    There is only one reasonable explanation. They are desperate.

  15. To: serously, are you f—ing serious?
    Seriously are youuuuu f—ing serious? You do crack me up and for that I want to thank you.

  16. Matthew please leave your personal problems off the blog, see a doctor maybe he can help you with your problem. LOL

  17. Some real nuts here. Some very very old like cuecumber an newones ones who dont give names. I call them the chicken hawks. Come to thinkof it cucumber calls himself a chair. How can any thinking person even consider all their bs. Talk about beating a dead horse. Now the engine is a gas guzzler? Wild cucumber takes some crackpot stat and adopts it. Chicken hawks attack same way, but make it personnal against paul. Coward chicken hawks. Whats next southern exposed showing up? Another big cry baby and fact phoney. Scuderi group will be worth billions of buxks soon. Non investors will crawl away, never to be heard from again. As it should be……

    • According to the Scuderi’s own data, their prototype engine consumes more fuel than engines that are currently in production. What’s more, this is after they have spent over $80 million. (Of course, thanks to the SEC, the world knows that not all of this money went towards developing their engine; the Scuderis have chosen to use some of it to enrich themselves.) Every time that the Scuderis have claimed their engine is more efficient than current internal combustion engines, they have referenced simulations only, and not actual physical tests.

    • Recumbentrider,
      Why do you think that a major automotive OEM would “sign” a memeorandum of understanding along with several others joining the liquid
      gas consortium if the technology was not capable of being more efficient than any engine currently in production? Go ahead you can admitt it, they
      know this engine has the potential of being the most fuel efficient engine ever produced.

      • The Scuderis have spent over $80 million dollars (some of which they diverted to family members who had nothing to do with the development of their engine), with absolutely no physical evidence that their engine is any better than engines that are currently in production (as a matter of fact, the Scuderi’s own data states that their prototype has poorer fuel consumption that current engines) , and not one dollar of revenue. The Scuderis have not made one sale; after approaching every major (and probably many not-so-major) engine manufacturers, all they have been able to produce was a ‘memorandum of understanding’, which they only provide the vaguest of information, and which is almost certainly non-binding; for that matter, no one knows who the ‘memorandum of understanding’ is with, what is really in it, or what the Scuderis did to get it. From what I can see, this so’called ‘agreement’ has impressed no one but a few credulous Scuderi investors.

        A very informative article about the legal nature of a memorandum of understanding can be found at http://articles.economictimes.indiatimes.com/2013-02-04/news/36743089_1_mou-document-parties. Where the article lists how a memorandum of understanding differs from a formal agreement, it says this about a memorandum of understanding: ‘This document cannot be enforced in a court of law.’

  18. recumbentrider,
    I wouldn’t call it enriching themselves, I have spoken to many investors who don’t seem to have any problems with the 4.3% spent inappropriately “only” in the eyes of the S.E.C. it’s minimal. By the way why does it bother you anyway, your not even an investor. Aren’t there more important causes in the world you can take up to better help humanity?

  19. Just for the record, there is no SEC approval process for Reg D private offerings. The idea that SG’s raise has been approved by SEC is factually incorrect, Paul.

    • I have spoken to several large investors, all of whom feel the 4.3% is minimal not even worth talking about. Most of the money went towards developing and protecting the technology and in those areas the SG has done an excellent job. Why don’t you come out from behind your computer
      and let us know what skin you have in this game?
      nothing better to do but put down ahave nothing better to do but bera?

  20. seriously paul, in all seriousness, are you f–king serious about being an investor and not being in a better position?

    only a paid blogger would say something so incredibly f–king stupid.

  21. by the way…the 80 million they spent ( and some would say some of that money was “embezzeled” ) is equivalent to 1/12th of a BILLION dollars.

    thats some serious f—king kaching.

  22. Your nothing more than a coward, you know it, I know it, and everybody else on this blog knows it. It’s never to late to change and become a man, you can start by standing behind your statements with your real name then at least I would have some kind of respect for you as a human being. How do you look at yourself in the mirror when you wake up in the morning it must be difficult. I still like you but your one strange dude.

  23. I have talked to many investors and I unfortunately have had friends of mine investing into this. The feedback I got from them is different. They are shocked by what they read.

    I have heard many times from the Scuderis about all these great things that were going to happen. But what happened in the end? A new financing round.

  24. you think i need to be a man and post my real name? are you f–king serious?

    real men don’t steal, cheat or lie. I have done none of those. know anyone who has?

  25. Paul is a paid blogger? Not only is paul not, I repeat, not a paid blogger, but he is not a crybaby and nuts like you. Chicken hawk, no name fibber who hangs with cucumber chair. What a joke. Scuderi group is a winning co, engine, and idea which will be a huge important part in our world and financial system. Also creating thousands of new good paying jobs, not to mention a cleaner enviorment. Wakeup already, or get out of the way.

  26. Hi Guys
    Anybody reading the “fantasy island” mail from Ruth last night?
    Everything is running so unbelievable great that you now receive 4 warrants for every round E share you buy. One month ago I think it was only 2 warrants. Guess in maybe two weeks you get 6 or even….warrants for every round E share. Who knows.
    Assuming that Paul and Dan (who are now receiving the double standard daily dose of the Scuderi magic mushrooms from Ruth) are now preparing to sell their house in order to buy into the final …….. sale, its now most likely clear for every investor who no longer accepts the Scuderi BS what this most likely…………

  27. Hi Guys
    You want to understand the Scuderi problem?
    Read this article from Eric Jackson on Forbes:
    “The Seven Habits of Spectacularly Unsuccessful CEOs Hall of Shame”
    Habit # 1: They see themselves and their companies as dominating their environment
    Remember when they always said “We own the holy grail………..”
    Habit #2: They identify so completely with the company that there is no clear boundary between their personal interests and their corporation’s interests
    Remember what the SEC reported.
    Seems they use the company accounts as they deem is good for them.
    Habit #3: They think they have all the answers
    Look where they are.
    Complete resistance for any advice. With exception of patenting, a management team living in dreams.
    Habit #4: They ruthlessly eliminate anyone who isn’t completely behind them
    Everyone exposing truth in public gets lawyers letter/threats…….
    and they announce to investors that the will sue everybody……..and I am really pissed with my my invested money.
    …….

    Click the link,read until the end and come to your own conclusion.

    http://www.forbes.com/sites/ericjackson/2012/02/09/the-seven-habits-of-spectacularly-unsuccessful-ceos-hall-of-shame/5/

    Scuderi, great technology,apprentices in management (exception patenting) at work at work!!!!!!!!!!!

  28. If your pissed then sell. Sell chicken hawk, or r u just a coward crybaby without a name. Light weight. Scuderi group in best position yet. Fly away chicken hawk.

    • Hi Dan
      Sorry if the truth is so painful for you.
      Your emotional attachment seems to indicate that you may be very close to the core team (locally and …..).
      I am a long time investor who can no longer ignore the brutal facts (ref. SEC report and multiple misleading announcements).
      For you this may mean that you are presently observing with one eye the unfolding of……..
      and that the other eye is potentially dosed with triple…..mush….
      No wonder, feel bad for your pain but at the end only a trustworthy and knowledgeable management team can lead to…..
      In the interest of your personal future you may consider your position and act ……….

  29. Hi Guys
    The truth is:
    1.Scuderi technology has great potential !!!!!!!!!!!!!!!
    2.Scuderi management has shown over and over again that its incapable to execute.
    In addition and according to the Sec settlement they are highly “efficient” in using investors money for their private cause. Some people may call this embezzlement.
    3.They deserve the gold medal for their ability of blowing smoke.
    4.Only chance for Scuderi success is replacing management instantly.
    Forensic accounting can then show how much they should pay back to the company.
    Anyone believes they paid back their private loans?You know we talk about our money?
    5.Investor relations busy distributing …. (you know Dan and Paul)
    Anybody received his Certificates after the C-Corp conversion?
    Anyway, nobody should feel bad for Paul and Dan.
    New management has to burn the mushrooms and I assume they will send them both for free to rehab.

  30. Dan there is no need to waste your time with these numskull’s, if they didn’t have the SG to complain about they would find something else to cry about.
    If you and I leave this blog there will be a handful of negative people to talk about abosutely nothing. SG is alive and well, within the next few weeks these dudes will all disappear.

    • Knuckleheads is the term preferred by SG, I’m surprised that you haven’t received the SG memo on this subject, Paul.

  31. dan, are you f–king serious too? Your kindergarden grammer makes it hard for anyone to take you seriously. At least paul can speak.

    Get your scuderi shares here, buy one get 4 free. They must be in such high demand.

    • Paul is a paid blogger,
      There moving like hot cakes, how many can I put you down for. LOL
      The real unpaid blogger Paul

  32. You sound like spoiled proboard slug crybaby. Sell chicken hawk sell. Use your name no balls coward punk. 4 for 1 sounds great.

  33. 4 for 1 sounds great if your ordering chicken wings.
    get your scuderi shares before they run out…limited time only
    are you f—ing serious? wake up people !!!!

    next up….paid bloggers

  34. Quick, get to tonight’s investor meeting in Springfield while supplies of warrants last–you wouldn’t want to miss a moment of the excitement. I hear there will be special door prizes for the first 15 attendees (but I can’t tell anyone because it’s confidential).

  35. It’s so funny to watch Paul relentlessly defend this company. After all of these years, all of the signs of fraud, scam, misappropriation, and Paul is still standing on his podium preaching to nobody. Nobody believes you Paul. We understand you are being paid by SG. Part of that 4.3% is probably yours.

    • Mike,
      Are you kidding me! Grow up your acting like a two year old baby. Yes, I have defended the SG time and time again almost as much as you been bashing them time and time again. We have a difference of opinions andthat’s it, to make a statement that I’m probably being paid by the SG is just plain stupid.

  36. As I have mentioned before, I have never convinced anyone to invest in the SG, not even one family member, not one co-worker, not one friend, my conscious is clear, evidently yours is not otherwise you would not be carrying on like a two year ols baby.

  37. Wow, just stumbled upon here searching for news on the company. Good stuff. Does anyone know how the meeting went last night? My LLC guy has told me recently that an S-1 would be filed in September with a little luck. Did they mention it? Are we still on track to go public soon?

    • Thanks for posting this link. It was good to read an intelligent discussion about the Scuderi Group, and it is good to see that most people are perceptive enough to see how very little the Scuderi’s have accomplished with the $80 million that investors trusted them with. The only ones that have been made rich by these investments are the Scuderis themselves.

  38. Checked out that site chicken hawk. What a bunch of slugs. no name sissy comes up with a whole flock of chicken hawks. Funny stuff. Not one of them proved a thing. Ask yourself that ask yourself? Scuderi group is a huge winner!

  39. Oh I forgot. Don’t waste your time on that bs site. Its full of conjecture and proboard rejects without names. Stay with scuderi group. Stay with a great engine co. who have a deal and a future in every part of the entire world.

  40. Conjecture — Definition
    1
    a : interpretation of omens
    b : supposition
    2
    a : inference from defective or presumptive evidence
    b : a conclusion deduced by surmise or guesswork
    c : a proposition (as in mathematics) before it has been proved or disproved

    Funny, sounds a lot like Scuderi Group and their endless claims of licensing agreements that never appear, negotiations that go nowhere and useless MOUs and LOIs with zero ROI.

  41. The definitions are just fine chicken hawk without a name, but they pertain to you. Thats right slug. You! Pretend you can think and reread your post. Your a funny chicken hawk. Scuderi group will shut u up soon enough. ha hooooooo!!

  42. Why would Scuderi Group shut me up? Have I said something wrong or deceptive? Has Scuderi been seeking licensing agreements since 2002?? Have they signed one yet?? Have they ever claimed they had a MOU but nothing came of it?? Have they claimed they were in negotiations but nothing came of it?? Have investors ever had a return on their investment?? Have I made any untrue statements?? And my name is Donald, does this disqualify me from chicken hawk status?

  43. I especially liked LawBeefaroni » Sat Jul 13, 2013 3:56 am post where he/she provides links to SGs websites during 2004, 2006, 2013. Have you read the claims that SG has historically made — pure conjecture, Dan.

  44. Donnie the chicken hawk. Wow! That really u? Not only r u in need of a rubber room u seem to take yourself seriously. Oh sorry, I used your pen pal name. everything u claim is just that. No bearing, or understanding of the scuderi group. What else is new? Tell me more.

  45. Dan, based on your unintelligible posts, it’s easy to understand why you still believe in Scuderi Group;)

  46. Chicken hawk donnie askyourself. Sell sell sell. Why bother keeping scuderi units if u have no faith? U make no sense. That is of course if u r an invester? I wonder? Maybe your a shut in with no life.

  47. OK, this has all been very entertaining, but it is time to close down this post for comments. I think everyone has had their say and it is not productive for people to keep going back and forth. Surely there must be a more legitimate source of information for Scuderi investors than a blog of a competitive engine company!

Comments are closed.