Former Motionloft CEO Jon Mills Arrested By The FBI

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Jon Mills, the founder and former CEO of real-world analytics startup Motionloft, has been arrested by the FBI, the bureau has confirmed. The arrest follows allegations that Mills lied to investors about an acquisition of his company, all while spending lavishly on private jets, expensive dinners, and parties with celebrities.

In late December, we published a story detailing how friends and other contacts had written a series of checks to invest in Motionloft in the first half of the year. Sources tell us that later in the year, Mills had bragged to them about an acquisition of the company, a claim that ended up not being true.

That didn’t stop Mills from going on a series of expensive trips with friends, according to our sources, even booking private jets and a penthouse suite in Las Vegas for one particularly extravagant weekend that involved a private performance by R&B singer Miguel.

But at the same time that Mills was partying in Vegas and at music festivals like Coachella, things were coming undone at the company he was seeking investment for. We have learned that behind the scenes, morale was low and Motionloft was having trouble paying its bills.

Beginning as early as March 2013, payroll was slipping regularly, with Mills offering up cashiers checks and even handwritten checks as payment to employees. According to one source who had been employed at Motionloft, the company even had some of its furniture disappear one day, although it’s unclear if it had been sold or repossessed.

Things came to a head after a Vegas trip in November, in which several of the friends who invested in Motionloft began to question when they would get their piece of the acquisition. But after questioning investor and board member Mark Cuban, they were told that there was no acquisition in place.

Things have been relatively quiet since December, but today two of our sources reached out independently to tell us the FBI had arrested Mills. A representative from the local FBI field office confirmed that Mills had been arrested yesterday “without incident” and that he is scheduled to appear in District Court Friday morning.

UPDATE:

The US Attorney’s Office issued the following press release about Mills’ arrest yesterday. There’s also a copy of the affidavit available here. (PDF)

Former CEO Of Technology Start-Up Charged In Investment Scheme

SAN FRANCISCO – Jonathan Edward (“Jon”) Mills, the former Chief Executive Officer of a San Francisco-based technology company, has been charged with wire fraud, announced United States Attorney Melinda Haag and FBI Special Agent in Charge David J. Johnson.

An affidavit filed by FBI Special Agent Brian Weber alleges that Mills, 30, of San Francisco, falsely represented that Motionloft, Inc., a company he founded and served as its CEO, was going to be acquired by Cisco, Inc., and that Cisco already had paid a good faith deposit of millions of dollars toward that acquisition. According to court documents, one victim invested $210,000 relying on Mills’ claims that this victim would obtain shares in Motionloft in return and huge profits when the acquisition closed. Mills allegedly made these false representations just days before Motionloft’s stockholders terminated him as CEO on or about December 1, 2013. According to court documents, representatives of Cisco and Motionloft’s largest investor have both stated there was no possible acquisition of Motionloft by Cisco. Furthermore, court documents reflect that Motionloft’s largest investor has been contacted by several victims of Mills, and that Mills has claimed he is trying to pay back those victims.

Mills was arrested yesterday in San Francisco, and he made his initial appearance in federal court in San Francisco this morning. Mills is in custody, at least until his next scheduled court appearance, tomorrow, February 21, 2014, at 9:30 a.m. before the Honorable Maria-Elena James, United States Magistrate Court Judge in San Francisco.

The maximum statutory penalty for wire fraud, in violation of Title 18, United States Code, Section 1343, is 20 years in prison, a fine of $250,000, plus restitution. Any sentence following conviction, however, would be imposed by the court after consideration of the U.S. Sentencing Guidelines and the federal statute governing the imposition of a sentence, 18 U.S.C. § 3553.

Authorities believe there are several additional victims of Mills’ alleged fraud. Anyone with information about Mills should contact the FBI in San Francisco at 415-553-7400.

Doug Sprague is the Assistant U.S. Attorney who is prosecuting the case with the assistance of Rayneisha Booth. The prosecution is the result of an investigation by the Federal Bureau of Investigation.

Please note that a criminal complaint contains only allegations against an individual and, as with all defendants, Jonathan Edward (“Jon”) Mills must be presumed innocent unless and until proven guilty.

It’s probably worth noting that the investor who was allegedly defrauded is not one of the people I spoke with as part of my piece in December, nor someone they knew directly. Also, that the investment made by “J.D.” came after the events that led my sources to believe that they had already been defrauded.