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The Bogus Tech Bro Accused of Scamming the Elderly to Fund Gambling Sprees

"Please don't kill me. You know, we're all human. We all make mistakes."

by Francisco Alvarado
Nov 4 2019, 2:30pm

Left Image: Mugshot via Broward Sheriff's Office. Right Image: The casino where the feds say he blew investors' cash. Photo by Joe Raedle/Getty Images

To senior citizen investors around the country, Isaac Grossman may have came off as the second coming of Larry Page.

According to federal prosecutors, Grossman promised his nascent South Florida-based tech firm, Dragon-Click, was going to revolutionize the way people shopped online. He allegedly told one of his money backers that one day, people would no longer be saying, "just Google it," but instead, "just Dragon-Click it."

One investor, a 78-year-old retired lumber industry executive residing in Temple, Texas, named Ronald Nedry, threw $271,000 at Dragon-Click during a two-year period beginning in 2015. Grossman, whose company was based from his home in the affluent Broward County suburb Parkland, allegedly told Nedry his funds would be used to cover costs for developing Dragon-Click's technology and securing patents.

In a recent phone interview, Nedry said Grossman pitched him on a concept that sounded simple enough: a web application that allowed users to click on a picture of something and instantly find websites that sell the product. After making an initial investment of $62,500 for 2,500 shares of Dragon-Click stock, Nedry said, Grossman would call and text him with updates while hitting him up for more cash.

"He last texted me that he had half-a-million dollars headed my way, but that he just needed $5,000 to complete a transaction," Nedry said. "It was all BS.

Nedry isn't the only person who feels that way.



According to a bevy of federal civil and criminal allegations against him, Grossman turned out to be more like a low-level version of Jordan Belfort, the infamous penny stock scammer of The Wolf of Wall Street. Last month, he was indicted on criminal charges of wire fraud, mail fraud, money laundering, and related conspiracies—a year after a U.S. Securities and Exchange Commission probe said the Brooklyn native siphoned approximately $1.3 million from Dragon-Click’s corporate accounts to pay for a lavish lifestyle.

At a time when the wealth promised by tech startups and apps are inescapable, experts said, the case showed how scammers might prey on a historically inviting target—seniors looking to pad their life savings—by hitching onto brands they could paint as the next Airbnb or Uber.

Grossman was arrested on October 11 and is currently locked up in Broward County Jail unless he can come up with a $250,000 bond. His federal public defenders did not respond to phone messages and emails requesting comment. Grossman, who pleaded not guilty, is scheduled for trial on November 25, and faces a maximum of 20 years on the most serious charges if convicted.

If nothing else, it certainly seemed like Grossman was going through a research and development process: He sent investors PowerPoint presentations touting the application’s concept and videos showing them supposed beta versions. The company also has a website, which is still up, boasting that Dragon-Click has the ability to recognize millions of products and offer them instantly for sale. As of publication, an application by that name was also (still) available for download on Apple and Android devices.

But the feds alleged Dragon-Click was effectively a sham, and that by April 2018, when SEC regulators obtained his bank records, the company's corporate account had a negative balance of $142. (Spokespersons for the US Attorney's Office and the SEC Miami office declined comment because the case is pending.)

In fact, according to an analysis of Dragon-Click related bank accounts by Miami-based SEC regulators, Grossman and his wife Adriana gambled $461,000 in Dragon-Click funds on slot machines and card games at the nearby Seminole Casino Coconut Creek, and spent another $158,000 on their children's private school tuition, payments for luxury cars including a McLaren and a Corvette, Walmart shopping sprees, and jewelry, including a 4.81 carat diamond ring. Only $53,000 out of the $2.4 million in investment capital Grossman raised was returned to investors, the SEC declaration alleges. (Attempts to reach Adriana Grossman for comment were not successful.)

Scams targeting grandmas and grandpas are a tried and true criminal racket that may only getting bigger as the 65-and-over population, driven by Baby Boomers entering retirement age, continues to grow at a record pace. According to the Washington D.C. think-tank Population Reference Bureau, the number of Americans ages 65 and older is projected to nearly double from 52 million in 2018 to 95 million by 2060, and the group's share of the total U.S. population will rise to 23 percent from 16 percent. A Senate Special Committee on Aging earlier this year released findings that older Americans lose about $3 billion annually to financial exploitation including phony tax collection, identity theft, sending money to people pretending to be family relatives in trouble, or investing in phony companies.

"Many of them are not quick to hang up the phone when they get an unsolicited call from an individual," said Chris Gerold, New Jersey Bureau of Securities chief who serves as president of the North American Securities Administrators Association. "Oftentimes there are other external factors. They are concerned they will run out of money, so they look for more yield. A higher rate of return is very appealing to them."

Nicole Iannarone, an assistant law professor at Drexel University specializing in securities regulation and professional ethics, agreed. "They think, 'Maybe we don’t have as much money as we wish we did,'" Iannarone said. "That exposes them to potential risk. It can make one more susceptible to fraud."

And the relationship may not be appealing solely for financial reasons. "Social isolation can be a significant challenge for seniors," Iannarone added. "You are lonely, get a call from this person and next thing you know, you become friends."

Grossman's alleged victims may not have known that they could check his history via an online database or call a hotline number set up by the Financial Industry Regulatory Authority (FINRA). Among other things, the ex-stock broker was involved in four customer disputes between 1999 and 2011, fined $5,000 and suspended five business days for allegedly executing stock transactions without a client's consent in 2004, and fired from a brokerage in 2010 for alleged unprofessionalism and violations of business standards. (These incidents all came before the launch of Dragon-Click in 2014.)

After his stock-broking star faded, Grossman got into the commodities industry when he launched London Metals Market LLC. It was a short-lived venture: In 2013, he settled charges brought by the U.S. Commodity Futures Trading Commission that he engaged in illegal, off-exchange precious metals transactions and did not use investor funds to purchase any precious metals. He was ordered to pay $121,665.75 in restitution, but never did, according to the feds.

That's when he pivoted to online retail. Over the next four years, he spent some investor funds on developing the Dragon-Click application, Apple and Android certificates, applying for patents and paying employee salaries, Grossman testified during a March 15, 2018 hearing with Miami SEC regulators. That included his wife, who was said to be making roughly $2,000 a week for giving him ideas on how to list products.

Under intense grilling, under oath and without a lawyer, Grossman admitted to using a percentage of the investor funds, which he claimed were his commissions and management fees, for the gambling, the jewelry and luxury car purchases, his kids' tuition, and personal family expenditures. Grossman also acknowledged that more than half of Dragon-Click's investors were over 60.

At one point, Grossman said he was going to pass out. "I'm about to have a nervous breakdown 'cause I'm trying to be as honest and upfront about everything,” he said, adding, "I just feel I am in a lamb suit. I'm about to be eaten."

He insisted Dragon-Click was legit, noting investigators could download the application from Apple and Android app stores and test it out for themselves. "I'm sure you all understand the company has the magnitude of being a billion dollar a year company, no questions asked," Grossman said, adding, "Please don't kill me. You know, we're all human. We all make mistakes."

Even when armed with knowledge of an unscrupulous broker, however, senior citizens can still be ensnared by players like Grossman. Consider Richard Bennett, an 80-year-old retired hospital administrator from Broomfield, Colorado, who invested in both London Metals and Dragon-Click. Benett said Grossman cold called him and successfully pitched him to invest in silver in 2013. "That went downhill," Bennett recalled. "I didn't hear from him for a while. I later found out he was penalized for the silver investments."

Two years later, around June, Grossman called Bennett again. He convinced the retiree that the London Metals fiasco wasn't his fault before launching into his spiel about Dragon-Click, Bennett said.

Bennett said Grossman emailed him a PowerPoint presentation explaining how the application, using artificial intelligence, could track down any product on the Internet. For instance, if a person found a picture of a Steph Curry basketball jersey they liked online, Dragon-Click could scan the image and then a pop-up window would pull up a sports apparel store that had it in stock. The company would generate revenue by selling retailers licenses to the application or receiving a commission from directing buyers to an online retail site, the presentation claimed.

Bennett said he initially invested $12,500 for 500 shares after Grossman told him the money would be used to complete the software, pay for a patent attorney, marketing, and technology. In 2016, he said, he invested another $12,500 for 500 more shares after Grossman called him to say he needed more funds to complete the patent process.

Now he hopes to perhaps see some restitution from the sale of luxury items seized from Grossman by the feds.

"He's a great salesman," Bennett said, chuckling. "He had stories and I fell for it."

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Tagged:
Internet
GAMBLING
scams
Dragon-Click