C-Quest Admits to $250 Million Offering Fraud

ADMINISTRATIVE PROCEEDING
File No. 3-22224

October 2, 2024 - The Securities and Exchange Commission today announced settled charges against CQC Impact Investors LLC, known as C-Quest, which perpetrated a scheme to manipulate and misrepresent data concerning C-Quest's business and made material misrepresentations to investors about this business, culminating in a $250 million offering fraud. C-Quest admitted to the facts set forth in the SEC's order and acknowledged that its conduct violated the federal securities laws, agreeing to the entry of a cease-and-desist order.

As described in the SEC's order, starting in the spring of 2022, C-Quest-a carbon credit project developer, which sponsored, financed, managed, and oversaw projects that generated carbon credits-began marketing its equity to institutional investors. Former senior C-Quest personnel, however, had previously orchestrated a scheme to manipulate and falsely inflate the amount of carbon credits generated by and estimated from C-Quest's projects. As part of its offering, C-Quest disseminated misleading offering materials, including "teasers," offering memoranda, financial projections, and due diligence questionnaires, that reflected manipulated data. Accordingly, C-Quest deceived investors with respect to its past and future ability to profitably and sustainably originate carbon credits. Ultimately, this fraudulent offering culminated in the sale of $250 million of C-Quest shares in early 2023.

The SEC's order finds that C-Quest violated Section 17(a) of the Securities Act and Section 10(b) of the Exchange Act and Rule 10b-5 thereunder. C-Quest consented to a cease-and-desist order.

The SEC's continuing investigation is being conducted by Zachary Sturges and George Carotenuto, under the supervision of Joshua Brodsky and Osman Nawaz, of the Division of Enforcement's Complex Financial Instruments Unit. The SEC appreciates the assistance of the U.S. Attorney's Office for the Southern District of New York, the FBI, and the Commodity Futures Trading Commission.