‘Promissory Notes’ Issued to Fund Startups Were Securities

An “investment boutique” and its owner can’t avoid a securities fraud suit by claiming the investment instruments they used were promissory notes, a federal district court in Massachusetts said.

Tanmaya Kabra and his company, LaunchByte.io LLC, allegedly exchanged the promissory notes for funds to help promote startup businesses. The holders were promised up to 32 percent interest over a short period of time, and Kabra personally guaranteed the notes.

According to the Securities and Exchange Commission, however, Kabra used the funds to pay personal debts and to partially pay back some of the earlier notes after their holders complained.

Kabra’s ...