SAN JOSE — A 70-year-old Santa Cruz software company CEO made his first appearance in federal court Tuesday after being arrested that morning on four charges of wire fraud stemming from alleged misrepresentations over its music streaming service, per a news release from the U.S. Attorney’s Office, Northern District of California.
Hank Risan was indicted and appeared in a federal courtroom in San Jose following an FBI investigation, resulting in the unsealing of documents accusing Risan of offering and selling stock and stock conversion in his software company, Media Rights Technologies Inc., and his music streaming service BlueBeat Inc.
The indictment was filed July 31 and accuses Risan of misrepresenting his company and streaming service to investors. These alleged false representations include erroneously claiming BlueBeat had copyright ownership of approximately 2.5 million songs by well-known artists, containing false or misleading comparisons and valuations of the service, falsely claiming imminent acquisition of BlueBeat by a multinational media and entertainment conglomerate and claiming to have the involvement of a former undersecretary to the U.S. Department of Commerce.
Prosecutors wrote that Risan told investors in 2020 that he “received a very favorable comparable regarding the BlueBeat Catalog,” adding that, “To put that news in perspective, BlueBeat contains approximately 2.5 million songs and $10K per song brings music to my ears. You can do the math!”
Prosecutors countered, “In reality, the indictment alleges, BlueBeat did not own the copyrights to the 2.5 million songs, the valuations of MRT and BlueBeat were fictional, the advertised multi-media conglomerate was not in the process of acquiring BlueBeat or its catalog, and the former Commerce official was not involved with BlueBeat.”
The indictment also alleges that Risan persuaded investors to purchase approximately $1.9 million in stock and stock conversions, and to make payments characterized as “loans.” He reportedly obtained approximately $3.2 million through these efforts and allegedly used those funds to pay personal credit cards, purchase collectibles and make mortgage payments on his personal residence, prosecutors wrote.
Risan was released on a $100,000 unsecured bond, per the U.S. Attorney’s Office. He is next scheduled to appear in district court on Oct. 8 for a status conference before U.S. District Judge P. Casey Pitts.
Indictments allege that crimes have been committed, and defendants are presumed innocent until proven guilty beyond a reasonable doubt, per the release. If convicted, Risan would face a maximum sentence of 20 years in prison and a fine of $250,000 for each count of wire fraud. The case is being prosecuted by assistant U.S. attorneys Matthew Chang and Jeff Nedrow with the assistance of Natachiana Burney and Susan Kreider.
Media Rights Technologies and BlueBeat were the subject of a 2009 federal copyright infringement lawsuit by EMI Records over claims that BlueBeat was selling soundalike recordings of Beatles songs at 25 cents apiece. The case was concluded with a $950,000 no-fault settlement. In 2021, the Media Rights Technologies office on River Street was subjected to a court-authorized FBI raid over what Risan told the Sentinel at the time was due to a dispute with an investor’s widow after Risan reportedly rejected an offer to transfer the stocks to the widow. Risan said the company showed FBI officials all the necessary documentation then, and it is not clear if the FBI made any follow-up visits between the 2021 raid and Tuesday’s arrest.