Please explain how this is a type of investment fraud.

The U.S. Securities and Exchange Commission accused the founder of Mozido Inc. of defrauding investors, The Wall Street Journal's Peter Rudegeair and Rob Copeland report.

In charges filed Monday, the SEC alleged Michael Liberty and four other people misled investors about Mozidos worth and its financial results. Mozido was among the most highly valued U.S. financial-technology startups just a few years ago.

The SEC also said Mr. Liberty directed investors to put money into a series of shell companies under his control that didnt actually have any ownership stakes in Mozido. Attorneys for Mr. Liberty said in an email that he will deny most of the substantive allegations made by the SEC, while lawyers for the other defendants either declined to comment or didn't respond to requests for comment.

Mr. Liberty and the others diverted money from those shell companies to pay for things including chartered flights, a dairy cow farm and a movie Mr. Liberty's then-girlfriend was producing, according to the SEC.

Mr. Liberty set up Mozido in 2008 to create technology to provide mobile wallets and other financial services to individuals without bank accounts. Wall Street investors, including Wellington Management Co., Julian Robertson and Mastercard Inc., plowed millions of dollars into the company.