Securities Law Blog

Daniel “Rudy” Ruettiger and twelve others have been charged by the SEC for deceiving investors into buying stock in his sports drink company, Rudy Nutrition. Famous for inspiring the movie “Rudy”, Ruettiger developed Rudy Nutrition and sold a sports drink with the tagline “Dream Big! Never Quit!” to compete with Gatorade in the sports drink market.

According to the SEC complaint, Ruettiger was the principal founder of Rudy Beverage Inc. He and a college friend ran the company out of Indiana until 2007 when Rocky Brandonisio became the company’s president and day-to-day business manager and moved the operation to Las Vegas. The company reportedly struggled financially with few customers, few assets, and no profits. In late 2007, Ruettiger and Brandonisio allegedly hired experienced penny stock promoter Stephen DeCesare to turn Rudy Beverage into a publicly traded company. The SEC claims that what resulted was a classic pump-and-dump scheme.

The SEC alleges that investors were provided false and misleading information about the company in press releases, SEC filings, and promotional materials. The scheme’s participants reportedly made misleading statements about Rudy Nutrition to the public in mailers sent to millions of US investors, messages posted in Internet chat rooms dedicated to penny stocks, and videos placed on the Internet for public viewing. At the same time, the scheme’s promoters allegedly engaged in manipulative trading to artificially inflate the price of Rudy Nutrition stock while selling unregistered shares to investors. In less than a month, Rudy Nutrition stock went from trading 720 shares to more than 3 million shares, and within two weeks the price of the stock climbed from 25 cents to $1.05 per share, according to the SEC’s complaint. While the scheme’s engineers were pumping up the stock, they simultaneously sold millions of shares to the market, generating more than $11 million in illicit profits.

Ruettiger agreed to pay $382,866 to settle the charges. The other participants in the pump-and-dump scheme agreed to settle and the settlements are subject to court approval.