Michael Migliozzi II and Brian William Flatow found 5 million people who said they would invest a total of $200 million. But the federal government halted the venture after it informed the two men of one major oversight — they neglected to register the public offering with the Securities and Exchange Commission, a violation of federal law.
The SEC says it reached a settlement with the two advertising executives. The men agreed to stop selling shares to the public.
The case spotlights a growing challenge for regulators to patrol the Internet for business ventures.