Colin Barr

Following the money in banking, economics, and Washington

How the SEC saved us from hipster beer fraud

June 8, 2011: 1:18 PM ET

The SEC has just popped the top on a scheme that doesn't quite rival Bernie Madoff.

In a case that gives new meaning to the British term "small beer," our courageous securities regulators today nabbed two guys who made no money running an online gag about Pabst Blue Ribbon.

No beer was reported harmed

Two advertising executives, Michael Migliozzi II of California and Brian William Flatow of Connecticut, agreed Wednesday to cease and desist from running a web site that solicited pledges from PBR drinkers to supposedly buy the Pabst brewery.

A 2009 story by Fortune's Beth Kowitt portrays the Migliozzi-Flatow effort, which aimed to scare up $300 million but actually raised exactly none, as "a gimmick as quirky as PBR itself" that started out as a joke but then took on a life of its own.

That November the two men set up a now defunct web site called, along with accompanying Facebook and Twitter pages. The site solicited no actual funds but encouraged users to make pledges that would be collected when the ad guys reached their $300 million target.

Those pledging would then be compensated, the SEC says, "with a 'crowdsourced certificate of ownership,' as well as beer of a value equal to the amount invested."

Only sophisticated investors would be drawn to that value proposition, needless to say. By February 2010, the suds-loving ad guys had managed, by their own count, to bring in empty promises for $200 million from some 5 million beer fans – an average of $40 each. One thing led to another, and by the next month, Migliozzi and Flatow were talking about incorporating their company and issuing shares to their many pledging fans.

Perhaps by this time they were drunk with power or something, because issuing shares is a no-no if you haven't registered with the SEC. Wednesday's settlement means, reassuringly, that the two won't make this mistake again. And the SEC? Perhaps it can investigate whether Coors is really "frost-brewed."

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About This Author
Colin Barr
Colin Barr
Senior Writer, Fortune

Colin Barr has covered finance for since November 2007. Previously he was a writer and editor for, winning a 2006 Society of American Business Editors and Writers award for "The Five Dumbest Things on Wall Street," and for Dow Jones Newswires. He is a 1991 graduate of Penn State and lives in Port Washington, N.Y., with his wife Meena Bose and their two kids.

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