Hemp Company Founders Plead Guilty in $1.8M Scandal

A separate civil case by the SEC against the two men and CanaFarma remains pending.

CanaFarma’s co-founders pled guilty to charges related to the misappropriation of nearly $1.8 million of investor money, eliminating the need for a trial that was slated for next week.

According to Law360, Vitaly Fargesen and Igor Palatnik admitted to one count each of conspiracy to commit securities fraud and conspiracy to commit wire fraud. The pleas follow their arrest in October 2021 over allegations that they provided misleading information regarding the hemp company’s financial prospects, aiming to raise $14 million.

Damian Williams, U.S. Attorney for the Southern District of New York, described the actions of the two businessmen as a “sophisticated scheme.”

In a statement, Williams said they did it to “obtain millions of dollars from investors with the promise that their money would be spent on building a legitimate company.”

“Instead, they lied about their business, lied to their auditors, and stole millions of dollars of investor funds,” he said. “Today’s guilty pleas reflect my office’s commitment to prosecuting those who greedily lie to investors to line their own pockets.”

Additional details show that in 2019, Palatnik created a deceptive business plan and marketing budget, with Fargesen implicated in emailing these fraudulent details to investors. In 2020, the pair provided misleading information through CanaFarma’s “purported chief executive officer.”

“On or about April 11 , 2019, Fargesen sent an email to four prospective investors attaching the CanaFarma Business Plan, which contained false and misleading statements, and the CanaFarma marketing budget, which included the fictitious $1 million payment for ‘EU operation set up and Marketing Costs.'”

Both co-founders were accused of creating falsified documents to conceal their misuse of approximately $1.4 million in 2019 and an additional $374,000 in 2020.

Sentencing for Palatnik is set for Jan. 11, while Fargesen’s is scheduled for Jan. 30.

At the same time, a separate civil case lodged by the U.S. Securities and Exchange Commission against the two men and CanaFarma remains pending.

Adam Jackson

Adam Jackson writes about the cannabis industry for the Green Market Report. He previously covered the Missouri Statehouse for the Columbia Missourian and has written for the Missouri Independent. He most recently covered retail, restaurants and other consumer companies for Bloomberg Business News. You can find him on Twitter at @adam_sjackson and email him at adam.jackson@crain.com.

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