The Securities and Exchange Commission asked a judge to approve a final settlement with four entities in a cannabis penny stock scheme that netted the group approximately $81 million, according to a report from Law360.
The four entities, New Jersey resident Alexander J. Dillon, Manhattanite Cosmin I. Panait, and their companies GPL Ventures LLC and GPL Management LLC, had one of their most successful schemes with HempAmericana (OTC: HMPQ), according to the original filing.
The combined settlement will cost the men almost $39.2 million and bar them from participating in penny stock offerings for five years and keep them from operating as unregistered securities dealers or committing securities fraud in the future.
The original case was filed in 2021, and the activity started in 2017 when GPL Ventures began acting as unregistered dealers by privately acquiring large blocks of stock in approximately 140 microcap issuers and publicly selling those blocks into the market for their own account, generating gross proceeds of at least $81 million.
Not involved in this settlement were HempAmericana Inc., Caroline Adams (as an administrator of the estate of Lawrence Adams), and Seaside Advisors LLC. Salvadore Rosillo was the CEO of Hemp Americana and Lawrence Adams was the CEO of Seaside Advisors, a consulting firm for penny stocks.
According to the original court complaint, the HempAmericana scheme generated a profit of approximately $11 million. To put this in perspective, from 2017 through May 2020, HempAmericana generated a mere $9,727 in revenues.
Shortly after HempAmericana’s first Reg. A capital raise was qualified in June 29, 2017, HempAmericana CEO Rosillo began issuing unrestricted Reg. A shares to the GPL defendants. The offering told investors that the money raised would be used for the business, but instead, it was used to promote the stock.
The case stated that the GPL defendants repeatedly acquired stock purportedly sold pursuant to the Reg. A registration exemption, conditioned on a portion of the stock sales proceeds being sent by the issuer to Seaside. Seaside then paid a professional stock promoter to promote the stock, and the defendants sold the stock during the promotional campaigns, which did not disclose that the promotions were indirectly funded by the issuer, HempAmericana.
Additionally, in order to deposit and sell their HempAmericana shares, the GPL defendants falsely told their brokers that they were not involved in the promotional activity. It was a classic pump-and-dump scheme.
An example of the scheme was cited in the court complaint: “In August 2017, when the GPL Defendants purchased 16 million shares of stock for $80,000, the funds went to a HempAmericana escrow account from which Dillon then provided instructions for $50,000 to be sent to HempAmericana and $30,000 to be sent to Seaside.”
That money was used to hire separate individuals to promote the stock pushing the price higher and then they would sell their shares.
The letter from the SEC proposed the following:
- The GPL Parties pay, jointly and severally, disgorgement of $29,681,569 and prejudgment interest of $2,489,799;
- Dillon and Panait pay civil penalties of $3,500,000 each;
- Bar the GPL Parties from participating in any offering of penny stock for five years;
- The GPL Parties surrender, for cancellation, all remaining, unconverted convertible notes. The notes have a face value of approximately $11 million.
The SEC said it was working with the remaining individuals to resolve the claims against them.