Doyen Elements became Covalent Collective and later was acquired by Cultive.
Doyen Elements became Covalent Collective and later was acquired by Cultive.
It may have taken a while but former Doyen Elements CEO Geoffrey Thompson was charged last week in federal court in Chicago for ripping off cannabis investors to the tune of $950,000. Thompson was charged with one count of wire fraud and the arraignment is set for Dec. 9, 2021, at 11:30 a.m., before U.S. District Judge John F. Kness. Wire fraud is punishable by up to 20 years in federal prison. According to a notice from the Department of Justice, the charge was announced by John R. Lausch, Jr., United States Attorney for the Northern District of Illinois; and Emmerson Buie, Jr., Special Agent-in-Charge of the Chicago Field Office of the FBI. The government is represented by Assistant U.S. Attorney Matthew Getter.
Last year. Thompson agreed to a settlement with the Securities and Exchange Commission (SEC) for an amount over half a million. The settlement was related to stock fraud associated with Accelera Innovations and Synergistic Holdings. Thompson had agreed to a payment of $350,000, representing profits gained as a result of the conduct alleged in the Complaint, along with prejudgment interest in the amount of $ 74,849.97, for a total of $424,849.97. In addition to that, Thompson has agreed to pay a civil penalty in the amount of $100,000 in the form of four payments of $25,000 each. He is also barred from serving as an officer of a public company for five years and from participating in an offering of penny stock, including engaging in activities with a broker, dealer, or issuer for purposes of issuing, trading, or inducing or attempting to induce the purchase or sale of any penny stock.
Thompson continually told investors that an IPO of the company he was raising money for was imminent when it was not. He raised $952,000 and used most of the money for personal expenses. The complaint also stated that Thompson told investors that the company had secured access to bank financing, when it had not, and represented to investors that the company had revenues resulting from an acquisition of another company when it did not
It was a classic ponzi scheme in that Thompson is accused of using newer investor money to pay out to older investor money to assure them that their investments were secure.
The statement did note that the information is not evidence of guilt. The defendant is presumed innocent and entitled to a fair trial at which the government has the burden of proving guilt beyond a reasonable doubt. If convicted, the Court must impose a reasonable sentence under federal statutes and the advisory U.S. Sentencing Guidelines.
In September of 2017, the SEC alleged that Thompson, acting through a company called Accelera Innovations Inc. and Synergistic Holdings LLC, sold approximately $1.7 million worth of Accelera stock to investors and that the sale was not registered or subject to an exemption from registration. At the same time that the SEC filed the complaint about Thompson and Accelera, Thompson and Doyen Elements were selling shares online.
Beginning in 2011, Thompson, through the limited liability company which he co-owned with his wife, GNNT, LP, owned and controlled Synergistic Group, LLC. Synergistic was a commodity pool operator, commodity trading advisor, and investment adviser that was registered with the State of Illinois. Thompson was the Managing Member and Chief Compliance Officer of Synergistic Group, LLC. Through GNNT, LP, Thompson owned at least 75% of Synergistic Group, LLC.
The Commission’s complaint in that matter alleged that from approximately January 2012 through September 2014, Thompson, acting through Synergistic Holdings, LLC and Accelera Innovations, Inc., sold at least 849,886 shares of Accelera common stock to 69 investors for a total of $1,700,301. The complaint further alleged that there was no registration statement in effect for the sales of the shares and that the sales were not exempt from the registration requirements. The complaint further alleged that $1.3 million of the $1.7 million in proceeds from the sale of Accelera common stock was deposited into an account controlled by Synergistic Group.
Shareholders have been confused over the Doyen situation. They invested money into Doyen Elements and when their money disappeared, they learned there were two Doyens. At the time, Thompson said the confusion stemmed from the fact that there was Doyen International (Canada) and Doyen Elements (U.S.). Thompson said the Doyen Elements company is the group that is ignoring shareholders and has renamed itself Reach Genetics. He said that this is the company these shareholders really invested in, not Doyen International.
He said that Doyen International sued Doyen Elements accusing the group of hijacking the Reg. A fundraising and requesting that they stop using the Doyen name. In March 2019, Doyen International announced it was rebranding and renaming itself to Covalent Collective. In addition, the company announced Bill Gregorak would be the Chief Executive Officer. Prior to being named CEO, Mr. Gregorak served as Chief Financial Officer of Covalent Collective since February 2018. Mr. Gregorak takes over as CEO from Geoffrey Thompson, a co-founder of Covalent Collective, who will continue as leader of the merger and acquisitions because Thompson was in the process of agreeing with the SEC that he would not be a director of a company.
In June 2019, the SEC filed a subpoena enforcement action in the U.S. District Court for the Northern District of Illinois against Covalent Collective, Inc. f/k/a Doyen Elements International, Inc. f/k/a Advantameds Solutions, Inc. (“Doyen”) for failure to produce documents in an investigation. The SEC’s application alleges that Doyen, through its founder, Geoffrey Thompson, may have violated the registration provisions of the securities laws by engaging in an unregistered offering of securities and may also have made misleading representations to investors and potential investors about the operations, acquisitions, and projected stock price of Doyen and related entities.
As part of its investigation, the staff in the SEC’s Chicago Regional office served Doyen with a document subpoena on October 24, 2018. The SEC’s application alleges that Doyen repeatedly refused to produce any documents in response to the subpoena, notwithstanding multiple efforts by the SEC to secure its compliance. The company finally gave the SEC the documents in July 2019.
“When we submitted our document production on July 23, 2019, we were confident that we had provided everything necessary to comply with the SEC’s subpoena,” commented Mr. Bill Gregorak, CEO of Covalent Collective. “It is gratifying to have received confirmation from the SEC and we are happy to be able to put this issue behind us and move forward with our corporate strategy of acquiring assets in our geographic priorities.” The only thing that Covalent had put behind it was giving the documents requested with the investigation, not that the investigation was ended.
Covalent Collective raised millions of dollars from cannabis investors and planned to buy a property called the Colorado 16 (CO16). Now the company is asking those investors for more money to fight a lawsuit over the acquisition and is accusing its former director Geoff Thompson of being a co-conspirator with the CO16 sellers. Covalent spent roughly $9 million on the failed Colorado 16 acquisition.
Black Bear Farms
The situation of this company gets even messier and more tangled with the current owners of Covalent. Various emails to the shareholders, which Green Market Report has reviewed explain how Covalent shareholders would receive a part of a cannabis farm called Black Bear Farms so that their investments won’t be zeroed out. Black Bear also operates as a company called Cultive. Covalent’s President Sal Milazzo is also President of Cultive. Gregorak recently told Covalent shareholders in an email, “Covalent shareholders collectively own the majority of both Black Bear Farms and AmaVie.” Yet, in a later email, Gregorak stated that Covalent shareholders only owned a 5% interest in Cultive (or Black Bear Farms).
More confusing is a letter from Milazzo as President of Cultive saying that the company was acquiring Covalent. Gregorak stated in another email that Cultive had a valuation of $49 million. This valuation is hard to verify as one shareholder complained he had never seen a financial statement.
There is also apparently a rogue group of angry shareholders sending around information to other shareholders that Gregorak has referred to in his communications. However, Green Market Report hasn’t seen those emails and can’t verify their existence.
Unfortunately for the shareholders who were duped, they will likely never get their money back. It may be cold comfort if Thompson is found guilty and sent to jail. However, the saga of Covalent/Cutive looks as if it will carry on for some time and Green Market Report will keep an ear to the ground if more news develops.
On Thursday, the Securities and Exchange Commission (SEC) announced charges against Geoffrey Thompson for illegally selling more $19 million in unregistered securities.
The SEC’s complaint alleges that Thompson, a repeated securities laws violator, and his company, Covalent Collective, Inc., directed numerous offerings of unregistered securities from 2014 to 2019, ultimately raising more than $19 million from approximately 500 investors. “As alleged in the complaint, Thompson used numerous mechanisms to solicit investors, including providing investors video and audio recordings in which Thompson encouraged investors to spread the word about the company’s securities to friends and family. The complaint further alleges that despite raising nearly $20 million, Covalent never commenced any revenue-generating operations. According to the complaint, Thompson diverted more than $2.7 million of investor funds for his own benefit.”
Green Market Report has followed the saga of Geoff Thompson and his revolving door of cannabis companies. Investors continued to complain to GMR as to why the SEC allowed Thompson to keep setting up cannabis companies and selling shares if he was really just ripping them off. In September 2017, the SEC sued Thompson for securities fraud and registration violations in connection with another of his companies, Accelera Innovations, Inc. (See SEC v. Accelera Innovations, Inc., et al., 17-cv-7052 (N.D. Ill). In April of this year, Thompson agreed to a final judgment permanently requiring him to quit violating securities laws.
He was also required to pay $350,000, prejudgment interest in the amount of $74,000, and a $100,000 civil penalty. The court also imposed a five-year ban on Thompson from (a) serving as an officer or director of a public company and (b) offering penny stocks. Even while the SEC was investigating him for Accelera, Thompson founded Covalent Collective, Inc., f/k/a Doyen Elements International Inc. f/k/a Advantameds Solutions Inc. and would insist that any shareholder problems with Doyen were because “there were two Doyens and his wasn’t the bad one.”
Between July 2014 through at least June 2019, the SEC said that Covalent and affiliated entities offered several different investments, all of which were connected to Covalent common stock. The Covalent securities offerings resulted in the sale of over 800 investments, to approximately 500 different U.S. investors, cumulatively raising over $19 million. Thompson directed Covalent to use offering methods including unregistered broker-dealers, press releases, an investor relations firm, a public website, and a call center operated by Fortress Legacy.
Covalent sold “special warrants” to approximately 177 different investors, raising a total of approximately $8 million. Approximately 79 of the 177 investors did not indicate that they were accredited. Between 2018 and 2019, an additional 440 subscription agreements with 293 different investors, sold more than $8 million in Covalent common stock. Other investors affirmatively disclosed to Covalent that they were not accredited, but were still allowed to invest. Thompson would email audio recordings about the stock offering and promote it through a public website. Covalent never provided the common stock investors with a prospectus or financial statements.
In a related action, the Commission instituted settled administrative proceedings against Covalent. The document read, “Covalent violated Section 5(a) of the Securities Act, which prohibits the sale of securities through interstate commerce or the mails unless
a registration statement is in effect, and Section 5(c) of the Securities Act, which prohibits the offer to sell any security through interstate commerce or the mails, unless a registration statement has been filed as to such security with the Commission.”
As recently as July, Covalent shareholders were being told of a new endeavor called Black Bear Farms and posted a YouTube video updating the shareholders. The new board says they were informal advisors to Covalent and are now the new management team. The video also mentions the company Hempcentrics. Thompson talked about Hempcentric in a 2019 podcast and it is unclear whether he is still a part of the company. Covalent shareholders can receive shares in this company if they choose.
In a recent email, the company said this about Hempcentrics, “Hempcentrics, formerly known as North American Hemp, is a company rightfully owned by CC. Gene (Berg) is working with the current Hempcentrics team to properly and fairly carve out our equity stake, taking into account what the individuals that have worked to form this company deserve. Once complete, Bill Gregorak and myself (Sal Milazzo) will need to approve it.”
According to the SEC case, despite raising $19 million, Covalent never started any revenue-producing moves. Instead, Thompson is accused of giving $2.7 million to himself, his wife, and other companies he owed. Covalent asked Thompson to resign when this was discovered. The SEC is asking for disgorgement of ill-gotten gains and prejudgment interest, and civil money penalties from Thompson.
At the end of August, Covalent sent an email to shareholders saying it was rebranding its parent company to the name Cultive. Just two weeks prior to the SEC prohibiting the company from offering securities through the mail, the company said in its email,
We have decided on a structure that will offer all CC shareholders an equity stake in Cultive without having to further invest personal funds. Thus, you will have interest in Cultive based on having shares in CC. Furthermore, accredited CC investors will be invited to purchase additional shares, equal to the number of shares they originally bought in CC. Basically, Covalent Collective will be issued 5% of our parent company. 46% of the company will be made up of CC accredited shareholders that choose to take advantage of our invitation to invest further in the business, along with those people that loaned Cultive funds to develop the farm and acquire the property and capital for the extraction facility and distribution center. The remaining 49% ownership, as we have reported prior, is owned by the Joint Venture partners.
The new management team wants the investors to believe that they are trying to salvage this mess. Lawsuits involving attempted acquisitions (involving Thompson) and continuous requests for more money make that a difficult task. The SEC may move slowly and eventually punishes those that violate securities laws. However, it can’t return the money to investors and it can’t jail the individuals accused of violations. The SEC would have to refer the case to another agency to pursue incarceration.
Doyen Elements is planning to publicly list its shares on the OTC Market, but early investors won’t have to wait. The cultivator said it was accepting investments now prior to its IPO at $7.00 a share. Doyen Elements has big plans and is currently building one of the largest grow facilities in North America. This 234,000 sq. ft. behemoth of a building will be capable of producing upwards of 70,000 pounds of cannabis per year. According to the company, this building will be the first of many self-contained grow facilities the company will lease out to legal cannabis companies.
The grow facility is located in Pueblo Colorado in an abandoned Pepsi factory. The project has strong community support since it has taken a derelict building and breathed new life into it. In addition to its own facility, Doyen Elements is planning on building a portfolio of real estate assets in order to lease them out to licensed cultivators and dispensary owners. The goal is to have over a million sq. ft. of grow space across the country.
Doyen is also trying to assemble a collection of cannabis companies. According to the company statement, “Equity Purchase Agreements are in place to acquire 16 long-standing, high-performing companies that span across all areas of the Cannabis Industry.” The companies are involved in multiple areas of the industry, from management, green technology, to research, etc, each company operates 100% independently from one another. The strategy behind the company portfolio is to allow “Doyen Elements the opportunity to profit from 16 different revenue streams while giving investors access to a diversified portfolio of companies in the industry. Also by cross-selling its services the company will obtain a higher ROI on client acquisition costs.”
Once the offering closes Doyen Elements plans to list on the OTC stock exchange.
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