Small shareholders in penny stocks typically have little power. They don’t own enough to make much of a difference with the owners and spending money on speculative investments doesn’t warrant sympathy as the prevailing attitude is buyer beware. The cannabis industry is no different, but with the preponderance of penny stocks within the industry, there is a tendency for companies to play fast and loose with investor money.
The SEC’s Office of Investor Education and Advocacy (OIEA) regularly receives complaints about marijuana-related investments, and the SEC continues to bring enforcement actions in this area. Back in 2014, the SEC issued temporary trading suspensions for the common stock of five different companies that claimed their operations related to the marijuana industry.
In September of 2018, The SEC charged a Texas-based investment fund and its founder with defrauding investors with false promises of massive returns in cannabis-related businesses. Michael Cone allegedly employed boiler room sales staff who made cold calls to investors and promised them up to 24 percent annual returns from investments in Greenview. According to the complaint, Cone spent investors’ money on designer clothes and luxury cars, and on payments to earlier investors to prolong the alleged scheme. In a parallel criminal proceeding, the U.S. Attorney’s Office for the Central District of California charged Cone and seized approximately $1.4 million in cash and assets.
Doyen Elements (now known as Reach Genetics) has left a string of investors out in the cold each telling a similar story. In November of 2017, Green Market Report reported that Doyen Elements was planning to publicly list its shares on the OTC Market, and was accepting investments prior to its IPO at $7.00 a share. Doyen Elements said it had big plans and was 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”. The company also suggested it would be going public shortly. Several investors decided to jump in and received a confirmation of their purchase and then that was it. The money was taken and all communication stopped.
The CEO of Doyen at the time was Geoffrey Thompson and 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. “In September 2017, I purchased 143 shares of Doyen at $7.00 per share,” said Robert Satten. “I received a subscription agreement from them and till this point in time nothing else……No ticker symbol, no number to call, nothing.”
Another investor Luis Dominguez and his wife Charity told a similar story. “I was reading a lot about the cannabis industry and I thought this was going to become a big thing. I thought whoever invests in this is going to make very big money. I told my wife and we started looking for information on the company. We thought the shares were cheap. We bought the shares through their website online.”
Dominguez also said he received no information after the initial purchase confirmation. He went to the company’s Facebook (FB) page to find a way to contact the company. “I called them and someone picked up the phone but she said the company was moving and she would try to get me more information,” Dominguez said that was the last time he spoke to someone He continued to call but no one answered the phone.
Then he heard Doyen Elements had been sold or merged to a new company called Reach Genetics. “So, I started calling the new company and still no one answered the phone,” he said. Eventually, the persistent Dominguez finally spoke to someone who answered the phone. “I told him my story and he sounded annoyed. He said the new company didn’t buy the part of Doyen that I had my shares with. That my shares were with Doyen Elements and he gave me a phone number to call.” No one ever answered the new phone number.
Thompson said the confusion stems from the fact that there are actually “two” Doyens. 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.
One shareholder that asked not to be named said he did receive an email about the name change to Reach Genetics, but that the phone number and emails he sent went unanswered. Reach Genetics is currently selling new shares for once again $7 a share. Reach Genetics has not responded to requests for comment.
Earlier this month Doyen International, Inc. 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 merger and acquisitions.
This is the third rebranding for this company as its original name before Doyen was Advantameds. To make matters more confusing, Doyen International changed its name in October 2017 to Cynterra Earth Sciences to make an acquisition of Boulder Hemp and Slo-Hemp, but then in November 2017 changed its name back to Doyen International. This is according to the company’s legal documents.
Thompson and the SEC
Thompson’s problems with the SEC are not over. The current complaint with the company Accelera is still ongoing. Thompson said the two (he and the SEC) are close to reaching a settlement. The SEC would not comment on the matter. Thompson said he expects that he will be barred from serving as on an officer of a public company for three years.
According to the SEC filing, “The complaint seeks permanent injunctions, disgorgement of ill-gotten gains, civil penalties, an officer-and-director bar against Thompson, and penny stock bars against Thompson and Synergistic.” The SEC also separately charged Daniel Caravette, of St. Charles, Ill., with acting as an unregistered broker-dealer. Caravette’s alleged violations involved sales of stock in Accelera and a Canadian company founded by Thompson which claimed to be involved in medical marijuana production, distribution, infusion, research, and testing. The Canadian company referred to by the SEC but not named was Advantameds (the original Doyen).
Thompson’s problems with the SEC meant that Doyen Elements wasn’t approved by the OTC to list its shares as originally planned. Remember, this is what the online investors in Doyen were told was imminent. In order to try to reapply to the OTC again (according to court documents), Thompson retired from Doyen and surrendered his 16 million shares so that the company would have a better chance the next time it applied with the OTC.
The plan was that Thompson would leave the company so that its chances to get listed would be improved. According to one of the lawsuits, it was alleged that once Thompson had retired and surrendered his shares, the Doyen Elements folks set out to compete directly with the Doyen International folks. Taking the expensive rebranding work (over $200k) and the strategic plans with it.
Thus, the two Doyens split and Doyen Elements became Reach Genetics, which is unreachable and Doyen International became Covalent Collective. Thompson sued to get his shares back and rescind the retirement agreement.
Covalent just announced that completed its first acquisition which the company dubs the “Colorado 16.” This company includes ownership of real estate that leases multiple medical marijuana cultivations, production, and five Colorado medical cannabis dispensaries.
Some investors have said that Reach Genetics has begun to contact them, but with little information as to what has transpired. One investor who asked not to be named said, “They changed their name to Reach Genetics, now they did send me an e-mail saying that was their new name but that was last summer and I haven’t heard anything from them or anything about them. I have tried calling the toll free number for Reach Genetics and I have emailed them and I have emailed Cindy Boreum and each time I have not gotten any reply.”
Covalent Collective seems to be moving forward with Thompson, but not in a formal role. The company says that it has “A vision to build the largest grow capacity in the U.S.”