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Video StaffOctober 28, 2022

4min13590

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This week Canopy Growth (NASDAQ: CGC) surprised the markets with news that it was creating a Canopy Holding company for its U.S. properties. The Canadian company has options to acquire some American cannabis companies like Acreage Holdings and Wana Brands, but those deals weren’t supposed to happen until cannabis was federally legalized. Now it seems Canopy has decided not to wait until that happens. The question though is whether the Nasdaq will allow the company to continue to trade on its exchange. The exchange has been firmly against trading plant-touching cannabis companies and so far it looks as if they aren’t on board with Canopy’s plans. 

The SEC has been busy this week with bad actors in the cannabis industry.  Cronos Group settled with the SEC for some accounting errors. The company agreed to pay over $1.3 million and the company’s accountant was also fined and barred from serving in that capacity for the next 3 years. NewAge Beverage also found itself in hot water with the SEC for continually making false statements about the company The CEO was ousted and the stock was delisted from the Nasdaq. The SEC also targeted CannAwake for not filing its financial statements.

Turning Point Brands, Inc.  (NYSE: TPB) announced its third-quarter sales fell by 1.9% to $107.8 million. However, it beat analyst estimates. The company is seeing good growth in ZigZag sales products, but vape products keep sliding.  

Verano is being sued by Goodness Growth over the company’s decision to walk away from the planned acquisition. In addition to that, Verano has refinanced its debt and pushed out its maturity dates. The company is also going to lean harder on debt secured by its real estate holdings. 

And finally, the state of Florida threw cold water on the plan to combine medical dispensaries with Circle K convenience stores. GTI has recently announced that it had arranged to work with the store chain that is owned by Alimentation Coutard, which already owns 20% of Fire & Flower. GTI said the dispensaries are next door to Circle K, not inside, but regulators don’t seem amused with the thought of gas station grass.


Adam JacksonOctober 5, 2022
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One World Products (OTCQB: OWPC), a fully-licensed hemp and cannabis producer in Colombia — owned by former Detroit Pistons point guard Isiah Thomas — is one step closer to commercialization.

The company received its second round of funds from its recent $10 million financing deal to help scale industrial hemp operations and work its way into the capital markets by 2023. Thomas has previously said that he wants the auto industry to trade plastic for hemp.

“We are delighted that our newest institutional investor clearly values the vision and tremendous growth potential that we see for OWP,” said Thomas, OWP’s chairman and CEO. “Furthermore, one of our original investors in OWP has increased his investment enabling us to restructure our debt with much more favorable terms.”

Upon filing an S-1 with the Securities and Exchange Commission as part of its recent common stock purchase agreement and registration rights agreement, an institutional investor made its second fixed-price follow-on equity investment of $150,000.

The fixed-price equity investments were priced at $0.15 per share.

Thomas noted that the second equity investment provides additional capital that will be used to continue to scale company operations in Colombia, enhance industrial sales of hemp products to customers and expand its carbon credits program.

“Of tremendous importance to us has been the faith and enthusiasm this institutional investor has demonstrated, evidenced by their $300,000 investment that is priced approximately 50% higher than our recent share price,” he said.

“Even more supportive long term, they are allowing us control over the timing and amounts of future equity capital, which allows us to take advantage of sudden increases in our stock price.”

OWP is the largest Black-controlled hemp and cannabis producer with offices in Las Vegas, Nevada, as well as offices and operations in Bogota and Popayan, Colombia. The company planted its first crop of cannabis in 2018 at its cultivation site in Popayan, Colombia, and began harvesting commercially in the first quarter of 2020.

“What I see in Colombia is the opportunity to become the green capital of carbon capture by working with the indigenous farmers, growers and the Afro-Colombian community,” Thomas said in a May interview with Radio W Colombia, “…because this is a unique opportunity in a unique time where the environment is calling for us to change our behavior. And not only change our behavior, but make sure that we continue to reduce our carbon footprint.”

Thomas’ international holding company, Isiah International, as well as OWP and the remaining business consortium controls approximately 1.2 million acres of land in Colombia focused on the licensed production of industrial hemp for integration into sustainable, carbon-reducing products.

OWP expects to supply its global clients with industrial and commercial applications for cannabis, hemp, and hemp products — including derivatives in crude oil, distillate, and isolate forms — with industrial-scale production to serve global cannabis and hemp demand. Its products will be produced and tested according to GAP, GMP, and ISO standards.

“I would also like to highlight that I am personally investing an additional $500,000 at $0.15 per share in $100,000 increments over the next five months,” said Thomas. “As an ascendant international hemp and cannabis company focused on environmental, social, and governance (ESG) standards, we believe that these latest rounds of investment and refinancing position us well to elevate the company to the next level.”

Cover Photo: Rey Del Rio/Getty Images


Debra BorchardtJanuary 25, 2022
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5min1581

The U.S. Securities and Exchange Commission (SEC) scored a big W this week when a California federal judge ordered cannabis investment firm VerdeGroup to pay more than $1 million in civil penalties, disgorgement, and interest. Law360 reported the final judgment was issued on January 20, 2022, and the defendants have 14 days to pay the SEC. In addition to the payments, the judge has permanently banned VerdeGroup, Thomas Gaffney, and Lisa Gordon from the securities industry.

U.S. District Judge Stanley Blumenfeld Jr. has ordered VerdeGroup to pay a civil penalty of $500,000. VerdeGroup, Tommy’s Pizza, Gaffney and his wife Cynthia Gaffney are jointly and severally liable for disgorgement of more than $470,000, including prejudgment interest. Gaffney and Lisa Gordon were also ordered to pay civil penalties of $100,000 and $5,000, respectively.

Cannabis Scam

The SEC had alleged that from January 2018 through July 2019, VerdeGroup raised approximately $612,765 from about 27 investors from several states. Thomas Gaffney is described in the original complaint as a recidivist violator of the securities laws. Gaffney was sued by the SEC in 2013 for engaging in a fraudulent stock scheme involving illicit kickbacks and phony agreements to mask the kickback. He was sentenced to time served, followed by three years of supervised release with a special condition of eight months of home confinement,
among other things.

In this alleged scam, Gaffney is accused of fooling 27 investors and raising nearly $612,765 that was supposed to go towards cannabis investments. Instead, the funds were “transferred from that third party account to an account in the name of relief defendant Tommy’s Pizza Ventures, Inc. (“Tommy’s Pizza”), the signatories of which are Gaffney and relief defendant Cynthia Gaffney. Investor funds were then used for Gaffney’s personal expenses, and a pizza parlor business, among other things. VerdeGroup and Gaffney misappropriated approximately $467,110 of investor money. To further generate investor interest in the offering, defendants Gaffney and VerdeGroup also made material misrepresentations to investors and prospective
investors about VerdeGroup’s business partners and its efforts to undertake an initial public offering. Gaffney and VerdeGroup made the same or similar misrepresentations
to lull investors into not withdrawing funds and to encourage investors to invest more and/or rollover funds to a different entity.” Some of the personal expenses included cruises and Tiffany’s jewelry.

Lisa Gordon was hired by Gaffney to handle VerdeGroup investor relations and acted as an unregistered broker-dealer in connection with the offering and directly offered and sold securities by soliciting investors through phone calls and emails. Gordon did not have a securities license. The securities offering was not registered with the SEC as required by the Securities Act and at least some of the investors were not provided with the information that a registration statement is required to provide for the protection of investors. In addition, the complaint said that at least one of the investors was unaccredited.

The offering was conducted using a Private Placement Memorandum (“PPM”) that offered $25,000,000 in promissory notes at $5,000 per unit with a minimum purchase of $10,000.
The PPM stated that the notes provided a 12% annual rate of return that matured in 24 months and converted to equity at maturity. VerdeGroup also claimed in the PPM that it “invests in equity positions with legal marijuana companies” and that it “anticipates ‘Going Public’ in 2019.” Investors were fooled when the PPM stated that Thomas “Lynch” was the person involved with VerdeGroup not Thomas Gaffney.

Investors May Get Some Money Back

According to the court order, the SEC “Shall hold the funds (collectively, the Fund) and shall distribute the Fund in a manner consistent with the Supreme Court’s admonition in Liu that the disgorgement remedy must be for the benefit of investors. Liu v. SEC, 140 S. Ct. 1936, 1947–49 (2020). The Court shall retain jurisdiction over the administration of any distribution of the Fund. The SEC may disburse funds to the defrauded investors without seeking leave of Court. If the SEC wishes to send any portion of the Fund to the United States Treasury or otherwise dispose of the Fund in any manner besides compensating the defrauded investors, the SEC must first obtain approval from the Court unless it has already distributed the full
disgorgement amount to investors.”

 

 


Debra BorchardtDecember 21, 2021
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12min1870

How does one make $11 million when the company records less than $10,000 in revenue for a year? Apparently by pumping and dumping the stock says the SEC (Securities and Exchange Commission). The SEC is opposing an attempt by HempAmericana (OTC: HMPQ) to have its complaint dismissed. 

Hemp Americana

HempAmericana was incorporated in 2014 with a factory and equipment aimed at processing, bottling, and selling products made of industrial hemp, including CBD oil. Since its incorporation, HempAmericana has never been profitable. From 2017 through May 2020, HempAmericana generated a mere $9,727 in revenues. Salvador E. Rosillo is HempAmericana’s CEO. The complaint alleges that almost a third of the company’s money was used for stock promotion – not for actually growing the business. 

The company reported that for the year ended in February 2021, it had revenues of $7,793 and expenses of $478,064, leaving a net loss of $551,291. For the quarter ending in May, the company had revenues of $300 and the quarter ending in August had no revenues and just $12,000 in cash. 

SEC Complaint

In August 2021, The SEC accused GPL Ventures and GPL Management of 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. The most lucrative of the penny stocks was HempAmericana which generated a profit of $11 million.

The GPL defendants are accused of secretly funding promotional activity in  penny stocks in a scheme known as “scalping.” Scalping is when someone buys shares of a stock for his or her own benefit before recommending that stock to others and doesn’t say anything during that recommendation of plans to sell them. The action is then followed by selling the shares once they rise after the recommendation. It’s also called a pump and dump scheme. The SEC accuses the GPL Defendants of buying and selling large blocks of HempAmericana securities from 2017 through at least late 2019. 

The SEC complaint alleges that HempAmericana, through Rosillo sold shares to Alexander Dillon, Cosmin Panait, GPL Ventures LLC, and GPL Management LLC on the condition that HempAmericana then pays a portion of the proceeds from those sales to stock promoters in order to tout the company’s stock. The filing stated, “HempAmericana then issued stock to the GPL Defendants under Regulation A—an exemption from the requirement that securities offerings be registered—and indeed provided a significant portion of the proceeds to stock promoters or their intermediaries. The GPL Defendants sold (or “dumped”) the stock at a profit once the promoters had touted the stock and “pumped” up its volume and price. As Rosillo knew, the GPL Defendants would not purchase more HempAmericana stock each time until they had sold their prior holdings. This practice took place over the course of three years, through multiple issuances of shares, and was never disclosed to other investors in the company.” 

Dillon and Panait co-own and control GPL Ventures and GPL Management, through which they invest in microcap companies. Dillon previously held a Series 7 securities license and was briefly employed at a registered broker-dealer from April 2013 to July 2013. Panait is a Romanian citizen.

Stock Promoters

Seaside Advisors, LLC and Lawrence B. Adams were hired to promote the HempAmericana stock. They didn’t disclose that the GPL Defendants funded the promotions, and they are accused of failing to disclose that the GPL Defendants intended to sell HempAmericana stock at the same time that Seaside and Adams were paying promoters to recommend that investors purchase the stock. Adams owns Seaside and is also the CEO of a microcap issuer, Image Protect Inc. (ticker OTC: IMTL).

The SEC alleges that the GPL Defendants repeatedly bought HempAmericana stock at a discount and then sold with HempAmericana sending a portion of its resulting stock sale proceeds to Seaside. Once HempAmericana sent stock proceeds to Seaside, Seaside used the proceeds to pay a professional stock promoter. That stock promoter hired other promoters to tout the stock. The GPL Defendants would sell their HempAmericana stock during the promotional campaigns.

For example, 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. Overall, of the $7.4 million in stock purchase proceeds that the GPL Defendants paid to HempAmericana during the scheme, HempAmericana paid $2.18 million to Seaside, and Seaside in turn forwarded nearly 60% of the amount it received to an unnamed individual hired to promote the stock. 

The unnamed individual then is accused of using two kinds of promoters. First, he hired people whom he understood to have email lists or social media mechanisms that would enable them to get buyers into the stock, apparently with the promise of buying cheaper stock in advance of the promotion. Second, he hired people who would in turn pay others to engage in more traditional promotional activity during the “pump” of HempAmericana’s stock price (before the GPL Defendants “dumped” their stock).  

The complaint stated, “As an example of how the scheme unfolded, in January 2018, the GPL Defendants purchased $170,000 of HempAmericana stock. $70,000 of the sales proceeds went to Seaside, and $55,000 of that amount went to Individual A, who in turn paid an entity, “Entity A.” Later that month, another entity, “Entity B,” put out email blasts promoting HempAmericana stock and disclosing that it was compensated by Entity A, which was described as a non-affiliated third party. The promotion’s disclaimer said that Entity B did not own any shares in HempAmericana and made no reference to anyone intending to sell shares into the promotion. Individual A’s hiring of such intermediaries further insulated the GPL Defendants (and HempAmericana) from any apparent connection to the promotional campaign.”

OTC Skull & Crossbones

While the SEC case didn’t mention the stock promoters, back in 2018 when the OTC placed a warning on the stock, that information was disclosed. At the time, the company had paid $71,000 to OTC Tip Reporter and $71,000 to Stock Prophet to promote the company through the end of 2017. Buzz Stocks was also paid $71,000 for the same time period. In addition to these outlets, Epicstockpicks.com was compensated $20,000 cash via bank wire by a third party, Awarness Consulting Network LLC for a one-day HempAmericana Inc. promotion.

The list of promotions continues…….PennyStockGeneral.com was compensated $3,000 via electronic transfer from a non-affiliated third party for the profile of HMPQ. ShiznitStocks.com was compensated $3,000 via electronic transfer from a non-affiliated third party for the profile of HMPQ. ValueStockPick.com is a web property owned by Brilliant Innovators and was also compensated $6,000 cash via bank wire by a Sand Stone Marketing LLC  to conduct investor relations advertising and marketing for HMPQ. This is not the complete list of promotions.

HempAmericana Asks For Dismissal

In September GPL Ventures LLC, GPL Management LLC and its co-owners Alexander Dillon and Cosmin Panait agreed to a preliminary injunction and asset freeze, without admitting or denying the SEC’s claims.  Then last month Hemp Americana and GPL Ventures said they wanted the case dismissed and filed separate motions.

“By attempting to expand the definition of ‘dealer’ to include private investors without customers, the SEC is engaging in a regulation-by-enforcement effort that threatens to capture literally thousands of day traders, hedge fund managers, family offices, or other traditional private investors who are active in their trading activities,” GPL argued. The defendants claimed that they did disclose in the offering that 20% of the funds raised would go towards sales and marketing and that the SEC is quibbling over the actual amount being 29%. However, the SEC says there’s a big difference between Sales & Marketing expenses versus stock promotion. 

The defendants argued, “If the SEC wants to quibble about this alleged discrepancy, it should get its math correct. The SEC alleges that GPL purchased, in total, $7.4 million of HempAmericana stock; that HempAmericana paid Seaside $2.18 million; and that “nearly sixty percent” of that $2.18 million—i.e., nearly $1.308 million—was actually used to fund the promotional campaign. But $1.308 million represents less than eighteen percent of the stock proceeds received from GPL, not twenty-nine percent.”

“The only alleged conduct in this ‘scheme’ attributed to HempAmericana or Rosillo is the retention of a consultant to engage in a stock promotion campaign — a fact it publicly disclosed, though it was under no obligation to do so,” HempAmericana and Rosillo both argued in their filings. They say they never saw the promotional materials or had any input into the stock promotion and so they aren’t guilty of stock promotion. 

They went on to argue that “if there was pumping, there was no dumping.” 

 


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