The Securities and Exchange Commission today announced it charged an issuer, its CEO, and six other entities and individuals with participating in a penny stock fraud scheme. The SEC also charged certain of the participants with operating as unregistered dealers, and obtained emergency relief to halt their ongoing conduct.
According to the SEC's complaint, filed in the United States District Court for the Southern District of New York, GPL Ventures purchased, since at least July 2017, more than 1.5 billion shares of HempAmericana Inc. stock through a Regulation A offering, with the understanding that HempAmericana would use a portion of the offering proceeds to secretly finance stock promotions that would enable GPL Ventures to sell its HempAmericana shares at a profit. The complaint alleges that HempAmericana misled investors regarding its use of the offering proceeds, and that co-defendants Seaside Advisors and Lawrence Adams paid a stock promoter who, in turn, funded promotions of HempAmericana’s stock that failed to disclose HempAmericana's role in financing the promotions and that GPL Ventures intended to unload its shares into the promotion. GPL Ventures and certain of the defendants allegedly reaped about $11 million in illegal profits from this fraudulent scheme.
The complaint further alleges that GPL Ventures' owners, co-defendants Alexander Dillon and Cosmin Panait, falsely represented to their brokers that GPL Ventures was not involved in any stock promotions with respect to the shares GPL Ventures was depositing and selling into the market. Finally, the complaint alleges that GPL Ventures, affiliate GPL Management LLC, Dillon and Panait are operating as unregistered securities dealers, having privately obtained discounted stock in more than 140 microcap issuers and subsequently generated gross proceeds of at least $81 million by publicly reselling such stock to the investing public at a substantial profit.
"Investors are entitled to accurate and complete information about how proceeds from Regulation A offerings will be used, and the identity and intent of people funding stock promotions," said Richard R. Best, Director of the SEC's New York Regional Office. "We will vigorously pursue those who work together to dump microcap shares on an unsuspecting public."
The SEC's complaint charges the defendants with violating the antifraud provisions of the federal securities laws, and seeks disgorgement of ill-gotten gains with prejudgment interest, civil penalties, permanent injunctive relief, and penny stock and officer and director bars against various defendants. The complaint also charges Dillon, Panait and the GPL entities with operating as unregistered dealers, and given their ongoing conduct, the SEC sought and obtained an order temporarily restraining these defendants and freezing their assets until further order of the court.
The SEC's investigation, which is ongoing, is being conducted by Brenda Chang, John Lehmann, Peter Lamore, and Adam Grace, and the litigation will be led by Paul Gizzi, Ms. Chang, and Mr. Lehmann, all of the New York Regional Office. The case is being supervised by Sanjay Wadhwa.
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