On September 30, the Securities and Exchange Commission SEC announced that it had charged eight cannabis stocks in a stock promotion scheme that included Emerald Health Pharmaceuticals, Elegance Brands Inc., now Sway Energy Corp. and High Times Holdings HTHC, reported Debra Borchardt for Green Market Report.
The SEC says investors purchased $80 million of securities after the promotions. Borchardt wrote that individuals received payments based on the number of securities sold.
The SEC did not reveal that he received compensation for the promotions because of alleged recidivist securities law violator Jonathan William Mikula. The SEC charged Christian Fernandez and Amit Raj Beri with acting as middlemen in addition to Mikula.
Beri acted as the middle man for the cannabis companies Emerald Health and HighTimes. Borchardt reported that High Times was not charged.
Beri was approved by the SEC for a Reg A offering, and was listed as CEO and CFO of Elegance Brands.
Beri made changes to the offering, but did not prepare a new offering statement with the SEC, and those securities are now considered unregistered.
At Mikula surging and in order to facilitate the promotion, Elegance agreed to engage Individual 1, an associate of Mikula s, and pay him 3% of the investor funds raised through the promotion and provide him 8.9 million shares of Elegance's stock, which amounted to 10% of the company's outstanding stock, per the complaint.
According to the SEC, Elegance has agreed to pay a penalty of $776,932 and Beri has agreed to pay a disgorgement of $960,314. Prejudgment interest was $38,979, 96, of which was prejudgment interest. A charge of $207,183, a 10 year bar and a conduct-based injunction prohibiting him from engaging in certain promotional activities is a requirement for a penalty of $207,183. Emerald Health made $30 million in the stock promotion campaign. The CEO of Emerald Health, James DeMesa, is accused of omissions in the filings on the promotion and related payments.
Emerald Health noted that Palm Beach Venture recommended the company as an attractive investment opportunity, without disclosing that this was a paid-for recommendation.
Emerald Health agreed to pay a penalty of $517,955 and DeMesa will pay a penalty of $103,591 and agree to a five-year bar from serving as an officer and director, and Dhillon has agreed to a permanent bar from acting as an officer and director.
Hightimes entered into an agreement to pay Entity 1, a Canadian entity controlled by Individual 2, 5% of the funds raised through the Palm Beach promotion. The purpose of the use of a Canadian entity and offshore account was to conceal that payments from Hightimes would go to Mikula, per the complaint.
High Times paid $150,000 for the promotion, but the complaint did not state the number of securities sold through the promotion. If High Times agreed to pay 5% of the securities sold and then pay $150,000 to the individual, it is possible to conclude that at least $3 million has been raised through this promotion. Borchardt wrote that High Times did not respond to a request for comment.