This story has been updated with the amount of payoff stock given to Laidlaw’s back office manager
Barry Honig is back in the hot seat for his role in the reverse merger of U.S. Gold. Chris Carey, editor of Sharesleuth, has a new investigative story out this week that tracks the money Team Honig alleged made in the alleged pump and dumps of U.S. Gold. This morning I received new private transaction documents between Barry Honig and broker dealer Laidlaw & Company from 2016 that support the theme of the Sharesleuth story.
Last fall I broke news how Laidlaw’s main street clients were used as Honig’s personal dumping ground when he wanted to get out of a stock at the high of a pump phase under the direction of Laidlaw’s managing director Jimmy Ahern and its CEO Matt Eitner. According to multiple brokers I interviewed at Laidlaw the senior Laidlaw executives would pay kickbacks in cash or discounted stock to registered reps who pushed Honig’s deals on their clients. Based on new documentation and interviews today we now know U.S. Gold was one of those deals.
Chris Cary and Jim McNair at Sharesleuth reported:
U.S. Gold went public in May 2017 by combining with Dataram Corp., a struggling maker of computer memory products whose shares were listed on the Nasdaq exchange. The so-called reverse merger was engineered by financier Barry C. Honig, who has created or bankrolled dozens of small public companies over the past decade.
Sharesleuth’s investigation found that Honig and several associates had acquired a large stake in Dataram prior to the deal, and that one of them – John R. Stetson – also managed a limited liability company that was U.S. Gold’s principal shareholder. Their role on both sides of the transaction was not disclosed in SEC filings, nor was their sale of millions of dollars in stock in the months before and after the merger.
In the transaction I have a copy of Honig is selling 1,000 preferred shares of U.S. Gold for $700,000. The stock purchase agreement says the 1,000 preferred shares are suppose to convert to one million of common shares in the the reverse merger of Dataram and U.S. Gold ($USAU). It’s dated December 2016. Sichenzia Ross Ference Kesner LLP is listed as the law firm to receive the proceeds of Honig’s preferred shares. Harvey Kesner is Honig’s long time deal lawyer. ( Attorney Kesner is currently being sued for malpractice by one the companies in the Honig pump and dump SEC fraud case.)
The preferred shares detailed in the stock purchase agreement are Series A preferreds that Honig bought for cash in the privately held U.S. Gold, prior to the completion of the merger with Dataram.
The two companies announced the deal in June 2016, but didn’t complete the reverse merger until May 2017. Chris Carey’s story highlights that during this time Team Honig also converted and sold all of their preferred stock in Dataram Corp.
Documents show the Series A shares in the private U.S. Gold were supposed to convert to millions of common shares in the combined company; the conversion amount was eventually reduced to account for a one-for-4 reverse split immediately prior to the closing. Which means the retail clients got less shares of common stock then what they were told they would get when the offer was sold.
Here is the important part. The Dataram merger deal documents filed with the SEC never said Honig had a stake in U.S. Gold. Honig has consistently stated that he is a passive investor in SEC filings. This was also said in a court proceeding in the Southern District of New York in 2017 via Honig’s attorney Charles Harder, according to a transcript seen by this reporter. The fact that he had shares in private U.S. Gold pre-Dataram merger would argue against his claim that he was just a passive investor, rather than an activist investor who was directly involved in the deal. SEC disclosure rules are different for activist investor vs. passive investors so main street shareholders know who is benefiting before they vote for a merger.
Honig’s private stock sale of U.S. Gold, with the help of Laidlaw’s senior executives Jimmy Ahern and Matt Eitner, is an example of how Honig can secretly be involved in deals and secretly unload shares.
Ahern (Left) and Eitner. At their satellite office The Havana Club.
On top of that, according to ex-Laidlaw brokers who sold Honig’s shares, retail clients were just told they would be buying “shares” in a hot mining deal. Unless the retail clients read the stock purchase agreement they would be unaware of how the shares were converted to common stock or how the lock period worked. Additionally, one broker said Jimmy Ahern offered him free trading stock in the new company if he could quickly get Honig’s preferred shares sold (Ahern/Laidlaw had buckets of discounted or free trading stock (around 5%) in the deal by being the placement agent) and the broker wouldn’t take kickback stock. FINRA rules require to broker to disclose if they are also getting stock as a form of payment when pitching companies to clients.
So Ahern sold the free trading stock and paid the broker more in his monthly pay runs; this was usually done by adding more money to commissions or adjustments.
One broker I interviewed said when Ahern pitched the free trading stock kickback deal they asked, “Isn’t this just a rich man’s bag deal?” Jimmy Ahern paused then answered, “Well Yes.”
Ahern and Eitner also used the U.S. Gold free trading stock, gifted to them via Team Honig, to pay one back office female employee as part of her severance. The former employee, Jodi Fauci, received 50,000 shares of pre IPO stock according to a document sent to Equity Stock Transfer that was obtained by this reporter. The stock transfer document is dated May 9 2017 and the trading price of the stock Fauci got was in the high $40s during that time. She signed a non disclosure agreement after the payoff and it is unknown when she cashed out of the stock which could have been worth over $2 million. Fauci when reached by phone wouldn’t comment on the record.
Sharesleuth reported:
U.S. Gold’s stock has declined by more than 90 percent from its peak that year (when adjusted for two splits), meaning any retail investors who bought on news of the merger and held their shares have lost nearly all of their investment.
U.S. Gold Corp is not one of the companies in the pump and dump scheme that Honig recently settled with the Securities and Exchange Commission. But the DOJ attorneys building a case against Team Honig in Northern California could add the stock to their coming indictment. Honig and his fellow defendants have signed tolling agreements with the DOJ that give the government more time after the statute of limitations expires to bring criminal charges, according to a defendant in the case interviewed by this reporter and a transcript from a court hearing earlier this year. The criminal investigation into Team Honig was first reported by this reporter in 2016. Barry Honig sued me for defamation for reporting on the SEC and criminal investigation and then withdrew the lawsuit with prejudiced the same month one of the companies in the SEC case (MabVax) disclosed they were under SEC investigation.
I have previously reported FINRA has an active investigation going that could stripped Ahern and Eitner of their licenses and roles at Laidlaw. The newest FINRA enforcement lawyer on the the Laidlaw case is Daniel Mark Hibshoosh. Additionally, earlier this year the FBI began contacting people who work or worked at Laidlaw in an effort to build a criminal case.
Barry Honig did not respond for comment for this story.
Jodi Fauci payoff stock
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