Cannabis Investor and mega Canadian millionaire Michael Serruya was hauled into the Ontario Securities Commission office last year after the Canadian regulator subpoenaed him for an on record interview and demand document production. The securities investigation centered on a Mississauga, Ontario-based coffee shop chain called Les cafés Second Cup. Michael and his brother Aaron Serruya are board members of the company which trades on the Toronto Stock Exchange under
Second Cup saw two suspect spikes in volume and price in the first half of 2018 with the stock going up and down by at least a dollar in a short amount of time. The regulator’s order was issued on June 13, 2018 and was addressed to Michael Serruya at his Yogen Fruz Ontario, Canada address. The Serruya family made triple digit millions developing the frozen yogurt brand and is estimated to have a net worth of over half a billion. Serruya made news this year when he was tied to Defrancesco in self dealing cannabis farm acquisitions with Aphria ($APHA).
The subpoena issued, under section 11(1)(a) of the Securities Act, asked Serruya for: all of his brokerage accounts from 2017/2018 that he had control over, all email address, all make and models of his cell phones, and was told to not delete any text, emails, instant messages or other recorded communication with the Defrancesco and Andrew Rudensky. This publication has seen a copy of the official OSC demand letter.
The OSC letter says, Serruya had to show up to the OSC office with the documents on July 6th 2018 to give evidence under oath. The OSC investigator was Stuart Mills. According to a person familiar with the situation he also had to turn over his communication devices.
The regulator warned Serruya he had to keep the investigation confidential and not tell the people named in the subpoena.
The investigation is believed to have not led to any enforcement actions and it’s unclear if the focus of the investigation was on Serruya or Defrancesco or both. The OSC would not comment on the status of the investigation for this publication but people familiar with the situation say it is closed.
According to an email sent by former Stikeman Elliott attorney Curtis Cusinato sent to Michael Serruya on July 26, 2018 titled ‘Accounts for Menchie’s Frozen Yogurt & Second Cup‘, attorney Cusinato was asking for $50,000 to be paid in legal fees and wanted these accounts cleaned up before he took over as Managing Partner of the Toronto office of Stikeman. Cusinato, who is Andy Defrancsco’s brother in law, told Michael in the email:
“How about as a thank you for bailing you guys out of jail you see tonit that our bills are paid from a year ago please! 🙂 or send some bath oils”
It’s unclear what other information about deal flow and trading the OSC gathered from Serruya during the interview or a review of his communication devices.
Andrew Rudensky worked as a retail broker at Canadian brokerage house Richardson GMP Limited where Defrancesco was his client. Rudensky ran into some trouble the IIROC that involved an enforcement action with fines of $56,923 and he was suspended as a registered rep for two years according to a statement from the Canadian regulator IIROC on July 30, 2018. After the dust up it is believed he went to work for Defrancesco at his investment firm Delavaco.
Defrancesco’s South Florida Delavaco office
Last month Second Cup announced that they were amending their agreement with the Serruyas which allowed them to nominate people to the board based on how much stock they owned. The Serruyas have been invested via 4 holding companies. The amendment took away the Serruya’s option to nominate two board members.
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