Laidlaw & Co. and Barry Honig, a small cap investor charged by regulators for running a long time pump and dump scheme, worked together to fund the underwriting of firm commitment initial public offerings unbeknownst to main street investors in the IPO’s. According to two senior staffers at Laidlaw, the broker dealer’s clearing firm Sterne Agee stopped honoring their back-stop agreement with Laidlaw in 2016 and wouldn’t put up the net capital needed to sell the small cap offerings. New internal documents given to this reporter show one of the Honig led deals Laidlaw sold is Therapix Biosciences Ltd in which Honig also provided the money for underwriting.
Laidlaw began looking for new clearing firms in 2016 but found that only one other clearing firm, Cor Clearing, was interested in their business–and a due diligence fee of $25,000 per deal would be required before Cor would allow Laidlaw to raise money for any company, according to former Laidlaw employee John Marinaccio. So the firm’s executives, Matt Eitner and Jimmy Ahern, hatched a plan to stay with Sterne Agee and ask Barry Honig to put up the 10% needed to fund the underwriting in the IPO’s he was a lead investor in. According to Laidlaw board minutes from March 6, 2017, Either and Ahern held a quorum of just themselves to approve the loan. Honig used an LLC he owned 94% of called HS Contrarian Investments to make the loan. SEC filings for Therapix say Honig’s co-conspirator in the SEC’s securities fraud case, John Stetson, owns and controls the llc but the SEC says in court filings this is a false statement.
Therapix ($TRPX) is a biopharma company started out of Israel who jumped on the medical marijuana bandwagon during the time of the Laidlaw IPO. The offering was sold for $6 per share. Honig’s long time SEC transaction lawyer, Harvey Kesner, was the lawyer for the IPO. Attorney Kesner is currently being sued for malpractice by one of the victim companies in the SEC enforcement case named MabVax.
Harvey Kesner, Jimmy Ahern, Matt Eitner
After the offering was sold in early 2017, Laidlaw then issued an analyst report giving the stock a buy rating with a price target of $18. The stock had two quick run ups and cliff nose drops since the IPO which could be seen as a pump and dump. Therapix reached a high of $8.94 off its IPO in March 2017 and another high in November 2018 of $8.65. The stock is currently trading below $3 and received a formal warning from NASDAQ about being dropped from the exchange because it wasn’t meeting listing requirements.
A review of Laidlaw financials filed with FINRA show they accepted subordinate loans of $6.25 million in 2016 and $3 million in 2017. HS Contrarian wasn’t the only llc used to fund underwriting in Honig backed deals. Honig also had Mark Groussman and his brother Johnathan Honig use their investment companies to fund some deals, according to a Laidlaw employee who saw internal documents related to the transactions.
Matt Eitner responded to a request for comment saying, “Any public offering that Laidlaw engaged in, including any related documents, as an underwriter have been filed and approved by the appropriate regulatory authorities.”
While Eitner at least had the sense to asked FINRA if they could do the subordinate loans, brokers I interviewed who sold the Therapix offering said they were not told Honig was funding the underwriting and was also investing in the deal. This meant that retail investors were also not informed. Honig secured a group of investing buddies to help him out in what appears to be an undisclosed affiliate group. Laidlaw president Matt Eitner told this reporter, “We always make the appreciate disclosures”. But a current FINRA investigation into Either, Ahern, and Laidlaw shows regulators think otherwise.
Team Honig’s involvement in Therapix was first reported by Chris Carey at Sharesleuth.com.
According to an internal sales and order tracking document for Therapix written by Laidlaw broker Luke Kottke, the $13.7 million raise was 91% funded by Honig and others he trades with as alleged undisclosed affiliates. The document obtained by this reporter shows the investors are: Michael Serruya/Serruya Private Equity, Adam Arviv, Barry Honig/HS Contrarian, Jonathan Honig (Barry’s brother), John Stetson, John O’Rourke/ATG Capital, John O’Rourke Sr., Corey O’Rourke, Andrew Schwartzberg, Iroquois Capital/Richard Abbe, Robert Prag, Adrian James, Roy Langston, Ed Karr,Jason Theofilos, Sean Posner and others. Honig was also able to get a few board seats out of his investment and put Mark Groussman and Eric So on the board. Groussman is a co-defendant in the SEC pump and dump case and has plead guilty. Eric So is also on the board of Riot Blockchain and believed to be one of Honig’s rent-a-directors. Broker Check records for Eric So show he was fired from RBC for multiple violations of personal trading.
If some of these names are not familiar here is how they are related to Honig deals:
– Schwartzberg also was an investor in the April 2017 private placement for Bioptix that preceded its transformation into RIOT. He also invested in the December 2016 Majesco private placement at the time of the PolarityTE agreement, and was an early investor in Marathon Patent.
– Michael Serruya and Barry Honig co invested in land for cannabis farms and dispensary licenses.
– Adam Arviv also was an investor in the Bioptix and Majesco placements, as Acquisition Group Ltd. He was also was a director of Green Growth Brands, and played a role in its “hostile takeover” for Aphria. Text messages, obtained by this reporter, between Adam and Andy Defrancesco and Michael Serruya show they are friends that plan their investments together.
– “Roy Langston” is Ray Langston (full name Charles Raymond Langston III), a longtime Honig investor who was charged with fraud by the SEC in 2013.
– Adrian James is a stock promoter who also got shares in the Bioptix placement – a Honig led deal.
– Robert Prag is a stock promoter who I reported was recently named in a securities fraud suit filed by Mabvax – one of the victim companies in the SEC’s enforcement case against Team Honig. The lawsuit says Prag was paid to promote Mabvax at the insistence of Barry Honig.
– Ed Karr is the current CEO of US Gold Corp. ($USAU). He’s been involved in a number of Honig companies over the years, including Pershing Gold and Majesco. He was a director of Majesco until December 2016, when it agreed to merge with PolarityTE.
– Jason Theofilos was an investor in Bioptix, through JAD Capital. He also was a director and large shareholder of Coinsquare, a Toronto digital currency exchange into which Riot Blockchain invested millions. He also heads MundoMedia, a Toronto digital advertising company in which Barry Honig, Jonathon Honig, Groussman and O’Rourke were investors.
– Sean Posner is believed to be the son of the late Victor Posner, barred by the SEC for fraudulent activities, and whose brother was the late Steven Posner, who also was barred by the SEC. Both were involved with financial felons Ivan Boesky and Michael Milken.
The internal Laidlaw sales tracking document shows the total book for the IPO sold was for $13,720,992 with only $1.2 million coming from Laidlaw’s main street retail customers. Team Honig funded the rest and as the SEC has described in their securities fraud lawsuit this group fits the pattern of an undisclosed affiliate and would have a controlling ownership of the company which was not disclosed. The only disclosure made was John Stetson had a 5.9% ownership. Given we know now that Stetson doesn’t actually own HS Contrarian that ownership statement is now allegedly false. Records show Stetson only invested $600,000 while HS Contrarian invested $1.2 million in the IPO.
Canadian multi-million Michael Serruya, who I reported this month was involved in an investigation by the OSC that included bad boy investor Andy Defrancesco, invested $1.8 million in Therapix. The documents show he was the largest individual investment in the IPO. There were also stock purchases made in the name of Aphria-Colonial Capital of $1.2 million. It’s unclear who owned this investment from the document but a person familiar with the former Aphria CEO says this is Vic Neufeld and Aphria co-founder Cole Cacciavillani’s account. Serruya had made statements to people who work on Bay Street (Toronto’s version of Wall Street) that he was never involved with Barry Honig’s pump and dump scheme but did make investments in companies Honig invested in on the recommendation of Defrancesco and Honig. Defrancesco and Serruya are not named defendants in the SEC enforcement case against Honig.
The internal Laidlaw documents also show a Honig relationship with a South Florida broker dealer called Delaney Equity Group run by David Delaney. The Broker Dealer was charged criminally last year by the Miami DOJ and FINRA revoked their license this year. Employees I spoke to at Laidlaw told this reporter they were often told to send Honig’s shares to Delaney via his account called the Barry and Renee Honig charitable trust. There has been speculation Honig would use shares held at Delaney Equity to trade against the companies he invested in. This ideal was also mentioned in the SEC lawsuit without naming the broker dealer. With the Therapix IPO there was a million dollar worth of shares issued in Barry’s brother’s name, Johnathan, through Delaney Equity. David Delaney was never charged criminally by the DOJ, it’s unclear if he is working was a witness against team Honig in the DOJ’s parallel criminal investigation looking into years of Honig’s group running pump and dump schemes.
Honig settled with the SEC this summer and was banned from trading in penny stocks but is continuing to litigate the amount of fines and restitution he will pay. Honig awaits to see if he will be charged by the Department of Justice.
I have previously reported Laidlaw is under FINRA investigation and the FBI has opened a case investigating the executives at Laidlaw.
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