Torque Esports Battles Important Trademark Infringement Case Without Informing Investors: $GAME.V $MLLLF

An electronic gaming company, Torque Esports ($GAME.V) , is at risk of being forced to change it’s TV and event brand name, World’s Fastest Gamer, because a former country musician, Boo McAfee, has sued for trademark infringement and unfair competition. McAfee, who says he owns the trademark for World’s Fastest Drummer, had also developed a online gaming business and has been operating it since 2008. Torque’s current CEO Darren Cox and the company’s board members were warned to stop using McAfee’s brand name this summer but ignored the legal cease and desist which lead to a federal lawsuit being filed against Torque in Illinois federal court on July 31, 2019. A review of the company’s public filings with the Canadian exchange it trades on, TSX.V, and its press releases shows the company has failed to disclose the lawsuit which could be considered a material event. Torque, formerly named Millennial Esports, is a company that received large investments from Andy Defrancesco and other companies he is believed to control.

Torque was originally founded by Canadian lawyer Alex Igelman who is believed to be a relative of Defrancesco’s partner in cannabis investing, Marvin Igelman. Defrancesco and Igelman have been accused of selling inflated foreign cannabis assets to Aphria ($APHA) which Aphria had to latter significantly write down. Defrancesco is currently being sued for securities fraud by Aphria shareholders in the Southern District of New York and has had to respond to an SEC investigation for his role in Cool Holdings ($AWSM). I have previously reported Defrancesco was also named in an Ontario Securities Commission investigation into a Canadian company called Second Cup. Defrancesco had been a resident of the Toronto area but now lives in Miami.

Alex Igelman left the board of the company he founded this spring. But Torque had two other Defrancesco buddies on the board Bryan Reyhani of Captor Capital and Sol Global’s CFO Peter Liabotis. Defrancesco signed regulatory filings this November saying the cannabis company he helped run, Sol Global Investments ($SOLCF), had made an investment in Torque owning over 12% of the company. The move was surprising since Sol Global stated in public filings that its intention is to make and grow investments in Cannabis companies which Torque has no association with. Around the same time the lawsuit was filed Andy Defrancesco was seen promoting the company on twitter and apparently found a new friendly CEO in a UK salesman named Darren Cox. Cox became CEO in mid-July 2019. It’s unclear if Alex Igelman left the company when he knew Defrancesco was coming in to promote the stock or if he left because the gaming business for other reasons. Daren Cox founded a company called Ideas+Cars which Torque bought.

Cox, through Torque’s subsidiary company Ideas+Cars, came up with an idea to team up with Formula One racing teams and online gaming apps and make a live event with substantial prize money for gamers. His first partner was British Formula One team McLaren and they convinced ESPN to do a limited series TV show which Cox called World’s Fastest Gamer. The show aired in 2017 unbeknownst to Boo McAfee who says he doesn’t watch ESPN. Cox, through Torque Esports, has also used McAfee’s abbreviated trademark WFG for branding and advertising over the last few years. It wasn’t until a staffer from Torque, Paul Ryan, called McAfee to buy his website domain name, www.worldsfastestgamer.com, that Boo McAfee realized how much Torque had used his brand name to build their own business. Torque has TV shows, Ads, and events using the disputed name. The company has also stated it want to brand merchandise with World’s Fastest Gamer.

In Torque’s 2018 audit annual financial statements, finally filed on Oct 2 2019, the company stated, “IDEAS+CARS is the in-house marketing and events agency for Millennial(now Torque). Its biggest benefit to the group is the ability to generate unique IP such as World’s Fastest Gamer and its unrivaled team and industry connections.”

After Cox/Torque was warned about legal repercussion if they continued to use World’s Fastest Gamer Cox still continued to pursue a contract with British car maker Aston Martin and their partner R-Motorsport. According to legal filings, Aston Martin was gun-hoe to do the deal and even helped draft a press lease about a gaming event that could win someone a year with Aston Martin’s race car team. McAfee found out about the deal when Torque pre-announced the launch of a new World’s Fastest Gamer esports racing competition on social media this summer in an effort to draw attention to its stock. McAfee responded by sharing with Aston Martin the cease and desist letter it had sent to Zak Brown at McLaren and its complaints to Torque. As a result the British car maker backed out of the deal with Torque over concerns about the trademark infringement, according to the lawsuit. McLaren also choose to honor the trademark claim and renamed their online car racing event Shadow and stopped doing business with Cox and Torque, according to Boo McAfee.

But Darren Cox continued the fight and was sly about avoiding service of McAfee trademark infringement lawsuit. The two Canadian addresses McAfee found in public documents were abandoned or did not exist, showing that Torque did not really have a physical address in Canada. When Manish Grigo, a man who claims to be their investor relations person, was found by the process serve he said the company had ‘moved to London’. McAfee eventually got service by serving Torque’s rent a CFO at his office, who was listed on one corporate filing as a representative of the company.

After the lawsuit was filed at the end of July Torque, with the help of Andy Defrancesco, Torque ran a massive pump campaign with fluffy press releases and Defrancesco constant twitter promotion. Darren Cox had just been made CEO. For a few weeks in August the stock traded from U.S. $1.12 to $4.12. It’s unclear how much Defrancesco sold during stock hike. At no time during the stock run did Torque or Darren Cox publicly inform its investors that it could have huge liabilities from alleged miss use of World’s Fastest Gamer. McAfee says he thinks Defrancesco is well aware of the lawsuit and stayed quite about it.

Under common law trademark you don’t have to immediately register a name with the U.S. government because legal standing says you can own your trademark if you can prove continuous use and that it’s recognized as your brand; which is what McAfee has been doing for over a decade. After Torque ignored his cease and desist letters sent by his trademark attorney Rob Hassett, McAfee submitted an application for approval with the U.S. Patent and Trademark office on June 4, 2019. A week latter on June 11, Torque tried to submit their own application. Since McAfee was first to apply for the trademark it is up to Torque to object to McAfee’s application which they have done.

Torque’s retaliation to McAfee’s claim has been extreme. They told the US Trademark Office they think Boo McAfee has lied about his continued use of the trademark over the last three years. Torque’s attorney Ashley Long of Seattle-based Carney Badley Spellman LLP wrote that the trademark was abandon, which McAfee’s attorney says in his opposition that’s just not true and there is no evidence Torque has shown that it wasn’t in use. Additionally, Torque filed a counterclaim in federal court against McAfee via their attorney John Gabrielides of Chicago-based Barnes and Thornburgh. The counterclaim is for tortious interference because McAfee wrote Aston Martin about his trademark infringement claim and Torque says it messed with their contract. Torque also thinks McAfee shouldn’t be able to talk about his public lawsuit on twitter or social media. McAfee’s lawyer Tony Dowell of Gutwein Law wrote in legal filings that McAfee’s first amendment rights prohibit Torque from bringing this kind of frivolous claim.

None of Torque’s lawyers responded for comment. When McAfee’s lawyers were reached for comment they said they stand by what’s in their legal filings as a response to the case. Darren Cox did not return a request for an interview.

McAfee is suing for monetary damages but says his main goal is to get Torque to just stop using World’s Fastest Gamer and wants them to have to re-brand. It’s unclear how expensive the re-branding would be to Torque.

Stock Halted

Torque has been lack about filing its required annual 2019 financials. Investors are looking for disclose how much of a stock position Defrancesco and his companies still have. In July and August Torque did a death spiral PIPE deal that raised $15 million and didn’t disclose who the investor are except to say one of their board members was affiliated to the investors. It’s believed the company was referring to the cannabis company, Sol Global Investments ($SOLCF) co-run by Andy Defrancesco where Torque’s board member is also the CFO. PIPE deals give the investor discounted stock and warrants in return for loaning the company money. The investor’s goal is usually to promote the stock so that retail investors will buy in while they sell their discounted stock. Sol Global made one announcement in the first week of December that it had sold some Torque stock. This came just a few weeks before Torque admitted the OSC could halt their stock because of a lack of financial filings. Torque’s board member Peter Liabotis (and buddy of Andy Defrancesco) likely would have had advance knowledge of the upcoming OSC halt.

Then on Monday January 6, 2020, after the close of trading, the OSC issued the cease trading order known as a CTO. Once the company files audited financials it can ask Canadian regulators for trading to resume. There is market speculation that the auditors won’t sign off on the valuations Torque as been touting as assets based off letter of intents it signed with new companies it wants to acquire and other assets it bought.

Because the stock also trades in the US on the OTC Markets, under ticker $MLLLF, the company can continue to try and promote the stock and get trading volume going with US investors which happen today with a close of a 74% increase in the value of the stock at $2. Basically, the Canadian investors get stuck in the stock right now while Torque pumps US investors.

Liz Heese of OTC Markets told this reporter, “It looks like IIROC has halted trading in this security in Canada as a result of the Cease Trade Order issued by OSC. In the US, FINRA has the authority to halt the security in conjunction with a foreign regulator, but in our experience, they do not typically halt in the US for delinquency. The company trades on our OTCQB market and is in the 45 day cure period, after which it will be downgraded to Pink if it is not caught up on filing.”

Torque also recently changed their US ticker, to $MLLLF, in an effort to draw in now investors. As of December 26, 2019 is was $MLLLD

If Defrancesco is still in the stock he could use his US brokerage accounts to dump the stock. It’s unclear when Torque will actually file their financials. The company’s net loss for 2018 was $11.5 million. The auditors in 2018 issued a Going Concern against the company.

The 2018 financials said, “On July 27, 2017, the Company acquired U.K. based IDEAS+CARS Ltd. (“IDEAS+CARS”), a leader in the fast growing esports racing environment. In connection with the acquisition, the Company paid £100,000 ($131,182) cash, issue 1,339,655 common shares of Millennial at an issuance price of CAD$0.80 ($0.61) per share and 450,000 options to purchase common shares at an exercise price of CAD$0.58 ($0.44) per common share for a period of five years vesting on the first, second and third anniversary of closing of the transaction.

That means the value of Torque’s stock is directly tied to Darren Cox’s compensation as he was the owner of Ideas+Cars and one of the reasons why the market sees him issue so many ‘me might do this’ press releases. Additionally the company said Cox’s first year salary, based on cash and stock, would be US $459,600.