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1 Apr

Why DeFrancesco-Cobb’s Mega Million Florida Cannabis Farm Deal Fell Apart: $SOLCF

A Ruskin, Florida produce farm turned Marijuana farm is mirrored in controversy since Andy DeFrancesco and his side-kick Brady Cobb showed up in 2018 with promises of making the original investors of the pot farm get rich quick if they sold. The farm is called 3 Boys Farm. The plan consisted of selling the farm to a newly formed private company, CannCure Investment, then flip the sale within weeks at a higher price to a public company trading on the Canadian Stock Exchange called Sol Global ($SOL). CannCure, which Florida LLC records show was registered to Andy’s wife Catherine Defrancesco, would get stock and cash paid for by shareholders of a public company. Then the cannabis farm would be quickly flipped to another private company called Verano for more stock who was quietly working to do a reverse merger with a Canadian energy company, Newton Energy, run by Gino DeMichele, a former Macquarie private wealth broker for Ron Schmeichel, an investing friend of Andy DeFrancesco. Schmeichael was a large shareholder of Newton Energy. The idea was if Sol Global’s stock didn’t jump in price, via buying one of only 14 cannabis farms in Florida, then the investing group had a backup plan with hopes that a Verano reverse merger deal would jump the stock of Newton Energy.

According to people who worked at 3 Boys Farm, the original owners were getting paid around $60 million in stock and cash by CannCure Investments and the stock portion was supposed to be in a company that would increase in value. Who is actually invested in CannCure Investments isn’t public but Andy DeFrancesco said in a Reddit Ask and Answer this December that there are around 50 investors. Based on past investing patterns of Defrancesco those investors would be Friends and Family of Andy. Andy was also conveniently made the Chief Investing Officer of Sol Global in October 2018. That’s the same month Florida LLC records show Brady Cobb took over as the registered agent of 3 Boys Farms on October 9th. The previous agent was Robert Tornello who founded the farm. Three weeks before that on September 19th Catherine Defrancesco signed records that also made Brady Cobb a manager of Cannabis Cures Investments. This publication has not found any public filings or statements that disclose Sol Global leaders (Brady Cobb and Andy DeFrancesco) likely conflict of interest or that affiliated parties are involved in the transaction.

Then in December 2018 two proven short sellers published a detailed report highlighting how Andy Defrancesco did behind the scenes deals, in other people’s names, to acquire cannabis assets and then sell them to public companies at alleged inflated values. The report also highlighted how these marijuana farms were promoted as thriving when it appeared little capital was being invested to grow the farm. And the Verano deal began to fall apart leading to a canceled reverse merger with Newton Energy on January 17th 2019.

Corporate records show the 3 Boys Farm investors were Florida residents: Robert Tornello, Ted LaRoche, Ed Chiles, Ron Clapper and William Nunnelly. Tornello, is the original owner of the produce farm. LaRoche and Chiles have money from a Florida restaurant group business and Nunnelly owns wine and liqueur distribution in Tennessee. The farm was reported in the summer of 2018 as being bought for what would end up being $100 million worth of stock in another marijuana company which would be one of the highest priced sales of a Florida cannabis farm. The sale was touted over and over again in press releases that turned into rewritten media reports with little fact checking. Brady Cobb, Florida attorney and CEO of Sol Global, even got a sponsored journalism piece to run in February at one of Canada’s largest papers The Financial Post stating, “As part of the Verano investment, Cobb also spearheaded the acquisition and rapid buildout of one of the 14 Florida Medical Marijuana Treatment Center licensees, 3 Boys Farms, which was transferred to Verano in exchange for US$100 million of Verano equity.” [Sponsored post are paid for by the subject of the story and made to look like a news story but do not go through the papers journalistic fact checking and standards.]

But 3 boys farms had not been transferred to Verano when that post ran. In fact, Sol Global still had not gained approval from the state of Florida to transfer the license from CannCure Investments yet nor had Sol Global completed buying CannCure Investments. Verano was contacted in February to confirm what Sol Global was touting about a done deal but a press person named Julie Shepard refused to answer questions about the deal being completed and only wanted to know what my story angle was. According to an email seen by this reporter Brady Cobb was contacted by a potential investor in Sol Global and also wouldn’t answer questions about the completion of the 3 Boys Farms to Verano. We now know that’s because the sale wasn’t going through and Verano was negotiating to merge with another public cannabis company called Harvest. And on March 11 Harvest announced it would acquire Verano in an $850 million all stock deal. Then on April 1st Sol Global finally announced the deal to sell 3 Boys to Verano was terminated. Florida did eventually approve the licenses transfer to Sol Global on March 8th according to Brad Dalton at the Florida Office of Medical Marijuana Use but that transfer isn’t done yet. The state database shows CannCure owns the license. Sol Global said they will still buy CannCure Investments for 7,317,500 common shares at a negotiated value of $4.00 per share. They didn’t explain if the $4 is in US or Canadian dollars (US dollars would equal $29,270,000). Additionally, the new deal says if Sol Global is able to sell 3 Boys to someone else the Cannabis Cures investors will get a percentage of that sale. Then Sol Global throws out another unbelievable number. The company says if 3 Boys doesn’t get sold in two years the CannCure investors get $80 million. That means the public shareholders of Sol Global are going to pay Team Defrancesco and affiliates $80 million because a deal didn’t get done–while Andy DeFrancesco is a senior executive of that public company (Sol Global).

Florida law allows a company to own only one license and Harvest already had an actual working medical marijuana farm and dispensing license in Florida. 3 Boys Farm has only been approved by the state to cultivate the cannabis and had work to do on extracting the cannabis to oil for an approved medical marijuana product as required by state laws. They also needed the State to approve they had the required packaging and a plan to dispense it through store front facilities or a delivery business. Their deadline to get this done is April 1st and the Florida Office of Medical Marijuana Use told this publication that 3 boys had not asked for a variance to get that deadline extended. In December of 2018 the extraction equipment needed hadn’t even arrived even though the new owners had been warned repeatedly by staff they needed it sooner in order to get the extraction right. Brady Cobb said in an email to this publication that it was expected to arrive in January. Since then Cobb has refused to answer questions on the progress of building out 3 Boys Farms and would not given an exact address for the new 33 acre processing center that was recently announced would be in Indiantown, Florida. The farms Chief Scientific officer, Greg Gerdeman, is a hippie PhD that goes around the state giving talks about cannabis products that could happen and post photos of pretty plants on his Instagram account. It’s unclear where the plants actually come from.

Intimidation and Lawsuits
The farm’s founder and president, Robert Tornello, and the farm have been sued by 3 former employees for harassment, intimidation, and breach of contract. In early 2018 Tornello was removed as a manager and then brought back when he found a new investor to flush cash into the farm. That summer Brady Cobb started to show up at the Farm full of promises of new contracts because better owners were coming in but then never fulfilled the employment contracts he promised. Andy Defrancesco was also seen or heard negotiating with Tornello to buy the farm while press reports in Florida were stating the farm was going to be sold to Catherine Defrancesco. Catherine was never seen on the farm negotiating a contract.

3 Boys Farm is one of only 14 farms that were granted a full vertical licences to grow, extract, and dispense medical marijuana for the state of Florida. It’s also one of the only farms that hasn’t finished getting its extraction and dispense approval from the state to make it a viable business. 3 boys farm has a slew of senior staff come and go after they saw problems with owners lack of execution of its business plan, according to former staff interviewed by this publication who spoke on the condition of anonymity. One of the lawsuits is still ongoing which was filed by a woman named AnnMarie Blair who had been hired to manage payroll and finances. When Brady Cobb was asked about the lawsuit during the Reddit Q&A in December he said the suit had been dismissed. But that wasn’t true. A reader linked to the suit describing AnnMarie but Cobb claims he was responding to another suit filed by a senior executive that was settled. A person in a senior position at the farm told this publication 3 Boys had set aside hundreds of thousands of dollars to settle the staff suits (there were 3 of them) because of the egregious nature of Tornello’s harassment and alleged wrongful termination of staff. This publication has confirmed 2 of the aggrieved staff were paid off to make the lawsuits stop. According to emails seen by this publication Brady Cobb was directly involved in talks with ex staff even pressing people to sign ‘do not talk’ agreements. While investigating this story Cobb continued with those threats. He even told this reporter that Greenberg Traurig, a bulldog litigation NY law firm, was going to contact me after I began asking tough questions and trying to speak with founding investors and staff this December. When I reached Robert Tornello on the phone he said “I know who you are but I’ve been told not to speak with you”.

The DeFrancescos
Andy and Catherine moved their family to the Fort Lauderdale area from Toronto a decade ago but Andy claims residence in the Bahamas. Court records show Andy said they bought their house near the water for only $2.2 million. Andy had some problems with Canadian regulators who stated in one report that he ‘uses his wife name on deals too liberally” and basically doesn’t have the ethics needed to be involved in public companies. The first time US investors got wind of Defrancesco was in March 2017 when journalist Chris Carey tied him and his wife into investments with accused pump and dump stock manipulator Barry C. Honig. Honig also lives in the South Florida area. Catherine’s name was showing up over and over again on stocks Honig invested in. Additional in March, Hindenburg Research published its first report questioning Andy Defrancesco’s role in the Aphria/Nuuvera deal.

Then in April 2018, court records obtained by this publication, show Catherine DeFranseco filed for divorce because the marriage had broke down. What’s more interesting is that Catherine’s divorce papers said the parties had already worked out a financial separation agreement that had been in place since 2016. She was asking for the court to finalize that agreement. In January 2019 Andy filed a response not contesting the divorce. Multiple attempts to reach Catherine to understand why she lets Andy use her name to start some of his investment companies have been unsuccessful. If, like Barry Honig, Andy DeFrancesco is ever charged by the SEC for trading as an undisclosed affiliate, Catherine could be at risk. Defrancesco was invested in a stock called $RIOT that has admitted that it is under SEC investigation. Andy has made public comments that he hasn’t heard from the SEC. The SEC doesn’t usually tell bad actors they are investigating them until a case is built.

Catherine Defrancesco recently started a hot yoga business in Miami and Fort Lauderdale called Sol Yoga. The mother of 4 is a pretty blonde in her late 40s who like to post photos of yoga poses on her social media pages but has no apparent background or experience in stock investing.

This summer just a few months before the SEC announced charges against Barry Honig and his team of South Florida bad boy defendants like Michael Brauser, John Stetson, Marc Groussman and Philip Frost, the Defrancesco’s made an odd financial transaction. They sold their beautiful home at 811 Poinciana Dr Fort Lauderdale, Florida to John Stetson and his wife. Public records obtained by this publication show the sale price was a whopping $5.2 million and was made on June 4th, 2018. That’s 3 million more than the Defrancesco’s paid almost a decade ago and higher than nearby comparables. The Stetson’s already had another nice home in South Florida but it’s only worth $2.1 million. The SEC’s complaint highlighted how Honig used his co-defendants like Stetson to put their names on stock investments and companies to hide how Honig was involved. The house sale for a price that high could be conceived by regulators as a questionable transaction as either Stetson is trying to hide assets or Andy DeFrancesco is getting a kickback for something he did to help Team Honig. Florida is a homestead state; meaning the government can’t take your home if they secure fines and disgorgement against you.

Andy told this reporter in December when I began asking for interviews that he would speak with me and even scheduled a call via a new media fixer they’d hired named Angela Gorman of New York based AMWPR. But he never showed up for the call. What I got was an email saying he knows of my work and would talk on the condition I don’t tie him to Barry Honig. He claimed he doesn’t work with him anymore. I don’t make conditions like that when I do interviews. Andy and Brady Cobb have continued to use Gorman’s PR firm to run a massive spin campaign. According to emails seen by this reporter, the PR firm pitches journalists that short sellers are out to get them and that Brady Cobb should be quoted. They were even successful in getting the Toronto team from Bloomberg to write a story about faults in the short sellers report. But the Bloomberg editor had to walk back his headline and make a correction to the story once it was pointed out that information provided to the reporters was not accurate. Additionally, Brady Cobb can now be seen on Fox Business news as a Lobbyist for the medical marijuana business. The Cobb Eddy LLC website states on Brady Cobb’s profile under Membership and Admissions that Cobb is a “registered Lobbyist before the federal government.” Brady Cobb’s name nor his law firm’s name of Cobb Eddy comes up in a search for registered lobbyist in the government’s federal database. I have asked Cobb to show me how he is registered as a lobbyist and he won’t respond.

UPDATE 4.1.19 7:20 pm: After reading the story Cobb has finally responded to a question telling this publication, “As CEO of Sol, I am the client and I engaged registered lobbyists on my behalf. Do your research.”
Brady Cobb appears to forget what he wrote on his own law firm website.

Brady Cobb claims he is a registered Lobbyist

UPDATE 4.2.19 3pm: Brad Dalton at the Florida office of Medical Marijuana Use just confirmed that 3 Boys Farm pulled off meeting their dispensing inspection yesterday on the April 1st deadline. This means their vertical license for medical marijuana is fully approved now.

Editors Note: Because of threats made to people involved in 3 Boys Farm, staff in this story is referring to current or past staff. To keep them safe I decided not to identify them. Multiple people who worked with the farm were interviewed for this story. The legal name for the company that bought 3 Boys Farm is Cannabis Cures Investments. It is referred to as CannCure in press releases from Sol Global.

5 Comments
19 Mar

Honig’s broker dealer Laidlaw target of FBI investigation

A bio-pharma company based in Massachusetts is the newest stock to be tied to a ring of small cap fraudsters lead by Barry Honig. Yesterday I reported Eloxx Pharmaceuticals ($ELOX) is being sued for fraud in relation to a securities transaction from 2017 that directly involves accused pump and dumpster Barry Honig and Philip Frost. I have now learned there is also a broker dealer that is under investigation by the government that helped team Honig sell shares of Eloxx to unsophisticated main street investors to create volume in the stock. According to multiple people who worked at the firm and public filings that broker is none other than Laidlaw & Co. At the time Laidlaw sold the first offering in Eloxx it was called Sevion Therapeutics.

Laidlaw is run by Matt Eitner and James (Jimmy) Ahern. The duo were subject to two investigative stories by this publication about there long-standing involvement in helping Barry Honig execute the dump portion of his scheme in multiple securities. Beginning in 2015 when Honig’s puppet CEO David Rector took over, Laidlaw pushed its staff to sell a $7 million private placement to its retail client base. Laidlaw is now being sued by a former long time client for up to $2 million for selling the client Eloxx and other stocks. The client is a retired doctor from New Jersey named Bruno Casatelli. According to a copy of the FINRA complaint, which is private because it’s in arbitration, also names Barry Honig as a nefarious insider working with Ladilaw’s Eitner and Ahern to benefit his investments over the firm retail clients. Stocks Casatelli names in the lawsuit as being sold with unsuitable recommendations and fraud are: Aethlon Medical, Inc., Actinium, Boston Therapeutics, 5G Investment, LLC., Alliqqua, Inc., Aspen Group, Inc., Brazahav Resources, Inc., Fusion Telecoms International, Inc., Protea Biosciences Group, Inc., Aeolus Pharmaceuticals, Inc., Biosig Technologies, Inc., Contravair Pharmaceuticals, Inc., Medovex Corp., Relmada Therapeuticals, Sevion Therapeutics, Spectrascience Inc, and Spherix Inc. Casatelli is being represented by Daxton White of The White Law Group out of South Florida.

Casatelli’s lawsuit list a litany of no-nos a FINRA registered broker dealer like Laidlaw knows it shouldn’t be doing but what now has the attention of the FBI and the DOJ in the Southern District of New York is the alleged conspiracy between Honig and Laidlaw executives to cheat their clients of out profits for the benefit of Honig and his other alleged bad actor small cap investors. According to a person with direct knowledge of the situation who was asked by the government to remain unnamed, at the beginning of this year the SDNY was calling in ex-Laidlaw staff to testify against the firm and were asked to wear a wire. I have previously reported there is an active FINRA enforcement investigation into Laidlaw but this is the first time I got notice the FBI in New York was recently involved.

Honig is currently battling a fraud suit led by the Securities and Exchange Commission but no criminal charges have been brought yet against the man who allegedly cheated main street investors out of millions for over a decade. The SEC amended complaint filed this month said Honig and his buddies, which include billionaire Philip Frost, Michael Brauser, John Stetson, and Marc Groussman, manipulated between 70 to 80 stocks over the course of their scheme. But only three companies are detailed in the regulators complaint. Recently, Frost’s OPKO Health made a SEC filing warning that while Philip Frost, the company head, has settled with the SEC without admitting guilt “other government agencies could still bring charges against Frost or his company”. Another agency likely means the DOJ. Which is why it would make sense for the DOJ to be building a strong case against Laidlaw’s Eitner and Ahern because if they get enough to charge them the Laidlaw duo would likely make very good cooperating witness against Honig.

Besides the client civil suits against Laidlaw, the firm nor its executives, have been charged by a government agency yet. Although they do have multiple FINRA fines imposed against the brokerage.

UPDATE 3.20.19 – Last night someone wrote into this publication saying they were a NBC journalist and were doing a story on me and stated they had proof I was accepting payment via venmo from people involved in the story. They used a nbcuni.com email address to post a comment demanding I answer that question here in the comments on this story. I have contacted NBC who had confirmed the name they used is not an NBC reporter, producer or even a name in their directory. The email was john.castletani@nbcuni.com.

This was a person pretending to be a fellow journalist trying to intimidate me.

I do not and never have taken donations from subjects of my stories. In fact in the last two stories I have reported this week I have received no donations although I need them. I was told by two former Laidlaw employees that Jimmy Ahern and Matt Eitner have hired a black ops public relations firm to try and retaliate against me for my reporting on their alleged fraud. Additionally there have been two attempts today to hack into my backend publishing platform. Luckily the software security for this news publication stopped it.

7 Comments
18 Mar

Barry Honig & Eloxx Pharma stock fraud case moves to Discovery : $ELOX

UPDATE 3.23.20 Federal judge Richard G. Andrews for the district of Delaware made a final ruling today allowing the case for securities fraud against Barry C. Honig and his puppet CEO David Rector to go forward. This means that microcap bad actor Honig will be forced to go through discovery for his alleged role in securities fraud of bio stock Eloxx Pharma. The company is also a named defendant.

The Judge ruled claims against Eloxx’s CFO Schmidt were thrown out because the pleading didn’t show enough behavior that Schmidt had ‘control’ of the fraud. But Judge Andrews gave the plaintiff, John Winfield, two weeks to file an amended complaint to try and argue why Schmidt should stay a defendant. Besides the SEC pump and dump complaint this is one of the first suits against Barry Honig that has made it to discovery. Honig has settled with the SEC for his role in a massive Pump and Dumb scheme in multiple securities and was ban from being a controlling investor or director in penny stocks. Honig’s fine and restitution has still not been decided in the SEC case and he is still under criminal investigation by the DOJ.

Winfield is being represented by Michael Maloney and William Firth III of New York-based Felicello Law P.C.

UPDATE 1.22.20: A magistrate judge in Federal court for the district of Delaware ruled yesterday that the securities fraud case against Barry Honig for his alleged roll in manipulating another preferred shareholder and cheating him out of profits in bio-pharma stock Eloxx can go forward. The Delaware judge’s decision said the SEC’s stock manipulation case against Honig, Philip Frost and OPKO Health had weight in her decision to allow 10(B)5 fraud claims to go forward and that the parties acted with Scienter because the SEC’s case established Mr. Honig’s “undisclosed relationship with OPKO Health, Inc. ($OPKO) and its Chief Executive Officer, Dr. Phillip Frost”.

The claims that survived the motion to dismiss are: (i) Securities Fraud under 10(b) and Rule 10b-5, (ii) Section 20 Control Group liability; (iii) Fraud; and (iv) breach of contract. The magistrate judge said the claims for breach of the implied covenant of good faith and fair dealing, be dismissed as duplicative of the breach of contract claim.

Eloxx was recently named in an SEC subpoena sent to the adult son of Barry Honig’s right hand guy Michael Brauser. The government’s subpoena was looking for documents relating to undisclosed paid stock promotions and groups trading as undisclosed affiliates.

The Eloxx investor in the case, John Winfield, is represented by Michael Maloney and Rosanne Felicello of New York-based Felicello Law LLP.

Original Story 3-18-19

Small-cap stock investor Barry C. Honig has been embroiled in a new set of fraud accusations for his role with a bio-pharma company called Eloxx Pharmaceuticals ($ELOX). He stands accused of working with his puppet CEO, David Rector, to force a large preferred share investor to convert his stock at a higher price then promised in a deal benefiting him and Honig’s investing partner Philip Frost of OPKO Health. The investor, John Winfield, filed suit in Delaware Federal Court on March 5th against Honig, Eloxx, Rector and the prior CFO James Schmidt.

Eloxx was formally called Sevion Therapeutics and Rector became CEO in January 2015. In 2017 Rector and Honig called Eloxx’s investor Winfield encouraging him to sign a deal that would convert his series A preferred shares to common shares at a rate better than originally agreed on when he bought the preferred shares because the company claimed it was was low on capital and required new financing. Winfield bought the shares in the summer of 2016 at a conversion rate that would give him 266,666 of common stock and by January 2017 Hoing and Rector were pushing for the conversion.

Rector offered to convert Winfield’s Preferred Stock at a more favorable price of $0.25 per share, which would result in the issuance of 800,000 common shares, not the originally agreed 266,666 shares of common stock – which was three times as many common shares.

Winfield didn’t take their first offer and negotiated a deal, called the ‘favored nation clause’ that said he would convert his shares BUT if another preferred shareholder gets a lower conversion price he should get that price also, according to the lawsuit. In February 2017 Honig called Winfield to say he had or was expecting to buy all of the remaining Class A Preferred shares and that another investor had already agreed to sell at the $.25 cents conversion.

Honig would call Winfield personally to promise the deal and push him into signing, even though Honig was not an executive of the company and declared himself an independent investor. Rector told Winfield that Honig was the lead investor in the company. While the company was agreeing verbally to the deal they delayed sending Winfield paperwork that promised the favored nation clause.

Rector and Honig have worked together in the past when Rector was a director of Majesco Entertainment from June 2015 to December 2016. Majesco became PolarityTE ($PTE) and today announced the Securities and Exchange Commission has opened a formal investigation into the company which includes the merger that changed Majesco to PolarityTE. The SEC is also investing Honig’s role with PolarityTE. Rector was also the COO of U.S. Gold Corp another Honig lead deal.

Winfield eventually signed over his shares to convert in July 2017. Meanwhile it appears Honig was working behind the scenes to get a merger deal done with a biopharma company from Israel.

It wasn’t till Winfield saw a proxy statement announcing the merger and asking shareholders to vote that he realized the other preferred shareholder Honig bought shares from was none other than Philip Frost’s OPKO Health. On top of that the Frost related shares were converted for $.10; meaning he got a lot more shares than Winfield did. Honig also never disclosed to Winfield that he and Frost were affiliated. When Rector became CEO in 2015 Frost was put on the board as a director. In September 2018 the SEC charged Honig, Frost and others for manipulating stock prices by trading as an undisclosed group of affiliates.

The company never honored their ‘favored nation deal’ with Winfield and he didn’t get the lower $.10 share price. In typical Honig deal making style there was a promotional presses push on Eloxx and in a three-month period from March to June 2018 the stock went from $7 to a high of $23.27 on June 15th.

Winfield has sued for violations of the Securities and Exchange Act section 10-B which is fraud, there also claims of Section 20 violations which is executives working as a control group to commit fraud, and breach of contract. He has hired New York-based shareholder defense firm CKR Law. The same law firm currently fighting for shareholders of XpresSpa for securities fraud in a lawsuit this publication has reported extensively on. Some of the people sued in the XpresSpa suit, like Richard Abbe of Iroquois Capital, have invested as undisclosed affiliates with Honig for years.

Rector is long gone from Eloxx and it’s unclear what Honig’s position in the stock is these days. An amended SEC complaint filed this month highlighted how Honig uses his buddies investment funds to front his position in a stock so main street investors can’t see his true position in a company. Eloxx’s stock dropped from its $23 high and is trading around $13 today. On March 14th Eloxx filed its 10-k and conveniently left out any mention of the company being sued for fraud in correlation to Barry Honig as a lead investor. They added a line under litigation that there are currently no ‘material lawsuits’. Apparently investor fraud isn’t material to Eloxx.

An internal investors relations person at Eloxx did not return a request for comment asking if the SEC has also contacted the company asking for information about Honig. As we saw in today’s PolartyTE announcement the SEC started asking for info back in Oct 2018 but we only learned about that today.

Honig did not return a request for comment. CKR Law did not return a phone call for comment on behalf of their client John Winfield.

John Winfield vs Honig and … by on Scribd

3 Comments
13 Mar

Greenwich Tennis Competitor’s dad Gordon Caplan arrested in Operation Varsity Blues

UPDATE: 10.3.19 – Gordon Caplan was sentenced to one month in jail and agreed to a suspension of his law license while the NY Bar investigates. Federal prosecutors had asked the judge for eight month of jail time.

UPDATE 4.5.19: Gordon Caplan is the first parent to admit guilt. His attorney circulated this statement today: “My immediate goal is to focus on making amends for my actions to try to win back the trust and respect of my daughter, my family, and my community,” Caplan said in a statement Friday. “The remorse and shame that I feel is more than I can convey.” Caplan also said his daughter Rachel, who is a junior in High School, had not applied to college yet. His white-shoe law firm Willki Farr said they have finally removed him as a partner. If Caplan’s plea remains a felony charge he will not be able to keep his law license.

Original Text
The Co-Chairman of a white-shoe law firm, Gordon R. Caplan, has been charged with a felony for making payments to help his daughter cheat on a college entrance exam. Caplan, a seasoned dealmaker for private equity firms was removed from his duties at Willki Farr Gallagher LLP today. It’s unclear if he is still getting paid but the law firm went right to work scrubbing his bio off their website. He was released on a personal signature $500,000 bond and given strict travel conditions.

Gordon, age 53, lives in uber-wealthy Greenwich, Conn. with his 49-year old wife Amy Elizabeth Caplan who grew up with family money in Greenwich and is a member of the Treibick family. Amy attended an exclusive private school called Greenwich Academy.

The Boston office of the FBI obtained wiretaps and recorded both Gordon and Amy speaking with the man who orchestrated the college entrance admission bribe scheme. That man is William Rick Singer who has already plead guilty and worked with the FBI to record parents involved in the scheme. Wiretaps show Amy saying she ‘wasn’t ok’ with the idea of payments made to a proctor of the ACT exams to manipulate the score of her daughters test. Yet the family moved forward with the plan and flew their daughter out to Southern California to take the exam at a testing center where people were placed to help rig it. Gordon eventually asked Singer to stop adding his wife to emails about the scheme and the DOJ says it was Gordon who made the illicit payment.

The complaint says the daughter was enrolled in an online high school. Research shows that daughter is Rachel Treibick Caplan. Rachel has been working on gaining recognition on the juniors national tennis circuit and plays in tournaments around the US.

Rachel Treibick Caplan

Gordon Caplan daughter. Operation Varsity Blues.

It’s unclear how much the daughter knew but their appears to be some culpability. The government said that the daughter went to see a doctor and was told to ‘play stupid’ so that she could get the doctor to claim a disability. The disability would allow her more time to take the exam. Caplan ended up paying Singer’s non-profit $75,000 to execute the cheating scheme; a payment that was conveniently set up to be tax deductible.

Gordon Caplan was taped asking William Singer if anyone had ever been caught in the scheme. Singer’s response was basically only if you tell someone and Gordon responded “his daughter wouldn’t talk”. Rachel took the test this winter and the complaint says her score was 10 points higher. Gordon alluded to thoughts of his daughter going to his college, Cornell, on the wiretaps but the complaint didn’t say if Rachel had used the fraudulent scores to apply to college yet. The DOJ decided not to charge any of the students tied to 33 parents arrested in the scheme even though they said some of the teens knew of the cheating scheme. Gordon’s wife Amy was also not charged.

Gordon was caught on tape saying “he didn’t care about the moral ethics” of the scheme. But did express concerns about his daughter being caught because “she’d be finished” if she was.

With an ethics statement like that Willkie Farr is likely already starting an internal investigation into Gordon Caplan’s work with the law firm’s clients. It’s the firm duty to report his actions to the state bar association with the idea that if you cheat once what else did you cheat at.

A phone call made to the Caplan’s Greenwich home went to voicemail and the voicemail was full. Caplan’s attorney did not return a request for comment.

Gordon was arrested around 6 am on Tuesday March 12 and had to spend some time in a holding cell in downtown New York. Two addresses were listed on his warrant. A $5.3 million mansion on 20 Brywood Lane in Greenwich Conn. and a classic-6 with park views at 25 Central Park West apt 7N, NYC, NY. He was processed and released late in the afternoon and wouldn’t comment to reporters waiting outside the courthouse.

Caplan has retained white collar criminal defense lawyer Patrick Smith who is a sole practitioner. In an odd move he also retained Peter S. Cane who practices civil litigation and is know as a ‘media lawyer’. Wire fraud faces up to five years in jail. Being found guilty of a felony is grounds for disbarment. Caplan is scheduled to appear next in Federal Court in Boston on April 3.

Gordon Caplan with attorneys Patrick Smith & Peter Cane (right)

Readers of this publication are familiar with the attorney Gordon picked Peter S. Cane who takes on some questionable clients. Cane just lost a case trying to bully and intimidate a journalist into revealing a confidential source for hedge fund manager Bruce Bernstein. Cane also lost the chance for his client to keep his divorce records sealed when a judge ordered the unsealing of the case. The divorce docs allegedly show Bernstein committed securities fraud. The journalist Cane sued was me.

EDITORS NOTE: This story has been updated. Amy attended Greenwich Academy not Brunswick. They are related schools in Greenwich.

Gordon Caplan Arrest Warran… by on Scribd

6 Comments
24 Jan

Iroquois’ Richard Abbe quits XpresSpa while company battles Fraud Lawsuit

An XpresSpa board member, Richard Abbe of Iroquois Capital, has quit the company board during the middle of a heated legal battle accusing board members of deception, undue influence, and fraud. The day before his resignation Abbe, who is named personally in the lawsuit, took the extra step to retain his own lawyer in the securities fraud lawsuit that I first reported on in August.

Over the holiday break, when no one was paying attention to SEC filings, XpresSpa filed an 8-K on December 26th announcing Abbe’s departure as of December 18. Then after years of board service XpresSpa suddenly decided they should vote to offer the hedge fund manage a holiday gift. The board agreed to indemnify Abbe and advance any legal fees he might need to defend his good name from allegedly being involved with shenanigans, like you know misleading regulators or stock holders. The 8-K says this nice little exit present also includes the company picking up the tab for any fines or settlements Abbe might have to pay as a result of his work on the board. But what’s not clear is if Abbe was found acting in bad faith or criminal conduct that the indemnity would still hold.

The defendants in this case are being accused of a fraudulent scheme to trick the founders of an airport spa business, XpresSpa, into a merger with a public Microcap company that resulted in a massive loss of their business investment.The public company was called Form Holdings.

During the litigation, that begin in November 2017, I reported an ex-wife came forward with some potentially damaging evidence that would put some of the defendants in the hot seat with the Securities and Exchange Commission. That’s because the Sarbanes Oxley Act upped the anti for individuals to be charged criminally for making false claims in a Proxy Statement. A proxy statement is a legal document containing the information the Securities and Exchange Commission requires companies to provide to shareholders so they can make informed decisions about matters that will be brought up at an annual or special stockholder meeting. Issues usually covered in a proxy statement include proposals for new additions to the board of directors, information on directors’ salaries, information on bonus and options plans for directors.

More importantly, a proxy statement discloses any potential conflict of interest between the company and its directors, executives and auditors. Specifically, proxy statements must list any related-party transactions that occurred in the past between the company and its key personnel. Not disclosing conflicts of interest and related party transactions is exactly what the plaintiffs in the XpresSpa are accusing Abbe and friends of doing.

I have previously reported how Abbe is intertwined in this litigation drama with his fellow New York investing buddy Bruce Bernstein, who is president of Rockmore Capital. Bernstein and Abbe have a history of investing along side another small cap financier who has been widely reported on for his alleged leadership role in a pump and dump ring. That man is non other than Barry Honig. One such company is Vringo the predecessor to Form Holdings who is a named defended and the XpresSpa case.

In fact Abbe’s fund Iroquois Capital was named in one of the SEC subpoenas in the Honig Case. The government was looking for communications from Iroquois and one of the companies named for being a pump and dump called MGT Capital. I was first to report on the contents of the SEC subpoena, which was fishing for information to prove this group was trading as undisclosed affiliates and influencing public company CEO’s to get false press release published to drive up the price of a stock.

Surprisingly Iroquois capital, nor its fund managers, were named in the original SEC complaint against Team Honig. The SEC asked the court to file amended complaint, which is due February 6, that could add more names to the Honig enforcement action.

The XpresSpa case is currently in the Summary Judgement phase. This is where the defendants ask the judge to rule on the case without lengthy discovery and depositions being allowed. The former XpresSpa owners will be hoping the judge doesn’t allow summary judgement and the case moves forward to trial. This would force Bernstein and Abbe to have to do depositions and turn over more internal communication via discovery. Keep in mind of a lot the juicy parts of this case are redacted from public filings. A notion I find unfair to public markets and XpresSpa current and future common shareholders.

You can find the SEC subpoena here:

$XSPA 8-K Abbe Board Resignation:
https://www.sec.gov/Archives/edgar/data/1410428/000114420418066266/tv509891_8k.htm

Previous reporting on XpresSpa, Abbe, and Bernstein:

Iroquois Capital’s Richard Abbe Sued For Fraudulent Takeover Scheme of XpresSPA

Rockmore Capital’s Bruce Bernstein Ex-Wife Outs him for possible SEC Violations in $XSPA Deal

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18 Jan

NY Court Case putting Journalist Source Protection At Risk

UPDATE 3.4.19: The New York Daily News is reporting 16 other news organizations have joined my fight to unseal this case and to defend the reporters privilege to protect sources. On March 1st legendary media attorney David Schultz, who leads the Yale Media Freedom and Information Access Clinic, filed an AMICUS brief on behalf of The New York Times, NY Post, Newsday, NY Daily News, The Intercept, Gannett Newspapers, The parent company of the New Yorker, the AP, Hearst, Gizmode Media, First Look Media, Reporters without Borders and more journalist non profit organizations. The NYDN reported the brief centers on the importance of the public and the media’s right to an open court system. No one should be able to sue a journalist with an attempt to get access to their protected source material and then have the court keep the fact they did this quite; which is what happen to me. The AMICUS brief shows other journalist and their news publications don’t want the NY State Court to repeat these kind of rulings against the media working to inform the public. I appreciate my peers in journalism supporting my byline and the work of any freelance investigative journalist who doesn’t have powerful internal media lawyers to back them up.

The hearing to unseal this case and dismiss any action trying to force me to reveal a source is tomorrow March 5th at 2:30pm. Court Address: 80 Center Street, room 307, NYC, NY. I encourage any NYC readers and journalist to attend and show your support for an open court system.

NY Daily News story

ORIGINAL TEXT
The subject of one of my investigative stories is attempting to use the New York State court system to force me to disclose a confidential source key to my reporting on the person’s alleged wrongdoing. On top of that,at the subject’s request, a judge has temporarily allowed the lawsuit to be sealed so that I can’t make public who is trying to do this. It’s an alarming legal move that goes to the core of press freedom, free speech, and source protection in this country. My readers should know I have every intention of fight this. With over a decade of investigative reporting under my belt I have never revealed a protected source.

To fight this injustice I have been working quietly behind the scenes to secure a top first amendment lawyer to defend this case in court this month. I am doing this not just to protect myself but for the rights of all journalist working with confidential sources so that the actions demanded in this case don’t become case law that could be used against other journalists.

Today I am pleased to announce the Press Freedom Defense Fund has award me a grant to help fund this defense and Mark Bailen and Peter Shapiro of Baker Hostetler have stepped up to take the case. The case caption is: Anonymous v. Anonymous Index No. 655887/2018 (Sup. Ct N.Y. Co.) and filed in New York State Supreme Court in Manhattan.

Stay tuned for more as we fight to unseal this case.

Thanks in advance for your donation support and continued readership!

You can find court dates for this case here: http://iapps.courts.state.ny.us/iscroll/
Read more about the Press Freedom Defense Fund here: https://www.pressfreedomdefensefund.org/

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20 Nov

That Honig-Morgan Stanley Story

On Friday November 16, I ran a story about Barry C. Honig and his Morgan Stanley investment adviser Kyle Wool. I had interviewed a person via email who proactively came to me saying they had copies of emails between Wool and Honig that showed misconduct and possible kickbacks being paid by Honig to encourage Wool to push his clients into stocks that Honig was an early investor in order to ‘pump up’ a stock and get trading volume. I published copies of the emails in my story. Within a few hours of publishing the story I then received an email saying the emails were fakes and the person who I was talking to had lied to me about some of the details they provided. The story was immediately removed because the evidence I was provided with was tainted.

Before I ran the story Morgan Stanley public relations and Kyle Wool were informed about the emails and what they said. Morgan Stanley confirmed Hoing was a client. And Kyle Wool didn’t say a word about any of the details not being true. My source told me Wool and Kyle have had a long term relationship and do party and socialize together, which checked out to be true. And Kyle Wool does have 3 customer complaint disclosures in his FINRA record. In 2009 a customer alleged Kyle Wool, while employed at Oppenheimer & Company, made unsuitable investment recommendations, churned investments and misrepresented material facts. The complaint settled for $337,500.

The person who contacted me Knew Honig’s correct AOL email address and Wool’s Morgan Stanley email address. They also knew the two had a professional relationship, which has never been disclosed before in any reporting on Barry Honig.

The email address the source used was a Proton email : barrymorgan1@proton.ch. The email of the person who sent me the second email was barrynotmorgan@protonmail.com. This suggest that the original email and the second email was sent by the same person or group. After the story ran the email account was shut down. A new email address was created to let me know the source had lied to me. I wasn’t familiar with Proton and have since learned it is an email service that uses anonomyzers and can be difficult to subpoena.

Here is the email saying the source lied.

Since the story came down I have been contacted by readers who said they thought the premise of the story is true because they either know Wool and Honig or they heard rumors about their relationship on The Street. Rumors are not journalism and they don’t go into any of my reporting. If you know these two men and are willing to go on the record of course I would like to hear from you. I will continue to cover Barry Honig and the SEC investigation into alleged fraud in small cap stock investing.

Thank you for always being loyal readers.

5 Comments
14 Sep

Is there a new Laidlaw-Honig Pharma Offering in Play?

This story has been updated with a response from Laidlaw

It appears Honig’s lieutenants at New York brokerage Laidlaw & Company have been actively selling a new deal. One riddle with conflicts of interest and possible self dealing for Matt Eitner and Jimmy Ahern. This week I reported on an Limited Liability Company called PPLL Partners that is controlled by Eitner and Ahern. The duo call it Pump Pump Loose Loose and allegedly past brokers at the firm say it’s used as a vehicle to pay kickbacks to for getting Barry Honig-backed deals sold to Laidlaw’s retail clients. But now it looks like it will also be used to set up the next Honig-backed investment. Last week, Barry Honig was charged by the Securities and Exchange Commission for running a stock manipulation scheme in multiple securities for years.

According to brokers at Laidlaw they’ve been instructed to sell a private placement deal in PPLL Partners to the firm’s retail clients. This type of offering is known as a Regulation D offering and can only be sold to accredited investors. Allegedly the pitch is that PPLL Partners is now an investment fund that is going to buy small companies that work on drug development for diseases like cancer. One such firm PPLL Partners might buy or invest in is Voltron Therapeutics. On April 4th Matt Einter filled a notice with the SEC that PPLL Partners was trying to raise $500,000 and that $305,000 has already been sold.

In Eitner’s required disclosures for FINRA he states that he has a financial interest in Voltron Therapeutics but only spends 4 hours a month working on drug development and that “it’s not investment related”. This kind of language was likely suggested by his outside counsel so FINRA doesn’t ask for more details about the firms Written Supervisor Procedures for registered reps outside business activities and investments. Since Eitner is the CEO and holds a series 24 license he is the one that is suppose to be the broker supervisor of all capital market deals and the offerings the retail brokers sale. But since according to an internal document obtained by this reporter Eitner has also listed himself as the CEO of Voltron Therapeutics; so he needs someone else at Laidlaw to supervise the firm raising money for PPLL Partners to invest in any companies he would own. And the firm has to disclose all these conflicts of interest in the private placement memorandum they give to perspective clients to buy into the offering. At press time it is unclear if this has been done.

I have asked the national retail branch manager, Alex Shtaynberger, if he is supervising this deal today and also John Coolong, the CFO and Chief Compliance Officer. According to FINRA records both men hold series 24 licensees and could do the supervision so the firm is in compliance with FINRA laws. Neither Coolong or Shtaynberger would respond to an email for comment but Matt Eitner has finally deiced to respond this reporter. I got a carefully written email that said they want to answer my questions but couldn’t do it till Monday. I have learned Laidlaw clients are already calling the firm asking about the validity of their investment in PPLL Partners after my story earlier this week exposed Either and Ahern’s relationship with Barry Honig. I told Eitner I would not wait to print this story but if they wanted to comment at some point I will add their comments after they are fact checked.

Voltron Therapeutics was officially registered as a company in Delaware in July 2017, according to state records. I made a call to the State’s corporation formation office and they said an annual report hasn’t been filed yet for the company. But what is most interesting is how this company was formed. According to internal emails obtained by this reporter, attorney Michael Lerner at Lowenstein LLP began writing up Voltron company formation documents for Jimmy Ahern and Matt Eitner in May 2017. These documents also included stock issuance to Majella Partners, which is owned by non other than Eitner and Ahern. Eitner discloses some ownership in Majella in his FINRA records and this reporter has seen communication written to Jimmy Ahern at Majella Partners. The company formation agreement also includes equity incentive plans for ‘consultants/advisers’ and a subscription agreement for Majella Partners. That means Majella and anyone the company want to pay as a consultant would get cheap stock in Voltron. Voltron is still a private company but if it did a reverse merger that founders stock could be valuable if there was run on the stock.

After Ahern got the formation documents from his lawyers he then sent an email the same day to Barry Honig and John O’Rourke at their AOL and Gmail accounts. On May 19, 2017 he told Honig and O’Rourke, “Just getting started here but I figured I would pass these along.” The formation docs for Voltron was what Ahern was updating Honig on. Ahern signed the email Managing Partner, Head of Capital Markets, Laidlaw & Company. Now as I previously reported Ahern doesn’t have a series 24 license or an investment banking license. He doesn’t have the required licenses to even be running an investment banking deal. So why is he emailing Barry Honig like he is running this deal.

In a brief interview with Marc Ellis, Laidlaw’s former Co-President and Chief Compliance Officer, he told this reporter after reading my story on how Either and Ahern operate the firm that “I knew something like this was going to come out at some point. The conflicts appear to be endless.” (Ellis served until mid-2012 when Eitner and Ahern were being push up the ranks by the Sands brothers to take over the firm.)

This deal is a chance to see how a Honig style deal gets started. It’s hard to tell what Voltron even is? I have found no mention of it on bio pharma drug chat broads and no public filings except it’s Delaware corporate formation. That doesn’t mean it’s not a real start up trying to buy drug development licenses but based on the SEC enforcement action Honig’s investments often don’t have the real technology, asset, or potential deals the companies claim they do. What this looks like to this reporter is the beginning of the development of a cheap share exchange using other peoples money to sell an idea to unsuspecting retail investors that the players involved know will never work out.

UPDATE 9.14.18 4:15pm – A half an hour after I printed this story Laidlaw has magically come up with a response via their CFO John Coolong: “Laidlaw is not conducting a securities offering for PPLL Partners LLC. Rather, it is an outside business activity and private securities transaction by a few registered representatives. Pursuant to FINRA Rules, Laidlaw has reviewed and approved this outside business activity and private securities transaction. I, as Chief Compliance Officer, am supervising this activity.”

This story didn’t report they were selling a securities offering in PPLL Partners. I am reporting it’s a Reg D private placement but note it’s still selling an investment in a company owned by its CEO. Also we don’t know WHO at Laidlaw approved the outside business activity. That’s important to the firms compliance procedures. Also given that John Coolong is the CCO reporting into the CEO – Eitner – still feels like a big conflict of interest because he is not Eitner’s direct supervisor?

Additionally, since my first story on Laidlaw ran on September 12 the company has removed Jimmy Ahern’s photo from their Executives page on the Laidlaw website. Maybe the whole he isn’t licensed to be a supervisor of a broker dealer thing sunk in?

Editor Note: I would love to hear from any Laidlaw investors who bought into the PPLL Partners Reg D deal. You can reach me at teribuhl@gmail.com.

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