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25 Sep

Barry Honig Secretly funded Underwriting in his Laidlaw & Co. Deals: $TRPX

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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20 Sep

Text messages show Cannabis investors Defrancesco & Serruya allegedly Colluded with Clarus Securities’ Christodoulis in Multiple Stocks

A foreign investor in the cannabis sector published a report this week detailing how Andy Defrancesco and a gang of high net worth investors set up complicated private transactions securing dirt cheap stock in the company Sol Global Investments would reverse merge with to become publicly traded. The report only uses research from the cannabis company’s obscure and often confusing financial statements to show Team Defrancesco getting millions of shares of stock at a discount 25 times less than what it was sold to unsuspecting retail investors. To execute the scheme they had to have had help from gatekeepers. New emails and text message obtained by this publication now show enablers such as lawyers, friendly CEO’s, the head of a broker dealer, and a mega millionaire investor collude together to allegedly manipulate multiple stocks, like Sol Global, over the last decade, rape retail investors through self dealing transactions, and possibly trade on inside information.

The investor report goes back to September 2016 when a highly diluted private placement took place with an investment into a cash poor company called Kitrinor Metals led by a “finder” who happen to get 8 percent of the gross proceeds of the offering and discounted warrants. The report says:

While past shareholders paid over $1.2/share, participants of the private placement got them for $0.05 (Common Shares) and $0.10(Warrants) respectively-That’s25x higher.

The author of the report reached out to Sol Global’s current CEO Brady Cobb and ask him to identify the unnamed players in the public filings. Cobb said he answered some of the author’s questions on twitter but Cobb wouldn’t say who the finder was when I wrote him for comment.

According to a person who worked with Defrancesco along with a review of deal documents and press releases that finder is none other than Andy Defrancesco. This means before he became chairman and CIO of Sol Global he was already racking in thousands of dollars to set up a Multi State Operator cannabis company that he knew he was going to control as a public company down the road. Defrancesco became CIO in the fall of 2018 and as I reported early this month was forced out as an officer of the company from negative press. It’s unclear how much of the millions in cheap warrants and stock Defrancesco has retained through multiple llc’s and family members names.

Defrancesco uses some of the discounted warrants and stock by giving them to a trader named Andrew Rudensky. I reported this month Rudensky was named in an OSC investigation and was banned as a broker for two years by Canadian regulator IIROC. Rudensky effectually now works for Defrancesco. On Monday there was an opening run on Sol Global stock ahead of the investors report. The company knew the report was coming out. The stock, which trades on the Canadian Stock Exchange and the OTC Markets, flew up by ten cents without a lot of volume of trading. $Sol.cn $Solcf are the tickers for the stock which has been trading under one dollar. According to a person who worked with Defrancesco, he uses Rudensky to effect trading orders to get the stock up to counter negative press or so Defrancesco and friends can dump their shares.

The investor report goes on to detail other private placements that benefited team Defrancesco at the expense of retail holders. We also see another one of Defrancesco’s enablers helping raise money for the creation of Sol Global (formerly named Scythian Biosciences) which is Clarus Securities run by Jimmy Christodoulis.

Christodoulis, another Canadian, is often rumored to be very close friends with Andy Defrancesco. The broker dealer he runs is a sponsor of Andy’s son’s professional race car team. And now based on a series of text messages I received between Christodoulis, Andy Defrancesco, and mega millionaire investor Michael Serruya we know they are more than just drinking buddies.

Michael Serruya was a major investor in an LLC that Sol Global bought with cash and stock called CannCure, according to a copy of Serruya’s internal documents at his private equity firm, obtained by this reporter, the initial investment was for $22 million. When Defrancesco and Serruya make private investments in the form of debt that turns into common stock there are usually some restrictions to when the stock can be traded. It’s called restricted stock. If they want to get out of the stock earlier than the deal documents or the law requires they would need a lawyer to write a false opinion letter or a broker dealer willing to trade their restricted stock for free trading stock. Both moves are illegal.

According to a group text message from April 26 2018 at 9:37pm, obtained by this reporter, Jimmy Christodoulis, allegedly does this for Defrancesco and Serruya.

Andy Defrancesco texted to Michael Serruya and Jim Christodoulis:

Mike-Jimmy here also
Announce increase from $10 to $20m raise
Clarus 100% manager
They swap FT for restricted for us

Jim Christodoulis texted back:

Understood

FT stands for free trading shares.

Christodoulis and Serruya were made aware of the content of the text messages I obtained yesterday and would not comment on if they colluded to work with Clarus as a broker dealer to raise money in return for swapping out stock. A move that would be viewed as a securities violation by regulators if they can prove the swap stock was made. The text chain doesn’t say which stock they planed to do this with.

I have obtained over a dozen text messages with conversations on separate dates between Michael Serruya and the men he alleged colludes with. A lot of the messages are Serruya complaining to Jimmy and Andy about the price of Aphria and Liberty Health Sciences. Serruya is on the board of Aphria ($APHA) and was an initial investor in Liberty Health Sciences ($LHS). The phone numbers are confirmed as belonging to each man.

On November 8th at 9:48am Serruya text Christodoulis:

If I could convince the aph Board to fire Vic, and get real bankers, the stock will hit $10 today

Christodoulis responds:

Why the fuck are you offering 110k of LHS put loud on the board well below where I’ve already traded 500k shares today
Moron

Defrancesco chimes in

Fucking retards

Serruya responds to Christodoulis and Defrancesco with more F-bombs and then writes:

Weeds up $1.10 and aph is up all of 21 pennies.
I hope the 2 of you, and Vic, get struck by Lightening

The foul mouth locker room talks is central in most of the text messages with the men calling each other faggots, pathetic and morons and then pat each other on the back when one of the stocks they invest does well. The Vic Serruya is referring to is Vic Neufeld, the former CEO of Aphria that was forced to step down this year. Serruya’s nickname for Defrancesco is “self absorbed 3 foot man” and for Christodoulis it’s “Greek angry bastard”. Defrancesco responded in an email to this reporter that he is also called “little man or five foot nothing” by Serruya. Defrancesco says he is 5 foot 4 1/2 inches tall (But apparently he has lied on his drivers licenses because a public records search for over a dozen Broward County, Fla. traffic infractions says he is 5 feet 6 inches).

On October 17 Serruya texted Christodoulis and Defrancesco:

I’m nominating you two faggots for bankers of the year award.
Aphria,
Kalytera,
bkd,
sythian,
Delavaco,
you guys are fucken legends.

The text message exchanges also show Christodoulis talking about a private raise for MedMen and estimating how well it will sell. Serruya also ask Christodoulis for information about a stock called MedReLeaf and Defrancesco chimes in that Serruya needs the info so he can short the stock. MedReLeaf was acquired by Aurora in May 2018.

On October 3rd Christodoulis writes Serruya with Defrancesco included in the text message chain:

Good Morning Michael,
I see you out there on the LHS this am. If it helps I can buy 1mm @ 85c.
Let me know. Thx

Serruya writes back that he is wrong it’s not him in the trade

Christodoulis responds:

I didn’t think it was you but wanted to make sure I let you know just in case
Hope you’re well

The language in this text could be construed as Christodoulis, the head of a large Canadian broker dealer, willing to effect a wash trade for Serruya to help create liquidity in the stock. Wash trades are a securities violation.

Jimmy Christodoulis and Michael Serruya did not respond to my emails for a request for comment on the content of the text message. Defrancesco would not answer questions sent in email except to respond with another disparaging personal message about this reporter and then sent a second email saying No Comment. According to more than one person who has worked with them on Bay St, the men have been calling in people who work with or have worked with them to have their communication equipment checked to see if they are communicating with this reporter.

Update 9.21.19: Andy Defrancesco says he is 5.4 1/2 inches I previously reported he is 4 foot 8 inches.

Editors Note: Given the understanding and past experience that Serruya or Defrancesco threatens people who speak with journalist I am not publishing the actual text messages I have obtained or disclosing sources that sent them. They have been verified with a third party consultant to confirm that are authentic communications. The investor who wrote the analysis quoted in this story has said publicly he did not end up buying Sol Global stock and was not paid to write the analysis. This is the second story in a series of reporting on the internal documents and communications I received. Teribuhl.com is funded by reader donations please consider supporting independent journalism with a donation today.

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6 Sep

Canadian Regulator Demanded Michael Serruya turn over Defrancesco Communications: $SCU.TO

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 $SCU,TO and the OTC Markets. The subpoena demanded communications from Andy Defrancesco and his wife Catherine along with a broker Defrancesco worked with named Andrew Rudensky.

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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20 Aug

SEC looking at New Names in Barry Honig Pump and Dump Scheme: $MGTI $MBVXQ

The Securities and Exchange Commission is trying to force one of the remaining defendants in the Barry Honig pump and dump scheme to turn over communication or documents that could show others role in the long running scheme. Yesterday the regulator filed a motion to compel against MGT Capital CEO Robert Ladd who refused SEC enforcement attorney Nancy Brown’s demand for documents that relate to Harvey Kesner, Honig’s long time SEC transaction lawyer, and others who invested in the company or are suspected of promoting the company.

Ladd’s attorney Randall Lee of Cooley LLP said Ladd objects to having to produced continued communication with the requested individuals after the SEC filed their initial complaint on September 7, 2018 citing those documents would likely be attorney client privilege. Attorney Harvey Kesner was not named in the original subpoena sent to MGT Capital in September 2016 that sought documents showing Barry Honig and his team were trading as a group of undisclosed affiliates. The news of the SEC investigation into Team Honig was first reported by this journalist at trade publication Growth Capitalist. Kesner has made statements in other court filings and in press reports that he does not think he is under SEC investigation. The new court filing could show otherwise.

The motion also the states the SEC has already collected documents from over 100 individuals and corporations, a move that shows how far reaching the investigation has been. Additionally, the SEC wrote in a letter to Judge Ramos on August 8th that they are currently investigating conduct that is distinct from and occurred after the SEC filed their amended complaint in March 2019. This means more charges could be coming.

Individuals the SEC is currently seeking information about as discovery in the pump and dump ring include:

Tara Guarneri-Ferrara – a partner level attorney that worked with Harvey Kesner at New York-based Sichenzia Ross Ference LLP

Avital Even-Shoshan – an attorney who worked for Harvey Kesner at New York-based Sichenzia Ross Ference LLP. Kesner listed Avital as the managing director of the transfer agent he is believed to have funded called Equity Stock Transfer. She also goes by Avital Perlman.

Jay Kaplowitz – a partner at Sichenzia Ross Ference LLP who was MGT Capital’s deal transaction lawyer. MGT switched counsel after the SEC subpoena was delivered.

Richard Abbe and Josh Silverman of Iroquois Capital – Iroquois was an initial investor in MGT Capital and is believed to have held investments in the company during the alleged stock pump. Iroquois and Josh Silverman were named in the original SEC subpoena to MGT Capital.

Yova Roth, Richard Allison, and George Antonopolous of Hudson Bay Capital – Hudson Bay invested in MGT Capital and is alleged to be part of a scheme to force MabVax to reverse merge into a company Barry Honig controlled.

Drew Ciccarelli – a stock promoter that owned Global Marketing Media who has allegedly been part of paid promotions for Team Honig for years. He owned multiple stock promotion websites (such as www.smallcapleader.com and TSX Ventures LLC) and an investor email database business that was allegedly sold to another promoter Adam Garcia of awesomestocks.com after he saw too many of his clients get charged by the SEC or DOJ, according to a person familiar with Ciccarelli. SmallCapLeader.com and TSX Ventures LLC are named in the discovery request by the SEC. @alldaytrader is Ciccarelli’s current twitter account.

There are additional names the SEC wants info on that Ladd says he likely doesn’t know which you can see in this document. Ladd’s attorney argues that the SEC is actually abusing discovery with these request because they fall outside a statue of limitations.

I was first to report defendants in the Honig Pump and Dump case along with possible others are part of a microcap criminal investigation by the Northern California Department of Justice. Honig recently settled with the SEC and agreed to a bar on penny stock investing. It’s believed he is cooperating with the SEC now as they battle the remaining defendants. Honig could also likely turn evidence over on any of the people named in the recent SEC discovery request.

Update: 6.20.10 8:30pm: After my story ran Ladd’s attorney wrote Judge Ramos a letter calling out the SEC for more questionable tactics. While this publication agrees the SEC moves are questionable as a matter of law at least the SEC is making a rare move to inform the public about others that could be involved in the securities fraud case.

Editors Note: Harvey Kesner has sued me and Bill Alpert at Barron’s for our individual reporting on Kesner’s possible role in the Honig securities fraud scheme in Southern Florida district court. I will be fighting the suit pro se; meaning I will be representing myself. I firmly believe all of my reporting on Kesner is stated with accurate facts or opinion. I believe Kesner’s move is another attempt to get access to my sourcing in the government investigation of his clients or him.

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7 Aug

Andy Defrancesco Secret Deals-Promoter Payoffs, Verano Shares pledged : $APHA $SOLCF $VRNO

This story has been updated with news on Sol Global’s Verano IPO shares

Cannabis company Sol Global Investments ($SOL.cn $SOLCF) posted positive net income in their year end financials but failed to discloses key details about one of their most valuable assets which is their shares of Verano. The Toronto based company is run by controversial investor Andy Defrancesco in the role of Chairman and Chief Investment Officer and his side kick a former Florida lobbyist, Brady Cobb, who serves as CEO.

On July 8th Sol Global announced it had received a $37.5 million U.S. dollars private placement investment made as a senior secured loan with 6% interest and a two year pay back. At the time of the announcement the stock was trading at $1.55. Over the past six months the stock has been on a decline after a one day high of $3.02 on March 21st. Sol Global said in filing with the Canadian Stock Exchange that the transaction was arms length, which means Andy and insiders of the company didn’t personally loan the money to company. There was a lot of market speculation on who would give a fledgling cannabis company who was short on cash that much money. According to a person familiar with the company who had direct knowledge of the investment the money came with a catch. Defrancesco had to pledge the Verano shares as secured collateral if Sol Global can’t payback the loan in two years. The firm lending the money is suspected to be a Canada based firm and there is market chatter that MM Capital is the lender.

On October 23 2018 Sol Global made a $88 million investment in Verano, a private cannabis company, in deal that was intended for Verano to buy Sol Global’s Florida medical cannabis farm called 3 Boys Farms. According to the Florida office of Medical Marijuana, 3 Boys Farm had not even secured its full license to sell and distribute the cannabis at the time of the announcement. That deal fell apart after Defrancesco was hit with negative press coverage in December challenging his business ethics and undisclosed insider dealings. Then on March 11, 2019, Harvest Health & Recreation Inc.(CSE: HARV) announced its intention to acquire Verano in an all share transaction for a purchase price approximating USD$850,000,000 which was based on a Harvest share price of CAD$8.79 per share. Sol Global’s class B private shares in Verano have a good chance of becoming very valuable once the Harvest deal closed. The company told investors they thought the book value per share of their Verano investment was $4 CAD.

In a series of text messages I obtained between Andy and an investor in Verano/Harvest Andy was worried the men running Harvest and Verano were going to try to cut him out of the merger shares. The texts show Andy was asked to stop tweeting that he had a role in the Harvest/Verano deal. In fact the Harvest/Verano leadership wasn’t communicating with him and wouldn’t let him issue a press release clarifying for investors that 3 Boys Farm couldn’t be sold to Verano now; because Florida’s medical marijuana rules only allow a company to own one cannabis farm license and Harvest already owned one. Eventually the investor helped Andy get permission to communicate how Sol Global was effected by the deal.

Sol Global’s year end 2018 income was negative $19,343,230 million. For the year ending March 31, 2019 Sol Global reported a positive net income of $71,245,897 million U.S. dollars, which was a significant improvement.The largest bucket of revenue came from Sol’s gain on the sale of the LatAM assets to Aphria with a whopping earn out of $150,616,833 million U.S. Dollars.

Defrancesco was caught up in controversy this winter when a short seller report detailed how he made undisclosed millions off leading the sale of LatAM cannabis licenses to Aphria ($APHA) for inflated values. He is being personally sued for securities fraud in the Southern District of New York in a class action lawsuit filed by main street shareholders of Aphria. Court filings show Andy has been avoiding service of the Aphria lawsuit at his Miami home and Florida office. Defrancesco is currently working in the U.S. off a green card and hasn’t traveled outside the US recently over concerns he would not be let back in. Sol Global’s year end financials also failed to disclose it’s chairman and chief investing officer is subject to a lawsuit that alleges he used his influence of Sol Global to make the questionable deal where Aphria paid around $200 million for the LatAM cannabis assets. A few months after the short seller report came out Aphria wrote down one of the assets in the report by $50 million. The stock tumbled on the news.

The Short Seller report written by Nate Anderson of Hindenburg Research and Gabe Grego Quintessential Capital Management caused Defrancesco to start personal attacks on the fund managers. Grego’s website was even hit was a DDOS attack causing it to crash. Defrancesco decided he need a black ops Public Relationship group to go to work drumming up counter press reports. That firm is called AWM Group. In their recent year end financials Sol Global admits it spent $3.6 million CAD on PR and consulting to “counter fraudulent short seller reports”. There were no lawsuits filed accusing the short sellers of fraud by the company and Aphria did not offer a point by point rebuttal to the report as publicly promised. Additionally, Defrancesco was working behind the scenes to get a cannabis analyst and a cannabis twitter stock jockey to write favorable coverage of Aphria and negative coverage on individuals who negatively reported on Defrancesco or companies he is involved in.

Twitter stock trader, that goes by the name Johnny Lambo, met with Defrancesco on King street in Toronto. According to how Lambo tells it Defrancesco wined and dinned him and offered to give him early insight into the company if he tweeted favorable news on Andy’s investment. When Lambo was out one night with another Bay street market player, interviewed by this reporter, Lambo said “Defrancesco also has this guy at Grizzle do coverage his way.” Lambo’s statement about Grizzle was made in justification of why he’s backing Defrancesco. His twitter handle is @lambojohnny and his real name is John Mastromattei. Lambo also told the Bay street market player he was given direction to tweet disparaging or fake news about this reporter.

Grizzle is a Canada based research firm that publishes reports on Tech and Cannabis with the mantra of “The language of new money”. The head of research is a man named Scott Willis who claims he is a certified financial analyst. Willis ran reports naming Aphria’s Vic Neufeld as the most trusted CEO. He published a multi-page report on November 1st 2018 giving Aphria a $200 price target and an individualized review of the LatAM assets with harvest production estimates and construction cost per gram. Grizzle immediately called the Hindenburg report a hit piece and tried to justify the Aphria share price the day after the short seller report became public.

The Grizzle stock price estimate helped prop up Aphria stock while Sol Global was selling their Aphria shares received from the LatAm sale. Sol Global booked profits in the triple digit millions off Aphria stock sales. The management review of Aphria’s CEO Vic Neufeld as a trusted public company executive was designed to counter a previous negative report about Neufeld’s role in a company Aphria was going to buy called Nuuvera. Nuuvera was another Defrancesco insider deal. A footnote to the report states Grizzle employees own Aphria shares. But no where in the Grizzle reports does it state Scott Willis was getting paid by Defrancesco or one of his many companies he controls to write the reports. Vic Neufeld was eventually removed from Aphria.

Andy Defrancesco celebrating with Vic Neufeld December 2017

Grizzle had also agreed to center their coverage on Aphria and turned down at least one other public cannabis company, according to an email sent by Scott Willis and seen by this reporter. Willis met the CEO of the company during a marijuana investor conference. When the CEO had a one on one sit down with Willis asking him if Grizzle could also cover his company the CEO was surprised by Scott’s demand that he get 50,000 shares of the company, according to an interview with this reporter. The 50,000 shares to pay for research was also written in an email between Willis and the CEO and seen by this reporter. Shortly after the meeting Willis wrote the CEO back saying he was going to have to pass on covering his company.

Willis wrote in August 2018, “I talked with my partner about your firm after our meeting and he agrees you guys have some great things going, but we will have to circle back with you in a month or two. We are currently working on a mandate for one of the big 3 producers..” The big 3 producer is believed to Aphria according to people familiar with the arrangement. The CEO says he never heard from Willis after that email and Grizzle never covered his company.

Companies can pay for research as long as the payment is disclosed by the company. In the U.S. SEC rules say a person writing and publishing a stock research report would have to disclose they were paid to write the report as a promoter. Grizzle adds a disclaimer to their website, that can be seen around the world, that their reports are only intended for Canada residents. It’s unclear if Scott Willis is a U.S. or Canadian resident.

Request for comment about the alleged Grizzle kickback sent to Andy’s Quinn Emanuel attorney was not returned for comment.

Yesterday David Milstead at the Globe & Mail was first to report that Defrancesco has hired a white collar criminal lawyer from big law Quinn Emanuel. He is a 36-year old Harvard grad named Alex Spiro who formerly worked in the Manhattan prosecutors office. Spiro admitted in the Globe & Mail story that he is working with the SEC on behalf of Defrancesco to respond to a recent subpoena in another non-cannabis company, Cool Holdings ($AWSM), that was an alleged pump and dump run by Barry Honig with the help of Defrancesco. I previous reported on how Defrancesco and Honig worked with broker dealer Laidlaw to allegedly off load $AWSM shares to Laidlaw’s main street clients.

I asked attorney Spiro today if he will also be representing Defrancesco in the Aphria lawsuit and he responded yes so it looks like Andy has finally stopped running from service.

Since Sol Global’s positive year end results have come out the stock has not traded above $2. The company will hold an earnings call on August 8th at 4pm to answer investor questions. The dial in number is: U.S. Toll-Free Number: (888) 390 0546

Update 2.17.21: Andy Defrancesco’s Sol Global Investment is set to clear millions off the sale of shares in Verano who went public today and closed three times its opening valuation at $30. Except a tough guy Canadian hedge fund called MMCap, who lent Sol Global $50 million CAD in the summer of 2019, says they now own 65% of those valuable Verano shares. The shares pledged as collateral for the loan was first reported by this publication two years ago. But Sol Global’s former CEO Brady Cobb and its current interim CEO Andy Defrancesco have been cagey about mentioning the pledged shares when discussing Sol Global’s valuation with investors. On February 7th Sol Global sued MMCap in an effort to stop the hedge fund from claiming the Verano shares. The lawsuit is filed in New York state court.

Update 2.27.21: I am reporting for Cannabis Law Report on new litigation that shines a light on possible stock fraud by Andy Defrancesco for making false and misleading statements about the ownership of the Verano shares in social media and in public financials with the CSE.

9 Comments
2 Aug

Laidlaw assisted Barry Honig in Secret stock sales Pre-P&D of U.S. Gold: $USAU

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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18 Jun

SEC Pump & Dump Case leads to Barry Honig Banned from Penny Stocks

Microcap investor and promoter Barry C. Honig has agreed to be banned from the business of investing in and financing publicly traded small cap companies. On Monday June 17, 2019 the Securities and Exchange Commission asked U.S. District court Judge Ramos to approve a settlement with Honig and his investment fund GRQ Consultants. In September 2018 the regulator brought an enforcement lawsuit in the Southern District of New York against Honig for his role as the leader of a pump and dump securities fraud ring dating back to 2013 that involved at least nine other individuals. Honig agreed to restrictions on his behavior relating to the stock market but not to the amount of a financial penalty. The disgorgement and penalty phase of the settlement will be litigated down the road. News of Honig being under SEC investigation was first reported by me in 2016 at trade publication Growth Capitalist when I learned about an SEC subpoena naming Honig and others charged in the SEC case.

The lack of a determined financial penalty at settlement is not unique, even as we have seen Honig’s other co-defendants like billionaire Philip Frost agree to pay $5.52 million when he announced his SEC settlement. Honig’s long time investing partner Mark Groussman agreed to pay $1.38 when he settled with the SEC in February. However, two other co-defendants agreed to similar terms that calculate monetary damages at a latter date.

SEC settlements are filled with confusing legal language that can be unclear to anyone who isn’t a lawyer and the regulator is usually not keen to explain them further. I asked a former SEC enforcement lawyer, who is now experienced in litigating against the SEC as a white-collar defense lawyer, to review the settlement. The lawyer told this reporter, “This is an interesting injunction because the SEC uses conduct-based injunctions or bars. It is also a bifurcated settlement. That just means that the settlement only pertains to the liability and not the monetary side (disgorgement and civil penalties). You typically bifurcate when it is a slam dunk on the liability so it saves money to only fight about the money side of things. I suspect they are asking for an outrageous amount of money.”

The SEC claimed Team Honig executed a $27 million scheme. The most the SEC has ever gotten an individual defendant to pay is $20 million in the Elon Musk case. It’s unclear how much it would take for a SEC fine to make a dent in Honig’s personal finances. He currently lives in an $8.9 million water front home in Boca Raton Florida, sends his children to an expensive private school and travels on private planes.

The SEC settlement also bars Honig from promoting penny stocks or trying to control the actions of a director or officer of a public company.

The settlement doesn’t mean Honig cannot try to continue making money from prior investments. One of those investments, PolarityTE, is precluded from the settlement, and is considered by many observers to be a current pump and dump.

Journalist Chris Carey of Sharesleuth.com pointed out to his twitter followers yesterday that the penny stock bar Honig agreed to does not effect his stock ownership of PolarityTE ($PTE) and Americas Silver Corp ($USA.TO). Carey said, Honig’s last disclosed ownership in both stocks is higher than 5% so Honig would have had to sell stock in those companies to comply with the settlement and there is no public record of him doing that.

Carey has been warning main street investors about Honig by reporting on problems with Honig’s public disclosure of actual share ownership. In March 2018 he wrote a detailed story, with journalist Jim McNair, showing Honig’s team used promoters with fake names who did not disclose they had been paid to promote stocks Honig and his associates invested in.

The Sharesleuth.com reporting has now shown up in a civil malpractice suit against Honig’s deal lawyer Harvey Kesner and was detailed in the SEC’s amended complaint against Honig filed this year. The amended complaint added paragraphs with more extensive detail about how Team Honig used the undisclosed promotional stories, by John Ford, John O’Rourke (as Wall Street Adviser) and “Writer E’” who appears to be Peter Epstein. Epstein’s activities were exclusively reported by Carey last year before the SEC filed their lawsuit.

Last month I reported SEC attorney Nancy Brown admitted at a hearing over discovery that the Northern California DOJ is running a parallel investigation to the Honig SEC case. An attorney for Honig’s co-defendant, John O’Rourke, even said one of the defendants in the SEC case is currently acting as a whistleblower for the DOJ and they expected the DOJ to bring an indictment soon. The Street is now left guessing who will be charged by the DOJ and who is making a deal. The SEC settlement has a paragraph that says Honig can’t deny the SEC’s allegations but he also doesn’t admit to them, which could shield him from instant criminal liability. That means the DOJ has to build a case with charges they think a jury can convict beyond reasonable doubt.

“Everything else is subject to the qualification in the first paragraph of the settlement “without admitting or denying the allegations” — It can’t be used as the basis for a criminal case because it is not an admission. However, the SEC can give the DOJ all of the information they have which would likely be enough for the DOJ to bring a criminal case,” according to a former SEC enforcement attorney who reviewed the settlement.

The San Francisco DOJ has been building a case against Honig and people who worked with him since at least 2014. I was first to report on two criminal plea deals obtained by the SF DOJ that named Barry Honig for his role in the pump and dump scheme of YesDTC. The company’s CEO, Joe Noel, pled guilty to the scheme but Noel’s court records have been sealed so we do not know whether he has been sentenced or is still working with the FBI.

A L.A. man named Imran Husain was also arrested in the case and named Honig in his plea agreement. I first reported on Husain for trade publication Growth Capitalist in May 2016 when his partner in the scheme was charged by the SEC. That partner was a well-known microcap deal lawyer named Gregg Jaclin. Jaclin was later arrested in 2017 by the SF DOJ adding criminal charges to the actions detailed in the SEC case. Attorney Jaclin said he would fight the case to trial but with new filings sealed, the status of the case is unclear. With recent documents in the Husain and Jaclin case sealed by the DOJ, the question is whether both men could be viable witnesses for the DOJ in a case against Honig. On June 7th the DOJ finally filled a request to set a sentencing date for Husain in October. The motion filed in federal court said Husain had been cooperating on another case, on which the DOJ was working that involved Gregg Jaclin. Since it was alleged that Jaclin sold shell companies to Honig( in order for Honig to get restricted stock unrestricted to aid in the pump part of the YesDTC scheme), flipping Jaclin could be key to the DOJ’s case against Honig and his associates.

4 Comments
7 Jun

New Emails show attorney Harvey Kesner aided Defrancesco in Questionable Cannabis stock Deal: $APHA $SOLCF

Just days after Canadian cannabis company Aphria announced it was paying an exorbitant price for undeveloped marijuana farms in Jamaica and South America from Scythian Biosciences an insider, Andy DeFrancesco, was using Barry Honig’s deal lawyer to move hidden shares within his family. I am reporting for Cannabis Law Report today that new emails written by attorney Harvey Kesner on behalf of the DeFrancescos could show how the insiders skirt beneficial ownership disclosure rules. I reported last week, DeFrancesco’s alleged hidden stock ownership is at the heart of a new securities fraud lawsuit filed against him and his band of sophisticated bad actors by Aphria main street investors.

According to two people familiar with the transaction, some of Andy’s Canadian friends who benefited with him on the deal are: Canadian millionaire Michael Serruya, Marvin Igelman, Lloyd Tomlinson and Clifford Starke. The names of investors on the deal, that ran through a private equity firm Andy controls called the Delavaco Group, is redacted in documents filed with Canadian regulators. The only public details shareholders get to see is how many millions in shares Scythian paid the LLC Andy set up for the assets. You can see Team DeFrancesco celebrating in February 2018 with Andy in Jamaica at a hotspot called Prendy’s On the Beach after they closed on the private cannabis license deal. The photo was posted by Michael Serruya on his private Instagram account.

My story at Cannabis Law Report details a Scythian stock transaction by Andy’s sister Andrea DeFrancesco (a flight attendant) and his wife Catherine DeFrancesco (a yoga studio owner) that appears to show Andy controlling the shares in an off-market stock sale between family on July 23, 2018. This is six days after a C$193 million deal is announce by Aphria and Scythian, which Andy is believed to have significantly benefit from at the expense of Aphria shareholders. When the U.S. broker dealer saw attorney Harvey Kesner was pushing to get the shares through the U.S. clearing system call the DTC the transaction’s legitimacy was challenged. Harvey Kesner was also the SEC reporting lawyer for Scythian during this time, which could create a conflict of interest for the New York law firm, Sichenzia Ross Ference Kesner LLP, that use to bear his name. Read here to get a behind the scenes glimpse of how parts of the alleged securities fraud was run.

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