Securities Regulation Daily Wrap Up, FRAUD AND MANIPULATION—C.D. Cal.: Cannabis principal’s vape pen business an alleged Ponzi scheme, (Apr 7, 2022)
Organizations Mentioned:Brutus California Ventures Corp. | CB Holding Group Corp. | Caesarbrutus LLC
The principal did not disclose two previous securities felony convictions to investors and, operating a sham business, took at least $32 million from them for personal expenses.
The SEC filed a complaint in California’s Central District Court against a recidivist principal, his stepdaughter and three sham companies he set up that misappropriated more than $32 million from at least 40 investors in what the Commission calls a Ponzi scheme. The SEC requests a permanent injunction, disgorgement of ill-gotten gains, prejudgment interest, and a civil monetary penalty, together with a penny stock trading bar for all defendants and an officer/director bar for the principal (SEC v. Bunevacz, April 5, 2022).
Sham vape pen business. The complaint alleged that from April 2017 to September 2019, the principal set up three companies which extracted the $32-plus million from the investors through promissory note purchases. During solicitation, he falsely told them the companies could generate significant profits by producing and selling cannabis products, particularly vape pens containing CBD oil. Additionally, he grossly misstated his experience in the cannabis industry and, moreover, failed to tell the investors he pleaded guilty to two felony securities charges in California in 2017, but did tell one investor he had no criminal history. The companies were, in fact, shams and the principal used the raised funds to pay his gambling and credit card debts.
According to the Commission, the above-mentioned fraud allegations violate Exchange Act Sections 10(b)/Rule 10b-5 and Securities Act Section 17(a). Also, Securities Act Sections 5(a) and 5(c) were violated because the promissory notes were not registered.
Th case is No. 2:22-cv-02284.
Attorneys: Kathryn C. Wanner for the SEC.
Companies: Caesarbrutus LLC; CB Holding Group Corp.; Brutus California Ventures Corp.
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