Two former executives of CanaFarma Hemp Products Corp. have been implicated in a consent judgment by the U.S. Securities and Exchange Commission in a $15 million fraud case. The duo were initially charged for misappropriating at least $4 million in investor funds in 2021.
The new development builds on the charges filed in 2021 by the SEC alleging that the Canadian start-up’s senior vice presidents of sales and marketing, Frank V. Barone and Kirill Chumenko, along with co-founders Vitaly Fargesen and Igor Palatnik, engaged in a fraud spanning over 2 years to make personal gains.
What is the CanaFarma fraud?
As per the SEC’s complaint, the executives of the Canadian startup, CanaFarma which is a hemp company with offices in Vancouver and New York City, engaged in a sophisticated fraud to obtain money from investors. Its co-founders Vitaly Fargesen and Igor Palatnik raised millions of dollars by making misrepresentations to investors, including claims that CanaFarma was a fully integrated company, as per the SEC release.
Read also:Unraveling The Mystery How Old Is Paul Walker A Tribute To A Timeless Star
They also claimed that their company processed hemp from its farm. However, the company never processed any of its hemp, and its products used hemp supplied by third parties.
The complaint further alleges that the executives misstated historical revenue numbers and included baseless projections about future revenues, to mislead investors.
Further, Fargesen and Palatnik were accused of misappropriating at least $4 million and using the funds for their personal use and purposes unrelated to CanaFarma. The SEC’s amended complaint further alleges that it was Fargesen and Palatnik who misled the investors that Barone and Chumenko, at the direction of Fargesen, made unsupported changes to CanaFarma’s finances to disguise the illicit payments made to Fargesen and Palatnik. The two are accused of using the fund for personal use or purposes unrelated to CanaFarma.
“Investors paid as much as $0.50 for each share of CanaFarma stock they bought through defendants’ securities offerings. Today, those shares are worth a fraction of what these investors paid,” the complaint stated.
New Charges on The Four Accused
Previously, Vitaly Fargesen, and Igor Palatnik, had each pleaded guilty to one count of conspiring to commit wire fraud and one count of conspiring to commit securities fraud.
In addition to the previously announced charges against CanaFarma, Fargesen, and Palatnik, the amended complaint now charges Barone and Chumenko with violations of Sections 17(a)(1) and (3) of the Securities Act of 1933 (“Securities Act”) along with the Section 10(b) of the Securities Exchange Act of 1934 (“Exchange Act”).
Read also:Discovering The World Of Mkpoint Movies A Cinematic Journey
Since it is a consent judgment, it means that the defendants had agreed to the judgment without admitting or denying the allegations. Both the old and the new combined charges carry a maximum sentence of 10 years in prison. Both Fargesen and Palatnik are expected to be sentenced in January.
Meanwhile, Barone and Chumenko have been barred from serving as an officer or directors of a public company and from participating in penny stock offerings. They have also been ordered to pay, disgorgement, civil penalties, and prejudgment interest.
