SEC charges hemp company with misrepresentations
On October 5, the SEC filed a civil fraud complaint against a Canadian-based hemp company and its two co-founders (collectively, “defendants”), alleging that they fraudulently raised over $15 million from investors, and that they misappropriated a significant portion of the funds for personal and other unrelated uses. The SEC claims that the defendants made misrepresentations, including that the company was a fully integrated company that was processing hemp from its own farm. However, the SEC alleges that the company did not process any of its hemp, instead using products supplied by third parties. The complaint further contends that the financial information given to investors “misstated historical revenue numbers and included baseless projections about future revenue that were unsupported by the [c]ompany’s own internal forecasts.”
The SEC’s complaint, which was filed in U.S. District Court for the Southern District of New York, charges the defendants with violating antifraud provisions of federal securities laws. The complaint seeks a permanent injunction against the defendants, disgorgement with prejudgment interest, civil penalties, and an officer and director and penny stock ban against the co-founders. In addition, the U.S. Attorney’s Office for the Southern District of New York filed criminal charges against the co-founders in a parallel action.