Cannabis Execs Charged with Defrauding Investors of $4M

In a federal indictment unsealed Tuesday, a pair of executives for New Jersey cannabis company CanaFarma Corp. are accused of defrauding investors out of at least $4 million. Vitaly Fargesen, CanaFarma senior vice president of strategic planning, and Igor Palatnik, the company’s senior vice president of product acquisition, are facing multiple counts of securities fraud and wire fraud.

In a statement, Manhattan U.S. Attorney Audrey Strauss said the pair “presented themselves as entrepreneurs developing a new business for an emerging industry.”

“But, as alleged, Fargesen and Palatnik were just using the trappings of a start-up to run an old-time scam: lying to investors to take money for themselves.”—Strauss in a press release

The charges are based on the duo allegedly soliciting funds based upon false and misleading representations, failing to invest investor’s funds as promised, manipulating the public stock price of CanaFarma, and secretly misappropriating millions of dollars of company funds, investigators said in a statement. The government alleges the defendants solicited at least $14 million in funds and misappropriated at least $4 million for their own benefit.

“The defendants, as alleged, lured investors to CanaFarma by falsely representing the company’s financials, manipulating their stock price, and misappropriating millions for their personal benefit,” Federal Bureau of Investigation Director-in-Charge Michael J. Driscoll said in a statement. “Just as a reminder to anyone who thinks they can manipulate people’s investments in this way—that’s simply not the case.”

Fargesen and Palatnik are each charged with one count of conspiracy to commit securities fraud, which carries a maximum sentence of five years in prison, one count of securities fraud, which carries a maximum sentence of 20 years in prison, one count of conspiracy to commit wire fraud, which carries a maximum sentence of 20 years in prison, and one count of wire fraud, which carries a maximum sentence of 20 years in prison. The case is being overseen by the Securities and Commodities Fraud Task Force.