The Securities and Exchange Commission has filed fraud charges against individuals of Fusion Pharm, a company that makes containers for growing cannabis, over a scheme involving false financial filings and illegal stock sales, according to a press release from the oversight body.
The investigation found that CEO Scott Dittman and his brother-in-law William Sears hired Cliffe Bodden to help create fraudulent corporate documents that enabled the company to issue common stock to three other companies controlled by Sears, who sold the restricted stock into the market — hiding the companies’ link to Fusion Pharm — ultimately making $12.2 million in profit. Sears transferred some of the funds back to Fusion Pharm who falsely reported the income as revenue from PharmPod sales, and issued financial statements that mislead investors due to the fraudulent reporting.
“Sears and Dittman misled investors by recording and trumpeting revenues for purported sales of PharmPods when they were really just round-tripping money from illegal stock sales by hidden affiliates,” Julie K. Lutz, director of the SEC’s Denver Regional Office, said in the release.
The trio agreed to settle with the SEC, who will set monetary sanctions against Fusion Pharm and Sears’ three other companies. All three men are also barred from participating in any future penny stock offerings. Sears and Dittman are permanently banned from holding an office or director position from any company. Dittman is no longer allowed to appear or practice before the SEC as an accountant.
Sears and Dittman have also been charged with crimes related to the fraud by the U.S. Attorney’s Office for the District of Colorado.
Get daily cannabis business news updates. Subscribe
End