The Securities Exchange Commission (SEC) recently obtained judgments against two former hemp company executives for fraudulent offerings. According to the SEC complaint, Frank Barone and Kirill Chumenko, both former senior vice presidents of sales and marketing at CanaFarma Hemp Products Corp., misrepresented the company while raising millions of dollars.
The SEC in October charged two other CanaFarma executives, Vitaly Fargesen, CanaFarma senior vice president of strategic planning, and Igor Palatnik, the company’s senior vice president of product acquisition, of defrauding investors out of at least $4 million. Fargesen and Palatnik pleaded guilty later that month to two counts of fraud related to the scheme.
The complaint against Barone and Chumenko alleges that CanaFarma executives made misrepresentations to investors, including claims that the company was fully integrated and was processing hemp from its own farm when in fact it had not processed any of its own hemp, and its products used hemp supplied by third parties. The amended complaint alleges that Barone and Chumenko, at the direction of Fargesen, made unsupported changes to CanaFarma’s financial model to cover up payments to Fargesen and Palatnik and that Fargesen and Palatnik – in some instances with the assistance of Barone and Chumenko – misappropriated at least $4 million and used the funds either for their personal use or for purposes unrelated to CanaFarma.
The judgments against Barone and Chumenko permanently enjoin them from violating sections of federal securities laws and bar the pair from serving as an officer or director of a public company and from participating in penny stock offerings, and order each to pay disgorgement, prejudgment interest, and civil penalties. The length of the bars and the amounts of the monetary remedies will be determined by a federal court at a later date.
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