2021-01-01 SEC Press press_release 61 KB 2,391 chars

SEC Charges Hemp Company and Co-Founders With Fraud

Release
2021-208
Caption
Securities and Exchange Commission v. Canafarma Hemp Products Corp., et al.
Source JSON
summary

The SEC charged CanaFarma Hemp Products Corp. and its co-founders Vitaly Fargesen and Igor Palatnik with defrauding investors of $15 million by falsely claiming the company was a fully integrated hemp processor and inflating financial projections, while misappropriating at least $4 million for personal use, leading to civil SEC action and parallel criminal charges.

paragraph

The SEC alleges that CanaFarma Hemp Products Corp. and its co-founders, Vitaly Fargesen and Igor Palatnik, fraudulently raised approximately $15 million from investors between 2019 and 2020 by making false claims about being a fully integrated hemp processor and fabricating revenue figures. The defendants misappropriated at least $4 million of investor funds for personal use and unrelated purposes, while also presenting baseless financial projections. The SEC has filed civil charges in U.S. District Court for the Southern District of New York, seeking injunctions, disgorgement, prejudgment interest, civil penalties, and officer-and-director bans, while the U.S. Attorney’s Office has brought parallel criminal charges against Fargesen and Palatnik.

narrative

The SEC charged CanaFarma Hemp Products Corp. and its co-founders, Vitaly Fargesen and Igor Palatnik, with defrauding investors of approximately $15 million between 2019 and 2020 through a series of material misrepresentations. The defendants falsely portrayed CanaFarma as a fully integrated hemp company that processed its own hemp, when in reality it relied entirely on third-party suppliers and had not processed any hemp itself. They also fabricated historical revenue numbers and presented unrealistic future financial projections to lure investors. At least $4 million of the raised funds was misappropriated for personal use, including expenses unrelated to the company’s operations. The SEC’s complaint, filed in U.S. District Court for the Southern District of New York, alleges violations of federal antifraud securities laws and seeks permanent injunctions, disgorgement with prejudgment interest, civil penalties, and bars against serving as officers or directors or participating in penny stock offerings. In a parallel criminal action, the U.S. Attorney’s Office for the Southern District of New York has filed charges against Fargesen and Palatnik. The SEC’s investigation, conducted with assistance from the FBI and the U.S. Attorney’s Office, was led by John Lehmann, Lee A. Greenwood, and Thomas P. Smith Jr., with litigation to be handled by Lehmann and Greenwood.

Enriched metadata

Scheme
pre-ipo-fraud (95%)
Court
Southern District of New York
Victim loss
$15,000,000
Classified pre-ipo-fraud(confidence 95%). EDGAR detection: forms S-1/Form D/1-A· recall 72% / precision 8%. detection rule →
Statutes
15 U.S.C. § 77q(a)15 U.S.C. § 78j(b)
Parties
canafarma hemp products corp.Richard R. Bestsec litigationsec's new york regional officeSecurities and Exchange Commissionthird partiesU.S. Attorney's Office For The Southern District Of New York
Keywords
sechemphemp companyinvestorsfargesen palatnikcompanycanafarmanewco-foundersfundsfargesenpalatnikcompany co-foundersco-founders fraudhemp products

Extracted insights

Dollar amounts 2
  • $15.00M $15 million $10M–$100M
  • $4.00M $4 million $1M–$10M
Entities 8
  • company canafarma hemp products corp.
  • person Richard R. Best
  • agency sec litigation
  • agency sec's new york regional office
  • agency Securities and Exchange Commission
  • person third parties
  • agency U.S. Attorney's Office For The Southern District Of New York
  • court u.s. district court for the southern district of new york
Triples 12
  • SEC charged CanaFarma Hemp Products Corp. and co-founders Vitaly Fargesen and Igor Palatnik
  • CanaFarma Hemp Products Corp. raised approximately $15 million from investors
  • Vitaly Fargesen and Igor Palatnik misappropriated at least $4 million
  • CanaFarma Hemp Products Corp. made misrepresentations about being a fully integrated company processing hemp from its own farm
  • Defendants misstated historical revenue numbers and included baseless projections
  • SEC filed complaint in U.S. District Court for the Southern District of New York
  • Defendants violated antifraud provisions of federal securities laws
  • U.S. Attorney's Office for the Southern District of New York announced criminal charges against Vitaly Fargesen and Igor Palatnik
  • Richard R. Best is Director of SEC's New York Regional Office
  • John Lehmann and Lee A. Greenwood will lead SEC litigation
  • CanaFarma Hemp Products Corp. had offices in Vancouver and New York City
  • CanaFarma Hemp Products Corp. used hemp supplied by third parties
View original SEC press releasesec.gov
Extracted body text (2,391c) 
The Securities and Exchange Commission today charged CanaFarma Hemp Products Corp. and its co-founders with fraudulently raising approximately $15 million from investors, and misappropriating a significant portion of the investor funds for personal use and other unrelated purposes. The SEC’s complaint alleges that in 2019 and 2020, CanaFarma, a Canadian startup hemp company with offices in Vancouver and New York City, and its co-founders Vitaly Fargesen and Igor Palatnik raised millions of dollars from investors. According to the complaint, while raising these funds, the defendants made misrepresentations to investors, including claims that CanaFarma was a fully integrated company that was processing hemp from its own farm when in fact it had not processed any of this hemp and its products used hemp supplied by third parties. The complaint also alleges that financial information provided to investors misstated historical revenue numbers and included baseless projections about future revenues. In addition, according to the complaint, Fargesen and Palatnik misappropriated at least $4 million and used the funds for their personal use and purposes unrelated to CanaFarma. “As alleged in our complaint, the defendants pitched investors with falsehoods about a fully integrated hemp company with rosy financial projections” said Richard R. Best, Director of the SEC’s New York Regional Office. “We will relentlessly pursue those who deceive investors and misappropriate and misuse their funds.” The SEC’s complaint, which was filed in U.S. District Court for the Southern District of New York, charges CanaFarma, Fargesen, and Palatnik with violating antifraud provisions of the federal securities laws. The SEC seeks permanent injunctions, disgorgement and prejudgment interest, and civil penalties against the defendants, and also seeks officer-and-director and penny stock bars against them. In a parallel action, the U.S. Attorney’s Office for the Southern District of New York announced criminal charges against Fargesen and Palatnik. The SEC’s investigation was conducted by John Lehmann, Lee A. Greenwood, and Thomas P. Smith Jr., and was supervised by Sanjay Wadhwa. The litigation will be led by Mr. Lehmann and Mr. Greenwood. The SEC appreciates the assistance of the U.S. Attorney’s Office for the Southern District of New York and the Federal Bureau of Investigation.
OCR text (2,391c · html-text · 99% conf) 
The Securities and Exchange Commission today charged CanaFarma Hemp Products Corp. and its co-founders with fraudulently raising approximately $15 million from investors, and misappropriating a significant portion of the investor funds for personal use and other unrelated purposes. The SEC’s complaint alleges that in 2019 and 2020, CanaFarma, a Canadian startup hemp company with offices in Vancouver and New York City, and its co-founders Vitaly Fargesen and Igor Palatnik raised millions of dollars from investors. According to the complaint, while raising these funds, the defendants made misrepresentations to investors, including claims that CanaFarma was a fully integrated company that was processing hemp from its own farm when in fact it had not processed any of this hemp and its products used hemp supplied by third parties. The complaint also alleges that financial information provided to investors misstated historical revenue numbers and included baseless projections about future revenues. In addition, according to the complaint, Fargesen and Palatnik misappropriated at least $4 million and used the funds for their personal use and purposes unrelated to CanaFarma. “As alleged in our complaint, the defendants pitched investors with falsehoods about a fully integrated hemp company with rosy financial projections” said Richard R. Best, Director of the SEC’s New York Regional Office. “We will relentlessly pursue those who deceive investors and misappropriate and misuse their funds.” The SEC’s complaint, which was filed in U.S. District Court for the Southern District of New York, charges CanaFarma, Fargesen, and Palatnik with violating antifraud provisions of the federal securities laws. The SEC seeks permanent injunctions, disgorgement and prejudgment interest, and civil penalties against the defendants, and also seeks officer-and-director and penny stock bars against them. In a parallel action, the U.S. Attorney’s Office for the Southern District of New York announced criminal charges against Fargesen and Palatnik. The SEC’s investigation was conducted by John Lehmann, Lee A. Greenwood, and Thomas P. Smith Jr., and was supervised by Sanjay Wadhwa. The litigation will be led by Mr. Lehmann and Mr. Greenwood. The SEC appreciates the assistance of the U.S. Attorney’s Office for the Southern District of New York and the Federal Bureau of Investigation.