The pair are also accused of manipulating the companys stock price for their own benefit and fraudulently inflating the firms financials.
A pair of cannabis industry executives defrauded investors of at least $4 million, according to a federal grand jury indictment unsealed Tuesday, which claims the two trotted out a phony CEO who didnt actually make any business decisions, manipulated the companys stock price for their own benefit, fraudulently inflated the firms financials, and blew a six-figure sum on a luxury vehicle rather than the IPO roadshow for which it was originally intended.
Vitaly Fargesen and Igor Palatnik of CanaFarma Corp., a publicly traded New Jersey-based outfit that describes itself as a fully integrated, multi-faceted Hemp products brand company, are now facing multiple counts of securities fraud and wire fraud for their alleged misdeeds. Fargesen, 52, is listed on the companys website as the firms senior vice president of strategic planning. Palatnik, 47, is listed as CanaFarmas senior vice president of product acquisition. However, Fargesen and Palatnik in fact exercise[d] secret control of CanaFarma, the indictment states, accusing the two of hiding their real roles behind a purported CEO who was subservient to them.
In a statement released Tuesday, U.S. Attorney Audrey Strauss said, Vitaly Fargesen and Igor Palatnik 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.
The duo is accused of serious wrongdoing that echoes somewhat another case now making news. Last week, Ozy Media collapsed after the startup was exposed for, among other things, allegedly having a company co-founder impersonate a YouTube exec during a due diligence call with Goldman Sachs, lying about a pending deal with Google, and leading producers, guests, and others to believe that an Ozy television show being produced would air on A&E and not Ozys YouTube page, where it eventually appeared. On Tuesday, a fund management company that invested more than $2 million in Ozys business sued the company for what it called fraudulent, deceptive and illegal conduct.
But they didnt stop there, prosecutors claim. Fargesen and Palatnik allegedly used the marketing budget to pay overseas affiliates to prop up CanaFarmas stock price. They then used false invoices to account for millions in nonexistent expenditures that instead went into their own bank accounts. In early 2020, Fargesen and Palatnik allegedly used funds they said would be financing pre-IPO meetings with various investment banks on personal expenses instead, including an approximately $100,000 down payment on a luxury vehicle.
As of Tuesday afternoon, Palatnik does not have a lawyer listed in court records. However, Fargesens attorney, Jeffrey Lichtmanwhose client list has featured boldfaced names including notorious drug lord El Chapo, Mafia scion John Gotti Jr., and cult leader Keith Ranieresaid he thinks prosecutors have missed the mark.
This indictment comes at the end of a multi-year investigation and contains allegations from two rogue employees who, as soon as the investigation began, ran to the government and began cooperating solely to save their own skins, Lichtman told ishonest. As we have told the government, we do not believe any crime was committed other than the plundering of the business by the two rogue employees.
If convicted on all counts, Fargesen and Palatnik each face a maximum of up to 65 years in prison.