A hemp CBD company listed on both the Canadian and Frankfurt Stock Exchanges was a vehicle for securities and wire transfer fraud, according to an indictment recently returned by a federal grand jury in New York.
Vitaly Fargesen and Igor Palatnik, both from New Jersey, are charged with soliciting funds from CanaFarma based on false and misleading accounts of their company. The pair are also accused of failing to invest requested funds as promised and of manipulating the company’s public share price, according to a now unsealed indictment issued by a grand jury in New York’s Southern District.
According to the indictment, the men raised more than $ 14 million, including investments in private stocks in CanaFarma, and used at least $ 4 million of the company money for their own personal gain and to further the alleged plan.
CanaFarma first sold a hemp-infused chewing gum under the brand name Yooforic and later added hemp-based tinctures and skin creams. While the company marketed itself as a “fully integrated cannabis company that spans the full spectrum of cannabis from seeds to consumer product delivery,” all of its products were actually from third-party suppliers, the indictment said.
Through a New York hemp grower, the company harvested 128,000 pounds of hemp in 2019 but did not process or sell any of it or use it in any product, prosecutors alleged. The company has never built a hemp processing facility, despite investors claiming that the business plan calls for a “fully certified clean processing facility.”
The conduct of complex financial transactions and improper reporting to cover their tracks was allegedly carried out by Fargesen and Palatnik and two co-conspirators not named as defendants. Co-operation among the co-conspirators is key to many of the charges set out in the indictment; Both defendants are charged with conspiracy to commit securities and wire transfer fraud, potentially leading to long prison terms.
Fargesen’s attorney Jeffrey Lichtman wrote in an email: “We were very disappointed that charges were brought here, despite working with the government’s many requests for information over the past year.”
He continued, “As will be revealed at the trial, the government’s indictment is based almost entirely on two rogue employees who managed to loot the company before falling into the arms of the government and admitting their own fraud.”
A Palatnik attorney did not respond to a request for comment.
A press release detailing the charges and arrests of the CanaFarma Principles quoted FBI Assistant Director Michael J. Driscoll as saying, “Just as a reminder to anyone who believes people’s investments being able to manipulate in this way – that’s just not the case. “
Current public deals
Just last month, CanaFarma announced that it intended to make an acquisition in the nutritional supplements and functional foods business and agreed to purchase Avitas Bio Corp. Avitas Bio has developed the VitaWin Healthy Snacks line – premium chocolate, confectionery and other foods enriched with CBD.
And in June, high-profile health and wellness company Vertical Wellness – supported by former Sports Illustrated swimsuit model entrepreneur Kathy Ireland – agreed to merge with CanaFarma to create a company led by Vertical Wellness CEO J. Smoke Wallin should be. The merger has been dubbed “the first house of CBD brands to go public” due to CanaFarma’s position on the Canadian Securities Exchange.
Vertical Wellness did not respond to an email requesting information on the status of the proposed merger.