The U.S. Securities and Exchange Commission (SEC) keeps targeting the marijuana industry for misconduct.
Recently, the agency launched proceedings against CannAwake Corp. CANX for failing to file financial reports since December 2018, the year the company reported a net loss of $1,109,506 for the prior nine months.
“Respondent is ORDERED to SHOW CAUSE by November 7, 2022, why the registration of its securities should not be revoked by default due to its failure to file an answer and to otherwise defend this proceeding,” reads the SEC Order To Show Cause, which was issued after an Order Instituting Proceedings that CannAwake never responded.
In 2018, the company reached an agreement with American Green Inc. ERBB, which became an 80% owner. The plan was for a subsidiary of CannAwake called Nipton Inc. to act as a property developer, manager and landlord for companies in the medical or adult-use marijuana sectors in California, including initiatives such as the transformation of near-abandoned towns into “cannabis-friendly destinations,” according to the Green Market Report.
However, CannAwake has apparently been abandoned, as its majority owner continued to present current financials and operate as normal; leaving CannAwake shares unsold, frozen in time, while American Green shares are selling for less than a penny.
It’s important to note that American Green issued its own cryptocurrency called American Greenback in April 2022, and spent $3.7 million buying a 40,000-square-foot building known as American Green’s “Cypress Chill” cannabis facility in Phoenix. Also, it began selling its own American Green branded “Private Reserve“ premium cannabis flower in Arizona in July.
SEC Files Multiple Actions Against Cannabis Companies
This year, the SEC announced multiple actions against marijuana businesses.
- Elegance Brands and Emerald Health Pharmaceutical were tasked with a stock promotion in a scheme that included shares of HighTimes Holding Corp.
- Cronos Group agreed to a C$1.3 million settlement for accounting errors.
- NewAge Beverage Company received cease and desist orders for making misleading statements about the company.
The agency filed charges in federal court in Denver, alleging that Brent David Willis, the former CEO of NewAge, a publicly traded CBD beverage company that marketed drinks licensed by the estate of Bob Marley, “made numerous materially false and misleading public statements,” about the company’s fortunes between July 2017 and July 2019.
Willis, who lied to investors and the public about the size of distribution deals with Walmart WMT and the US military in an attempt to boost the future of the struggling company, was involved in a “multi-year fraud,” agency alleged.
According to the SEC, the lies pumped the share price of NewAge’s stock, once a high-flier with a market capitalization of more than $500 million before it was delisted from the Nasdaq (NASDAQ: NDAQ) in September, to a peak of $8.47 a share. The SEC also alleged that Willis, “cashed in” by banking more than $2 million from selling company stock during a six-month period in 2019.
Denver-based NewAge is currently listed on the pink sheets, and shares in the company, which previously was called New Age Beverages Corp., were recently trading for less than one cent, reported MJ Biz Daily.
However, Michael Diver, Willis’ attorney, rejected the SEC’s accusations and vowed to fight the agency in court, after noticing that the complaint seeks a permanent injunction against Willis from participating in public companies in the future, as well as financial sanctions, including paying back his “ill-gotten gains.”
“At no time did anyone come to him with questions about the existence or scope of the distribution arrangements referenced in the SEC’s complaint; nor did anyone question whether NewAge was committed to developing CBD products,” Diver said in a statement. “These are black-and-white issues and we expect to prevail in litigation.”
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Photo: Courtesy Of Tingey Injury Law Firm On Unsplash
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