All information in this report was compiled from public records maintained by the SEC.
False Farm-to-Table Hemp Adds Up to $15 Million Offering Fraud
Frank Barone, 55, of Holmdel, New Jersey, and Kirill Chumenk, 47, of Los Angeles, California, on Dec. 1, entered into SEC consent judgments for fraud and misappropriation of funds, the SEC said.
Previously, the SEC charged CanaFarma, a start-up hemp company with Vancouver and New York offices, and its co-founders, Igor Palatnik and Vitaly Fargesen, with the same scheme. The duo founded CanaFarma as a “farm-to-table” hemp company that would grow its own hemp, process it into hemp oil, and sell products containing that oil directly to consumers.
However, the two founders, Barone and Chumenko, raised millions of dollars from investors by making misrepresentations such as CanaFarms processing hemp from its own farm when it had not done so and its products actually used hemp supplied by third parties.
From 2019 until Jan. 2021, Barone served as senior vice president of sales and marketing at CanaFarma. Chumenko also served in the same role during that time and as a director through March 2020. This duo previously worked together for over 15 years on various cosmetics and health supplement companies that used direct-to-consumer marketing, according to federal regulators. An SEC amended complaint charged them with the same scheme as the founders in connection with a $15 million offering fraud.
According to the amended complaint, Fargesen allegedly directed Barone and Chumenko to make unsupported changes to CanaFarma’s financial model to disguise a series of payments to the founders. The complaint also alleges the founders, with the help of Barone and Chumenko, misappropriated at least $4 million to use for personal reasons or purposes unrelated to CanaFarma.
The judgments against Barone and Chumeno enjoin them from future violations and bar them from serving as officers or directors of a public company and participating in penny stock offerings. The length of the bars and the amount of disgorgement, prejudgment interest, and civil penalties will be determined at a later date, the SEC said.
Software Offering Fraud Exceeds $2 Million
Marc Wexler, 61, of Colts Neck, New Jersey, on Dec. 4, entered into a final SEC judgment for offering fraud and violating federal securities laws, federal regulators said.
In an SEC complaint dating back to 2013, Wexler was allegedly involved in a scheme to manipulate the price of the securities for CodeSmart holdings. According to the complaint, he sought to flood the market with CodeSmart shares and promoted them to artificially inflate the stock price. He also personally dumped his CodeSmart shares on the market while working with two brokers who simultaneously purchased CodeSmart stock in their clients’ accounts. As a result, Wexler profited more than $2 million.
In the court’s partial judgment, Wexler agreed to be permanently enjoined from future violations, along with officer-and-director and penny stock bars. He also agreed to give up $2,218,599 with prejudgement interest.