CannaFarma Investment Scam – Investors scammed out of $ 4 million by a fake CEO

Two cannabis industry executives defrauded investors nearly $ 4 million. These executives challenged a fake CEO who claimed to be making business decisions. However, both manipulated the company’s stock price for selfish gains and fraudulently increased its financial values. The couple reportedly spent nearly six-digit amounts on luxury cars rather than the planned IPO roadshow.

A closer look

The executives at CanaFarma Corp. named Vitaly Fargesen and Igor Palatnik are currently facing multiple fraud allegations. These executives are charged with their alleged wrongdoing, wire transfer fraud, and securities fraud. Palatnik, age 47, is tagged as Senior Vice President of Product Acquisition on the company’s website. Furgeson, 52, has been named senior vice president of strategic planning for CanaFarma. In reality, however, Palatnik and Fargesen have remote control of the company. The prosecution accuses both of them of hiding their real roles behind a fake CEO who was subordinate to them.

According to US prosecutor Audrey Strauss, Palatnik and Fargesen presented themselves as entrepreneurs in a statement published last Tuesday. Both claim to be generating new business ideas in the cannabis industry. But as claimed, Palatnik and Fargesen used a startup’s traps to scam. They lied to their investors and took the money for themselves.

The US Securities and Exchange Commission filed a complaint against CanaFarma last Tuesday. The authority accuses Palatnik and Fargesen of having violated the anti-fraud provisions of the Federal Securities Act.

Both people face serious charges, reflecting another case that has also hit the headlines. Last week, investors saw Ozy Media collapse after the startup was exposed. The co-founder of the startup is said to have posed as a YouTube manager during a due diligence call with Goldman Sachs. He lied about an upcoming deal with Google, making the guest, producers, and others believe that an Ozy TV show would be airing on A&E. Last Tuesday, Ozy Media was sued by one of its investors, a fund management company. The company, with a $ 2 million investment in Ozy, sued the company for “fraudulent, fraudulent and illegal behavior.”

Analysis of the indictment

The indictment states that CanaFarma’s alleged plan can be traced back to October 2018. In 2018, the duo initiated the acquisition of a dormant Canadian mailbox company through a straw buyer. A few months later, Palatnik and Fargesen reached out to people identified as “Co-Conspirator 1” (CC-1) and “Co-Conspirator 2” (CC-2). The filing states that Palatnik and Fargesen told CC-1 and CC-2 that they have a pool of investors overseas who would fund their idea. The idea was to start a company based on hemp products. And once they get the money, they’ll be ready to go.

The team eventually founded CanaFarma Corp. in March 2019. And while Palatnik and Fargesen held subtle titles, they had extensive control over CanaFarma. According to the indictment, the duo had control over all corporate decisions, corporate funds, and fundraising from investors. That same month of March, Palatnik and Fargesen hired the fake CEO to act as the face of CanaFarma. The “CEO” reported directly to them and had no access to a seat on the board of directors or the company’s bank account. The alleged CEO carried out Palatnik and Fargesen’s wishes at all times.

CanaFarma made their first product, a hemp-infused CBD chewing gum known as Yooforic. After Yooforic, the company also made other products like CBD skin creams and hemp-based tinctures. But according to the indictment, CanaFarma did not produce Yooforic, but sold it under the CanaFarma label as a license agreement. By 2019, Palatnik and Fargesen began negotiating with a trading partner to build a processing plant and grow hemp. The partner company could lease a farm in Dutchess County, New York and stick to the end of the deal. The company harvested a total of 128,000 pounds of grass. But CanaFarma failed at its end, stiffened the grower and diverted $ 2 million to another hemp farmer.

After this event, CanaFarma began soliciting investors in a confidential placement round, raising a total of $ 14 million. Investor presentations were published by the “CEO” on instructions from Palatnik and Fargesen. However, the materials we send are full of misleading and false statements. Prosecutors mentioned that CanaFarma’s management team was led by a CEO with no authority. Prosecutors went on to say that CanaFarma did not produce or cultivate any products, but rather relabelled goods produced by others. That’s not all; CanaFarma also deceived investors by inflating the actual marketing budget by at least $ 1.4 million. The fund is said to have been embezzled by Palatnik, Fargesen, CC-2 and CC-1.

Prosecutors claimed the couple didn’t stop there. Palatnik and Fargesen paid the foreign subsidiaries the marketing budget to manipulate CanaFarma’s share price. The duo then used the fake invoice to prove non-existent expenses in the millions. Money that flowed into their bank accounts instead. In 2020, Palatnik and Fargesen reportedly used funds to fund pre-IPO meetings with multiple investment banks on personal expenses. The couple made a $ 100,000 deposit on a luxury vehicle.

Around June 2020, CanaFarma announced that it would use its knowledge of cannabinoids to make a version of hydroxychloroquine. Former President Donald Trump has called for hydroxychloroquine as a cure for COVID during the COVID pandemic. A drug that didn’t work.

Bottom line

As of last Tuesday, Palatnik did not have a lawyer listed on the court records. Fargensen, on the other hand, has an attorney, attorney Jeffrey Lichtman. Jeffrey Lichtman previously defended cult leader Keith Raniere, Mafia offspring John Gotti Jr. and notorious drug lord El Chapo.

In an interview with The Daily Beast, Jeffrey Lichtman mentioned that the charges consist of allegations made by two rogue employees. He claimed the employees ran to the government to save their skin as soon as the investigation began. Lichtman claimed he did not believe his client committed any crime. Lichtman mentioned that the crime committed involved two unscrupulous employees who disrupted his client’s business.

If Fargesen and Palatnik are convicted on all counts, they face up to 65 years imprisonment each …

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