The two co-founders of CanaFarma Hemp Products have been charged with fraudulently increasing $fifteen million from investors by generating bogus statements about the “farm to table” hemp startup and its management.

The U.S. Securities and Exchange Commission claimed Vitaly Fargesen and Igor Palatnik misrepresented CanaFarma as a “fully integrated” hemp enterprise and inflated its income in materials for two non-public choices of shares even though pocketing $four million of the investor funds for their private use and reasons unrelated to CanaFarma.

They also touted the quality of CanaFarma’s management team, which was purportedly led by CEO David Lonsdale when, in reality, he “was CEO in identify only, generating no substantive selections and getting route from Fargesen and Palatnik,” the SEC claimed in a civil grievance.

Fargesen and Palatnik have also been indicted on related legal fraud expenses.

“Fargesen and Palatnik had been just applying the trappings of a startup to operate an old-time fraud: lying to investors to acquire income for on their own,” Manhattan U.S. Legal professional Audrey Strauss claimed in a news launch.

In accordance to the SEC, CanaFarma’s stated small business approach was grow hemp at two farms in New York and process it into hemp merchandise these as “Yooforic” chewing gum that it would market instantly to consumers. Lonsdale, the president of boutique finance company Lonsdale Group, was employed in March 2019.

Fargesen and Palatnik, who had been vice presidents of the enterprise on paper, “told [Lonsdale] and other folks at CanaFarma that [he] would act as a mere figurehead CEO and would not make any true selections,” the SEC claimed.

CanaFarma, having said that, allegedly did not manufacture Yooforic itself, licensing output to a third celebration and leaving the hemp it grew in storage, unused. “Fargesen explained to an person … that CanaFarma was generating payments to the to start with hemp farm ‘just for the tale,’” according to the SEC.

For its 2nd supplying, the enterprise claimed that in March 2020, it was “achieving nearly $one,000,000 for each thirty day period revenue” but reached “only somewhere around $44,000 in income in March 2020” and “never reached $one million in month-to-month revenue” even though it was conducting the fund raises.

Tafadzwa Ufumeli via Getty Photos

CanaFarma Hemp Products, David Lonsdale, hemp, Igor Palatnik, U.S. Securities and Exchange Commission, Vitaly Fargesen