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SEC Charges Hemp Company and its Co-Founders with Investment Fraud

October 29, 2021 Blog

On October 5, 2021, the U.S. Securities and Exchange Commission (SEC) charged CanaFarma Hemp Products Corp. (“CanaFarma”) and its co-founders with fraudulently raising approximately $15 million from investors. The SEC also alleges that the company and its co-founders “misappropriate[ed] a significant portion of the investor funds for personal use and other unrelated purposes.” Investors who lost money with CanaFarma may be able to recover their fraudulent losses with the help of an investment fraud attorney.

Hemp, Cannabis and Marijuana Investment Offerings are On the Rise

With more U.S. states making the push to legalize cannabis-derived products for medical and recreational use, investment offerings involving hemp, cannabis and marijuana businesses are on the rise. The legal marijuana business is expected to flourish in the United States over the next several years, and this means that investors will increasingly have exposure to opportunities to invest in cannabis-based businesses. Recreational marijuana use has been legal in Canada since 2018, and U.S. investors have access to investment opportunities promoted by Canadian businesses as well.

The SEC’s Case Against CanaFarma and Its Co-Founders

The SEC describes CanaFarma as, “a Canadian startup hemp company with offices in Vancouver and New York City.” According to the SEC, CanaFarma and its co-founders, Vitaly Fargesen and Igor Palatnik, misled investors by claiming that the company was “fully integrated” and processing hemp from its own farm. In fact, the company’s products used hemp from third-party suppliers. The SEC also alleges that CanaFarma provided investors with false financial information, including “misstated historical revenue numbers” and “baseless projections about future revenues.”

Based on these allegations, the SEC is seeking injunctive relief, disgorgement, civil penalties and prejudgment interest from CanaFarma, Fargesen and Palatnik. The SEC reports that Fargesen and Palatnik are also facing federal criminal charges in the Southern District of New York.

Your Options as a Victim of Investment Fraud

For investors who lose money in these types of alleged investment scams, seeking to recover their fraudulent losses typically involves filing claims in securities litigation. Federal securities laws protect individual investors who fall victim to fraud; and, while SEC enforcement actions and criminal prosecutions may result in liability for the defendants, they generally do not result in full restitution for aggrieved investors. As a result, for individuals who lose money in investment scams, it is important to speak with an investment fraud attorney as soon as possible.

In addition to pursuing claims against companies and founders that engage in fraudulent investment scams, aggrieved investors will have other options in many cases as well. For example, if an investment broker or advisor led you to invest in a fraudulent offering, you may have a claim against your broker or advisor for negligence or fraud.

Speak with an Investment Fraud Attorney for Free

Do you have questions about recovering your losses from a fraudulent investment offering? If so, we encourage you to contact us promptly. For a free consultation with an experienced investment fraud attorney, call 212-742-1414 or get in touch with us online now.

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