An Offering Fraud Tied to Marijuana
Offering fraud actions are one of the largest categories of cases brought by the Enforcement Division. While they are based on a wide variety of claims, many are keyed to whatever is popular in the market place. Recently, for example, a number have focused on crypto assets. Others tie to more traditional themes like quick profits and safety. Still others just go with standard themes like the Commission’s most recent case in the area—marijuana. SEC v. Profile Solutions, Inc., Civil Action No. 1:22-cv-22881 (S.D. Fla. Filed September 9, 2022).
Named as defendants in the action are: the firm, Dan Oran and Leonard Tucker. Mr. Oran is the CEO of the firm; Mr. Tucker, a recidivist, tried to stay in the background as a consultant.
The firm, initially formed in 2006, later reformulated into Profile Solutions, Inc., a Florida firm. CEO and president Oran owns 38.3% of its shares. Mr. Tucker claims to be a consultant but in fact acts as an executive officer of the firm. Previously, he pleaded guilty to three felony counts –securities fraud, conspiracy to commit securities fraud and RICO. He has also settled a securities fraud suit filed against him by the Commission.
Over a two-year period, beginning in 2018, Defendants engaged in a fraudulent scheme built on false statements regarding marijuana. CEO Oran, for example, authorized Profile to issue press releases claiming the company had obtained “preliminary approval” to grow and process medical cannabis and hemp in Kingdom of Eswatini, a nation in Africa formerly known as Swaziland. In fact, the claims were false. At the time the CEO gave the authorization, it was illegal to grow cannabis in Eswatini. That fact was not disclosed to investors. Defendants then made the same misrepresentations about Eswatini to the public.
Defendants also filed a false registration statement with the Commission. While the filing requires that all individuals acting in a management or executive capacity be disclosed, they were not. The position of Mr. Tucker was not disclosed.
Defendants’ scheme was concealed behind a web of lies. Those included: 1) the false clams about Eswatini; 2) the false claims that third parties were ready to distribute the cannabis products of Profile in Central and South America; and 3) the role of convicted felon Tucker. The complaint alleges violations of Securities Act Sections 17(a)(1) & (3) and Exchange Act Section 10(b). The company and Mr. Oran settled with the Commission. Each consented to the entry of permanent injunctions based on the Sections cited in the complaint. Mr. Oran also consented to the entry of a five-year office/director bar and agreed to pay a penalty of $150,000. See Lit. Rel. No. 25500 (September 9, 2022).