SEC Files Offering Fraud, Reg FD Action
Offering fraud cases typically have some kind of “hook” – a product, pitch line, or something that is designed to entice investors to consider the investment. Eventually it is that pitch, perhaps with some follow-up, that convinces the investor to part with his or her cash in exchange for more often than not, nothing or at least nothing of real value. In the Commission’s most recent case in this area the pitch centered on potentially lucrative contracts with the Armed Forces and the CDC infused products of New Age, Inc. SEC v. Willis, Civil Action No. 22-2744 (D. Colo. Filed October 18, 2022).
Brent Willis is named as Defendant in the action. He was appointed CEO of New Age, Inc. in March 2016 and continued in that position until earlier this year. The company claims to be based in Utah and the developer and global seller of “organic and healthy” products. Its shares are traded on NASDAQ under the symbol NBEV.
Over a four-year period, beginning in early 2018, CEO Willis touted supposed agreements and contracts of New Age. For example, in the first half of 2018 he touted an arrangement supposedly obtained by New Age with the U.S. military. The company, it was claimed, was selling beverages to the Armed Forces at all commissaries and exchanges world-wide. In fact, there was no contract; no sales; and no inventory.
Later in the year CEO Willis told potential investors that New Age had developed a portfolio of Cannabidiol, or CBD, infused beverages. The sale pitch was geared to tie into the then current tends and publicity regarding CBD products. In fact, the company never completed development of a CDC product.
In addition to the direct sales pitches, Mr. Willis drove other promotions for the company. For example, in early 2018 he made selective disclosures regarding the business activities of New Age and the claimed agreements with the U.S. Military by communicating the information to some equity analysts. Later he sent product information regarding the C beverage products to select equity analysts prior to the public announcement. The complaint CBD alleges violations of Securities Act Section 17(a) and Exchange Act Sections 10(b), 13(a) and Regulation FD. The case is pending. See Lit. Rel. No. 25562 (October 18, 2022).