Business Monday: Judge clears pump-and-dump case against Snowmass homeowner
The Securities and Exchange Commission’s fraud allegations in a lawsuit against a marijuana investor and Snowmass Village homeowner are sufficient enough to move the case forward, a federal judge ruled last week.
Chief U.S. District Judge Marcia Krieger’s opinion and order were delivered Tuesday and came after attorneys for defendant Jeffrey Friedland and his companies Global Corporate Strategies and Intiva Pharma LLC filed a motion to dismiss the suit in May 2018.
Last week’s ruling by Krieger also was the latest development in a case stemming from March 2018, when the SEC sued Friedland, GSC and Invita in the U.S. District Court of Denver on securities-fraud allegations that a marijuana-based pharmaceutical company paid Friedland to pump its stock through blogs, media interviews, news releases and other mediums. The SEC contends Friedland failed to publicly disclose that OWC Pharmaceutical Research Corp. of Israel was giving him minority interest in its stock for touting it, which is against federal securities law.
Friedland and his wife allegedly created a limited liability company for the sole purpose of receiving and selling the stock, the SEC contends. Those ill-gotten gains helped Friedland buy a 2,796-square-foot Snowmass home for nearly $2 million in a cash transaction in August 2017, the SEC alleges.
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The defendants, in a May motion, sought dismissal of the case on the grounds that the SEC’s suit failed to provide sufficient enough facts and legal arguments under federal pleading requirements. The motion also argued that Friedland disclosed his involvement as an OWC investor and advisor.
Since that motion was filed, the case has seen little movement that’s included replies to the motion by the parties involved.
Krieger wrote that the SEC’s arguments against Friedland and the other defendants so far passes muster.
“The SEC has adequately alleged that, through the January 2016 agreement, Mr. Friedland agreed to promote OWC and its stock in exchange for receiving a considerable payment in the form of that stock,” the judge wrote. “And the SEC makes clear that in each of the identified communications, Mr. Friedland did not disclose that he was being paid by OWC to promote the stock, nor did he disclose the amount that he was paid.”
In response to Friedland’s explanation that he revealed his connection to OWC, Krieger wrote that the “mere fact that Mr. Friedland might have disclosed his affiliation with OWC as an investor or advisor did not suffice to inform the public of how much OWC was compensating him for that service.”
In what is known as a pump-and-dump case, the SEC also alleges Friedland unloaded the 5.1 million shares he received to campaign for the stock, as well as 1.3 million shares he bought for $120,000 in 2013, for about $7 million in 2017, the complaint alleges.
So far the SEC has successfully moved Krieger, in April, to freeze Friedland’s Snowmass property at 466 Meadow Road so long as the litigation is active. Krieger also froze Friedland’s Denver home and nearly $3.1 million in accounts associated with him, later unfreezing one of those accounts in December.
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