Cannafarma corp scam
Cannafarma corp scam

CannaFarma Investment Scam - Investors Defrauded Out of $4 Million by a Fake CEO

Cannabis scams are flourishing as investors want to get into the Green Rush!

Posted by:
Joseph Billions on Tuesday Oct 19, 2021

CannaFarma Investment Scam - Investors Defrauded Out of $4 Million by a Fake CEO

CannaFram Corp scam


A pair of executives within the cannabis industry defrauded investors of an amount reported to be close to $4 million. These executives trotted out a phony CEO claiming to make business decisions. However, they both manipulated the company's stock price for selfish gains and fraudulently increased its financials. According to reports, the pair spent almost six figures on luxury cars rather than the proposed IPO roadshow.


A closer look

The executives of CanaFarma Corp., named Vitaly Fargesen, and Igor Palatnik presently face multiple fraud charges. These executives are being charged with counts of wire fraud and securities fraud for their contended misdeeds. Palatnik (age 47) is tagged on the company's website as the senior vice president of product acquisition. Furgeson (age 52) is tagged as CanaFarma's senior vice president of strategic planning. However, Palatnik and Fargesen, in reality, have remote control of the company. The charge accuses both individuals of hiding their actual roles behind a phony CEO who was a subordinate to them.


According to U.S. Attorney Audrey Strauss in a statement released last Tuesday, Palatnik and Fargesen presented themselves as entrepreneurs. They both claim to be developing new business ideas in the cannabis industry. But, as claimed, Palatnik and Fargesen were utilizing the traps of a startup to a scam. They lied to their investors and took the money for themselves.


A complaint was also filed against CanaFarma last week Tuesday by the Securities and Exchange Commission. The agency is charging Palatnik and Fargesen with breaching anti-fraud regulations of federal securities law.


Both individuals are facing serious charges, which echoes another case that is also making the news. Last week, investors witnessed the collapse of Ozy Media after the startup was exposed. The co-founder of the startup was allegedly pretending to be a YouTube exec at a due diligence call with Goldman Sachs. He lied about an upcoming deal with Google and led the guest, producers, and others to believe an Ozy TV show would air on A&E. Last Tuesday, Ozy Media was sued by one of their investors, a fund management company. The firm with an investment of $2 million with Ozy sued the company for "deceptive, fraudulent, and illegal conduct."


Analyzing the indictment

The indictment explains that CanaFarma's alleged scheme can be traced back to October 2018. In 2018, the duo, via a straw purchaser, initiated acquiring a dormant Canadian shell company. A few months later, Palatnik and Fargesen reached out to individuals identified as "Co-conspirator 1" (CC-1) and "Co-conspirator 2," (CC-2). The filing explains that Palatnik and Fargesen informed CC-1 and CC-2 that they had a pool of investors overseas who would fund their idea. The idea was to create a company founded on hemp-derived products. And as soon as they get the funds, they will be up and running.


The team eventually established CanaFarma Corp in March of 2019. And while Palatnik and Fargesen held subtle titles, they had extensive control over CanaFarma. According to the indictment, the duo had control over all corporate decisions, company funds, and investor fundraising. That same month of March, Palatnik and Fargesen employed the phony CEO who operated as the face of CanaFarma. The "CEO" reported directly to them and did not have access to a seat on the Board of Directors or the company's bank account. The purported CEO executed the wishes of Palatnik and Fargesen at all times.


CanaFarma did produce their first product, which was a hemp-infused CBD chewing gum known as Yooforic. After Yooforic, the company also made other products such as hemp-based CBD skin creams and tinctures. But according to the indictment, CanaFarma didn't produce Yooforic but retailed it under the CanaFarma label as inclusive of a licensing deal. By 2019, Palatnik and Fargesen began negotiating with a commercial partner to build a processing plant and grow hemp. The partner company could lease a farm in Dutchess County, New York, keeping their end of the deal. The company harvested a total of 128,000 lbs of weed. But CanaFarma failed on its end, stiffing the grower and channelling $2 million to another hemp grower.


After this event, CanaFarma started soliciting investors in a confidential placement round, raising a total of $14 million. Investor presentations were released by the "CEO" on the directive of Palatnik and Fargesen. However, the materials sent out we're filled with misleading and false statements. The prosecutors mentioned that CanaFarma's management team was led by a CEO who had zero authority. The prosecutors continued saying that CanaFarma did not produce or grow its products but re-labelled goods produced by others. That's not all; CanaFarma also deceived investors by inflating the actual figure of the marketing budget by at least $1.4million. The fund was reported to be misappropriated by Palatnik, Fargesen, CC-2, and CC-1.


Prosecutors claimed the pair didn't stop there. Palatnik and Fargesen went ahead to pay overseas affiliates with the marketing budget to manipulate CanaFarma's stock price. The duo then used the fake invoice to account for nonexistent expenditures in millions of dollars. Money that instead went into their bank accounts. In 2020, Palatnik and Fargesen reportedly used funds for financing pre-IPO meetings with several investment banks on personal expenses. The pair made a down payment of $100,000 on a luxury vehicle.


Around June 2020, CanaFarma declared it would be using its knowledge in cannabinoids to create a version of hydroxychloroquine. Former President Donald Trump pushed hydroxychloroquine as a cure for COVID during the COVID pandemic. A drug that wasn't effective.


Bottom line

As of last Tuesday, Palatnik doesn't have a lawyer registered in court records. On the other hand, Fargensen does have a lawyer, attorney Jeffrey Lichtman. Jeffrey Lichtman has previously defended cult leader Keith Raniere, Mafia scion John Gotti Jr., and notorious drug lord El Chapo.


In an interview with The Daily Beast, Jeffrey Lichtman mentioned that the indictment consists of allegations from two rogue employees. He claimed the employees ran to the government to save their skin as soon as the investigation began. Lichtman asserted that he does not believe his client had committed any crime. Lichtman mentioned that the crime committed was two rogue employees disrupting the business of his client.


If Fargesen and Palatnik are convicted on all counts, they each face up to 65 years in prison...








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