Crowdfunding During the COVID-19 Global Pandemic

Choosing the right crowdfunding exemption should be an informed decision. First of all, you need to consider how much money you want to try to raise. Some exemptions are capped at specific amounts. Base your choice on how much you realistically believe people will invest. Second, consider the kind of company you have. If it’s a development stage startup, for example, you may want to opt for a Regulation CF offering, which permits you to raise small sums from a large number of people. If it’s an operational company generating revenues and even profits, a Regulation D, Rule 506(c) offering, which allows you to raise an unlimited amount, might be the appropriate choice.

Crowdfunding Options After Coronavirus

In the past six weeks, the COVID-19 outbreak has caused quarantines and closures, and has restricted the movement of people and goods between countries and within the United States. It’s devastated certain industries and economies at home and abroad. Uncertainty about the duration of the crisis has roiled the financial markets, leading to worries about a global recession to come. Large businesses like Boeing will survive, as in 2008, because they’re “too big to fail,” but the small businesses that are the real backbone of the U.S. economy may face hardship. Some—the lucky ones—will need to raise capital to respond to increased demand for their crisis-related products; others will need additional cash to keep their businesses viable during the pandemic.

U.S. small businesses are left unsure whether they’ll survive without an injection of cash. While government relief is in the works, many businesses won’t qualify, or the resources available to them will not be enough to address their needs. But some industries will not be impacted, and may even experience growth during the coronavirus crisis. Companies in these industries that need capital to meet rising demand should consider crowdfunding a securities offering as an option. Read More

The SEC Addresses COVID-19 Disclosure Requirements – Securities Lawyer 101

 

COVID-19 Disclosure Requirements

The SEC Addresses COVID-19 Disclosure Requirements

Earlier this month, the Securities and Exchange Commission (the “SEC”) addressed COVID-19 disclosure requirements in a release reminding companies subject to the SEC’s reporting requirements of their disclosure obligations regarding their assessment of, and plans for addressing, material risks to their business and operations. Issuers are encouraged to keep investors and the markets informed about how they’re affected by the current crisis, and how they plan to deal with it. The SEC also granted extensions to deadlines for certain filings and reports  including Form 10-K, Form 20-F and Form 10-Q by issuers impacted by COVID-19.

Companies engaged in fund raising should consider the impact of COVID-19 Disclosure Requirements in their offering materials. All issuers should consider COVID-19 disclosure requirements in their SEC filings and reports, and in communications to shareholders as well. Because the extent and severity of the COVID-19 outbreak is not yet known and is rapidly evolving, public companies must monitor and consider on an ongoing basis their SEC and investor disclosures, in light of the latest developments, and their potential impact on business and operations. Read More

SBA Offers Small Business Loans in Response to Coronavirus – COVID-19

The Coronavirus Preparedness and Response Supplemental Appropriations Act (the “Act”), passed with near unanimous support in both the House and Senate and was signed into law on March 6, 2020. The Act provides $20 million for the Small Business Administration (“SBA”) disaster loans program to support SBA’s administration of loans to entities financially impacted as a result of COVID-19 (coronavirus). Individual businesses may apply for up to $2 million of working capital loans.

There are 30.2 million small businesses in the United States, and they employ 47.5 percent of the nation’s workforce. The top three industries for small business employment are healthcare and social assistance, accommodation and food services, and retail trade. All of these sectors will be affected by the intensification of the coronavirus crisis. The last two have already been hit hard, as many states have ordered the closing of all “non-essential” businesses. Only groceries, gas stations, healthcare providers, drugstores, banks, and restaurants offering takeout or delivery services can remain open. Read More

CBD Oil for Pain: FDA Approves Over-the-Counter Cannabidiol Topical

On January 29, 2020, the U.S. Food and Drug Administration (FDA) approved an opioid-free pain-relieving cream from Honest Globe, a plant-based wellness company specializing in alternative health care. This over-the-counter all-natural topical is infused with cannabidiol (CBD) oil, an ingredient found in cannabis, originally derived from the hemp plant.

According to Yaniv Kotler, The Brand’s Chief of Business Development, “We are ecstatic to announce that Elixicure’s Registration has been Certified by the FDA.” This authorization affords those living with chronic pain a way to manage their symptoms without the use of narcotics. They are currently the first and only CBD oil for pain relief that is FDA-approved. Even The Banned Substance Control Group approves the use of Honest Globe’s CBD oil for pain relief to athletes and competitors on all levels. Read More

FINRA Addresses Digital Securities – Regulatory Notice 19-24

FINRA Addresses Digital Securities – Digital Assets Regulatory Notice 19-24

FINRA Encourages Member Firms to Provide Notice of Activities in Digital Securities

Last year, FINRA took several steps to engage with its members regarding their current and planned activities relating to digital assets. These efforts included the issuance of Regulatory Notice 18-20, which encouraged firms to keep their Regulatory Coordinator informed if the firm, or its associated persons or affiliates, engaged, or intended to engage, in activities related to digital assets, including digital assets that are non-securities. In 2020, FINRA continues to encourage firms to continue keeping their Regulatory Coordinators abreast of  activities related to digital assets until July 31, 2020.

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SEC Charges Attorney Ben Bunker with Fraudulent Scheme

ben bunker

On January 23, 2020, the Securities and Exchange Commission (SEC) issued a cease and desist order against attorney Ben Bunker (Benjamin L. Bunker). Bunker is a 42 year old lawyer based in Las Vegas, Nevada. Bunker was working for two individuals using the company Greenway Design Group, Inc. to perpetrate a scheme where they placed Greenway shares into a brokerage account, promoted the shares so that the stock price would rise artificially and then sell the shares back into the market. Bunker’s role was to prepare false opinion letters necessary for the two individuals to obtain stock certificates, transfer them, and then later sell them to the public.

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FINRA Sanctions 5 Firms for Failing to Reasonably Supervise Accounts

finra

FINRA, before the New Year 2020, sanctioned five major financial firms who failing to reasonably supervise custodial accounts. These five firms were: Citigroup Global Markets Inc.; J.P. Morgan Securities LLC; LPL Financial LLC; Morgan Stanley Smith Barney LLC; and Merrill Lynch, Pierce, Fenner & Smith Incorporated. The violation was of FINRA Rule 2090, known as FINRA’s “Know Your Customer” rule. This rule states “Every member shall use reasonable diligence, in regard to the opening and maintenance of every account, to know (and retain) the essential facts concerning every customer and concerning the authority of each person acting on behalf of such customer.”

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Diane Dalmy and Michael Woodford Charged for False Legal Opinions

Dalmy and Woodford Charged for False Legal Opinions

On March 13, 2019, the Securities and Exchange Commission (SEC) charged attorney Diane Dalmy with fraud for “for concealing from transfer agents and brokerage firms her involvement in preparing legal opinion letters concerning the sale of certain microcap securities.” The OTC Markets had placed Diane Dalmy on their prohibited list of attorneys; the OTC Markets is the largest trading system for microcap securities in the United States. To work around this, Dalmy used another lawyer– Michael Woodford, a retired divorce attorney, to sign legal opinion letters that she handed off to him. Of course, Michael Woodford did not due any due diligence himself in order to give a proper legal opinion, and would just sign whatever document was put in front of him. He then provided the opinion letters to transfer agents and brokerage firms. He would go on to be charged for his role as well in June 2019.

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Guy Scott Griffithe & Robert Russell Charged by SEC in Cannabis Company Scheme

Cannabis Company

A California man, Guy Scott Griffithe, and a Washington state man, Robert William Russell, were charged on Tuesday, January 21, 2020, by the Securities and Exchange Commission (SEC) for defrauding investors by selling them shares of one company, which they said would go towards operating another, when in fact the funds were being used for personal expenses. In other words, they were selling fake shares of a company.

The companies in question are Renewable Technologies Solution, Inc., an entity controlled by Guy Griffithe, and SMRB LLC, a Washington company owned by Robert Russell. SMRB LLC holds a license to grow marijuana under Washington’s recreational marijuana laws. These licenses can often be hard to get, which can make a company valuable if it has one. Griffithe and Russell ended up raising almost $5 million of the fraudulent shares of the cannabis company.

According to crowdfundinsider.com, funds raised by Griffithe and Russell were used towards the following purchases:

  • 2008 Bentley Continental,
  • 2012 Mercedes Benz C Class,
  • 2013 Ford Mustang,
  • 2015 Porsche Panamera,
  • $250,000 towards a 65-foot Pacific Mariner yacht bought by Russell and Sonja Russell,
  • $25,000 towards a 42-foot Hydrasport custom powerboat,

Griffithe also allegedly deposited approximately $1.7 million into Russell’s personal bank accounts.

Sonja Russell is Robert Russell’s wife, and she is also named in the complaint filed by the SEC.

SEC Associate Director Melissa R. Hodgman said, “As alleged in our complaint, Griffithe and Russell exploited popular interest in the cannabis industry to obtain millions of dollars from investors who thought they were buying into a profitable business. Instead, Griffithe and Russell deceived investors and used the money to enrich themselves.”

Griffithe has produced several films over the past few years, with his credits available on IMDb, as well as an extensive bio that is very favorable towards him.

This securities law blog post is provided as a general informational service to clients and friends of Hamilton & Associates Law Group and should not be construed as, and does not constitute legal advice on any specific matter, nor does this message create an attorney-client relationship.  Please note that the prior results discussed herein do not guarantee similar outcomes.

Hamilton & Associates | Securities Lawyers
Brenda Hamilton, Securities Attorney
101 Plaza Real South, Suite 202 North
Boca Raton, Florida 33432
Telephone: (561) 416-8956
Facsimile: (561) 416-2855
www.SecuritiesLawyer101.com

SEC Obtains Emergency Asset Freeze Against Kenneth Courtright and TGC

On Wednesday, January 15, 2020, the Chicago Sun Times reported "A federal judge has frozen the assets of Kenneth Courtright, an Illinois man and the company he ran under the name “The Income Store” after the U.S. Securities and Exchange Commission (SEC) accused him of a “Ponzi-like scheme” that raised $75 million." This man is named Kenneth Courtright. He founded the company and is the current chairman. Courtright was using the money from his company to overpay his mortgage and pay tuition for his kids' private school.

On Wednesday, January 15, 2020, the Chicago Sun Times reported “A federal judge has frozen the assets of Kenneth Courtright, an Illinois man and the company he ran under the name “The Income Store” after the U.S. Securities and Exchange Commission (SEC) accused him of a “Ponzi-like scheme” that raised $75 million.” This man is named Kenneth Courtright. He founded the company and is the current chairman. Courtright was using the money from his company to overpay his mortgage and pay tuition for his kids’ private school. The Income Store is officially known as Todays Growth Consultant, Inc. (TGC).

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