Monday, October 09, 2017

SEC roasts reggae coffee company schemer for $58 million

By Rodney F. Tonkovic, J.D.

An SEC enforcement action against Marley Coffee has ground to a halt with a $58 million final judgment. Wayne Weaver was pressed for participating in multimillion-dollar international pump-and-dump scheme involving the stock of Jammin' Java Corp., a company using the trademarks of reggae artist Bob Marley for licensed coffee products. Weaver, of the U.K. and Canada, is the last defendant in this action against whom a judgment has been obtained (SEC v. Jammin' Java Corp., October 3, 2017).

The scheme brews up. According to the complaint, the scheme began to percolate in 2008, when former CEO Shane Whittle orchestrated a reverse merger to form the company and through which he secretly gained control of millions of Jammin' shares that had been issued to foreign nominees. In 2010, Whittle spread a portion of his stock through a complex network of offshore entities controlled by Weaver, among others. Weaver and the other offshore defendants then orchestrated a sham financing arrangement designed to create the false appearance of legitimate third-party interest and investment in Jammin'. The public announcement of this arrangement in December 2010 caused Jammin's share price to soar.

In early 2011, entities under the defendants' control or coordination took advantage of the elevated prices and sold over 45 million shares in unregistered transactions, generating at least $78 million in profits. Weaver also took part in funneling a portion of the profits back to Jammin' under the guise of the sham financing arrangement. In May 2011, however, the share price collapsed after Jammin' disclosed that it had learned of various unauthorized internet stock promotions. The price dropped even more after Jammin' released disappointing results in a Form 10-K.

Roasted. The final judgment permanently enjoins Weaver from violations of the registration, antifraud, and beneficial ownership disclosure provisions of the securities laws. Weaver is permanently barred from participating in penny stock offerings and was ordered to disgorgement of $26,371,585, prejudgment interest of $5,221,809, and a civil penalty of $26,371,585. He has filed a notice of appeal.

The last drop. The Commission has previously obtained consent judgments against all of the other defendants named in the action. These judgments have ordered the payment of over $8 million in disgorgement, interest, and penalties.

The case is No. 15-cv-08921.

No comments: