| The Securities and Exchange Commission recently charged four people, including two Massachusetts men, with attempting to defraud investors by concealing ownership and control of a publicly traded company so they could secretly profit by evading SEC rules.
The SEC charged Christopher R. Esposito of Topsfield of violating the antifraud provisions of Section 10(b) of the Securities Exchange Act of 1934, Rule 10b-5 thereunder, and Section 17(a) of the Securities Act of 1933. The agency also charged Anthony Jay Pignatello of Manhattan Beach, California, James Gondolfe of Cambridge, and Renee Galizio of Loxahatchee, Florida, in the scheme and leveled charges against Lionshare Ventures LLC and Cannabiz Mobile Inc., as well.
In a complaint filed in federal court in Boston, the SEC said that Esposito first raised more than $550,000 from investors between June 2011 and June 2012 in an unregistered offering of securities in his company Lionshare Ventures LLC. He then spent $300,000 of investor funds for unauthorized personal expenses and used $75,000 to acquire control of Cannabiz Mobile Inc., a Massachusetts publicly-traded company that first claimed to be in the business of mineral exploration and later claimed to be in the business of servicing businesses in the medical marijuana industry.
Then, between May 2012 and August 2015, Esposito, along with Pignatello, concealed his de facto control of Cannabiz and a large percentage of its securities in order to profit by evading SEC Rule 144, which limits securities sales by affiliates.
Esposito did this by, among other things, installing Gondolfe as the sole officer and director of Cannabiz – even though Esposito secretly controlled the company – to make false statements in Cannabiz’s public filings and other documents, paying third-party stock promoters to tout Cannabiz stock in order to increase its stock price and trading volume, selling significant amounts of Cannabiz convertible debt to others for almost $304,000, and with Pignatello and Galizio, selling millions of shares of Cannabiz stock directly into the public market.
