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Portfolio > Alternative Investments > Cannabis

SEC Charges ‘Recidivist Securities Laws Violator’ in Cannabis Firm Offerings

By Jeff Berman

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Cannabis plants grow in a greenhouse. Photographer: Cole Burston/Bloomberg

The Securities and Exchange Commission on Thursday announced charges against accused repeat offender Geoffrey J. Thompson, claiming he illegally sold more than $19 million in unregistered securities for a cannabis company he controlled.

In a complaint filed in U.S. District Court for the Northern District of Illinois, Eastern Division, the SEC says Thompson directed numerous offerings of unregistered securities from at least July 2014 through June 2019, ultimately raising more than $19 million from about 500 investors.

Calling him a “recidivist securities laws violator,” the SEC claimed he and his firm, Covalent Collective, used numerous mechanisms to solicit investors, including providing investors video and audio recordings in which he encouraged them to spread the word about the company’s securities to friends and family.

The complaint further alleged that, despite raising almost $20 million, Covalent never commenced any revenue-generating operations. Thompson diverted more than $2.7 million of investor funds for his own benefit, the SEC said.

In the process, he violated securities registration provisions of Sections 5(a) and 5(c) the Securities Act of 1933, the SEC alleged.

The SEC seeks injunctive relief, disgorgement of ill-gotten gains and prejudgment interest, and civil money penalties.

“Thompson is currently working as a consultant for a new cannabis-related venture that is seeking to raise funds from investors,” the SEC pointed out in its complaint.

In a related action, the SEC instituted settled administrative proceedings against Covalent, the regulator said.

The SEC previously charged Thompson and his microcap company, Accelera Innovations, with fraud for painting a misleading picture of the company’s finances that deceived the investing public about its true financial condition as well as its technology.

The SEC’s 2017 complaint alleged Accelera’s public filings included the revenues of a separate company that it did not own or control and, as a result, Accelera improperly inflated its annual revenue by up to 90%.

The earlier complaint also alleged that Accelera portrayed itself as a provider of software when, in reality, it was not providing software to anyone. The complaint also alleged that Thompson, acting through Accelera and Synergistic Holdings, sold about $1.7 million in Accelera stock to investors, and that the sale was not registered or subject to any exemption from registration.

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Jeff Berman

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