On Tuesday, District Judge Alvin K. Hellerstein of Southern District of New York denied GPL Ventures LLC, HempAmericana and Seaside Advisors’ move to dismiss the case brought against them by the Securities and Exchange Commission.
GPL Ventures and its associated companies are in business in privately acquiring and selling securities of microcap issuers. HempAmericana researches, develops, and sells products made of industrial hemp. Lastly, Seaside Advisors LLC is a consulting firm for various microcap companies that assists with marketing and public relations.
Judge Hellerstein found the motion to dismiss the case meritless based on the defendant’s failure to cite relevant precedent. The defendants claimed “that HempAmericana did not make or disseminate the promotional statements, and that the securities laws do not preclude an issuer from paying for stock recommendation.” Yet, according to Judge Hellerstein, they do not cite or discuss SEC v. Martino, a relevant prior case.
The original complaint alleges that the defendants had been running a scalping scheme in which they would enrich themselves by “privately acquiring large blocks of discounted shares of stock and publicly selling those blocks into the market for their own account, generating gross proceeds of at least $81 million.”
The scheme allegedly started with GPL Ventures would purchase such stocks at a discounted rate and then sell them simultaneously while Seaside Advisors would run promotional campaigns, “which did not disclose that the promotions were indirectly funded by the issuer, HempAmericana, using the proceeds received from the GPL defendants.”
Ultimately, Judge Hellerstein found that the SEC’s case was plausible under the Exchange Act Section 15(a); therefore, the initial case management conference will be held on February 25, 2022.
GPL is represented by Smith Vilazor and Corrigan & Morris. HempAmericana is represented by DLA Piper.
