CNBC Investigates Barry Honig trading in Bitcoin Company $RIOT

We witnessed somewhat of a reporting miracle today! CNBC TV journalist Michelle Caruso-Cabrera and her producer Scott Zamost took on an on-the-ground investigation into the questionable activities of micrcocap investor Barry C. Honig and got out from behind the desk to do some real reporting.

In 2016, I was first to expose that Honig and a fellow investor John O’Rourke were named in an SEC investigative subpoena regarding trading in MGT Capital. My reporting at trade publication Growth Capitalist explained the SEC could be looking at how a group of investors, including Honig, trade as a group without disclosing their affiliation. The investigation appeared to also be looking at stock promotion and how it was disclosed along with the timing of public announcements as to who owns how much of the stock. Today we see CNBC try to take on reporting with a similar fact pattern through Honig’s investing in a company called Riot Blockchain ($RIOT).

Riot made the rounds of financial news when its stock flew up in December from $8 to over $40 after a simple name change to a company in the Bitcoin business. CNBC reports “Until October, its name was Bioptix, and it was known for having a veterinary products patent and developing new ways to test for disease.” SEC filings show that Honig was considered an insider in the company because he owned more than 10 percent of the stock. John O’Rourke was gifted shares when he suddenly became the company CEO after Honig pulled an activist move that magically put O’Rourke in charge of the company and axed previous board members. Honig does a bridge loan, gets cheap cashless warrants and boom sells the stock on its high while retail investors pile in. Then the stock tanks. This type of investing is a rinse and repeat move for Team Honig and mirrors what we saw in MGT Capital.

CNBC actually did some good question-asking-reporting here although they didn’t get a lot of truthful detailed answers. Caruso-Cabrera went to Honig’s Boca Raton office at 555 S. Federal Highway Suite 450 after she couldn’t get anyone at the company to do an interview. We see Caruso-Cabrera enter Honig’s office and find none other than John O’Rourke there. O’Rourke comically runs away from her and almost slams her fingers in the door but then comes back out to promise an ‘off camera’ interview. Honig and O’Rourke both deny that they “work together” but then Honig later admits O’Rourke did at one time have an office in his office. If the CEO of the company had his office in a major shareholders office that claims not to control the company that doesn’t look good. You can read CNBC’s print story and see on-camera footage here.

A lot of the CNBC coverage focuses on if O’Rourke currently works out of Honig’s office. Their reporting indirectly tries to point out both of these men could be lying. If CNBC wanted to drive home this point they also could have done some SEC filing research, like I did. where John O’Rourke office address is Honig’s office address in this filing from December 2016.

I have previously reported O’Rourke has worked out of Honig’s office after I interviewed a person who saw him working there. Which is just odd he goes and denies it to CNBC. I reached out to O’Rourke’s attorney Nick Morgan at Paul Hasting this morning to ask what CNBC didn’t clarify. When did O’Rourke stop working out of Honig’s office and what is his new office address? Attorney Morgan said he would get back to me but as of press time I have no answer. Honig was also contacted through his Attorney Charles Harder and asked when O’Rourke stopped working out of his office. At press time Attorney Harder did not respond.

While we really enjoyed the gotcha moments Caruso-Cabrera captured on camera, it was disappointing not to see CNBC mention the elephant in the room. Honig and O’Rourke are named in an SEC subpoena for their role trading and investing in MGT Capital. On January 31st the WSJ did a similar story on Riot looking at Honig and his role in the company which included their reporter Ianthe Dugan asking Honig flat out about the SEC subpoena. The WSJ reported “Mr. Honig said that he hasn’t been contacted by the SEC and doesn’t believe he is a target. “I am 120% not worried,” he said.” A government agency investigating securities violations usually doesn’t knock on the subjects door and let them know they are gathering evidence against them until they have a case built. So Honig’s public denial doesn’t carry much weight in my book.

There is also something else alarming in the CNBC story. Honig’s longtime deal attorney Harvey Kesner, who is now a named partner at Sichenzia Ross Ference Kesner LLP, was reached on the phone by CNBC and said “he didn’t know anything about Riot Blockchain and Barry Honig.” And then he hung up on them. What??? Kesner is the named deal lawyer on multiple Honig investments. He is the attorney I have called multiple times, and has responded for Honig on deal questions and his law firm is on SEC filings for Riot. On top of all that CNBC figured out Kesner also owns an investing company called Paradox Capital Partners, which I previously reported on, who also owns RIOT stock. I emailed Kesner this morning to give him a chance to clarify his comment but so far he is radio silent.

I have to wonder if Kesner is trying to finally distance him self from Honig because of questions about the timing of Honig’s self reporting of RIOT stock ownership. You see since Honig went above owning 10% of the stock (he reported he owned 11%) ,and then sold to own about 2%. if he did that selling within 6 months he is subject to the rules that prevent sell-then purchase or vice versa within six months. Honig should have filed a Form 3 which I can’t seem to find in SEC filings. And all of this could be a section 16(b) violation of the Exchange Act. Which creates the opportunity for the company (RIOT) to sue Honig for any profits he made from a short swing and the profits go back to the company. But I guess if your friend John O’Rourke is running the company he is not going to file that lawsuit! And we don’t know when Honig officially sold because of his lack of timely reporting. Something we saw him also do with MGT Capital.

Here is an example of a lawsuit for a 16(b) violation with a company called WPCS. A stock Honig and O’Rourke also invested in.

John O’Rourke told Benzinga after the first CNBC video aired that their coverage was Garbage and a Hit Piece. That means Michelle Caruso-Cabrera is on the right track. Riot saw a $5 drop in its stock price today which is about a 34% decrease since the CNBC story aired. Ambulance chasing securities lawyers have also announced that they plan file a class action lawsuit for securities violations against RIOT.

Editor’s Note: Honig previously sued me for reporting he was named in an SEC subpoena. He dropped that litigation against me in January and I am here reporting again. Lawsuits are a pain and risk me having to disclose sources but they will never deter me from staying on the story. Donations to this free publication are greatly appreciated and always needed. Tips can be sent to teribuhl@gmail.com .

Subscribe

Enter your email address to subscribe to TeriBuhl.com and receive notifications of new articles by email.

Comments

  1. What is incredible here is how superficial the CNBC report really is – they say Honig and O’Rourke have done this before. Why don’t they just Google “Barry Honig” “John O’Rourke” and see more than 20 deals where they worked together. How many filings with the SEC list that same office. And don’t forget to throw in that Brauser guy and John Stetson and what about his MARA company. And COOL. And MGTI. Just google all those terms. Amazing CNBC is so elementary in its work. Teri gets it, the others need to read her work!

    Keep up the good work Teri. Don’t let these guy squash your ground breaking research. Good job!

  2. Why is this turd still trading at $10 after what many bloggers have been saying for weeks now makes it on the mainstream business network? It should go straight back to under $2 where it came from.

  3. Here’s Hoing Playbook

    http://sharesleuth.com/investigations/2018/03/pretenders-and-ghosts-stealth-promotion-network-exploits-financial-sites-to-tout-stocks

    Nice reference to Yahoo Interclick and 5to1 deal which Yahoo bought for $30M what was Ross Levinsohn thinking?
    5to1, an Internet advertising company that Mr. Brauser sold to Yahoo in 2011 for $28 million

  4. Gary Corsale says:

    It’s a shame that MGTI had to resort to the toxic financing that Honig and pals provided in the early startup days. The NYSE de-listed them because of it. Unfortunately it will take a few quarters in 2018 for the company to shed the stigma of the early startup capital days. When MGTI rid themselves of these guys and deals, Honig sued them because he wanted to squeeze more from them and was denied. MGTI has now rid themselves of these entities and looks much better for it. I would encourage a follow up.

Share Your Voice