Andy & Catherine DeFrancesco Non-Related Party Transactions? : $AWSM CoolTech

Update: On May 9th CoolTech ($AWSM) announced in an 8-K it received a SEC subpoena asking about its unusual trading activity in September 2018. Defrancesco hired a New York based lawyer from Quinn Emanuel, Alex Spiro, to represent him in the matter after U.S. regulators were also asking inquires about Andy.

Original Text
This week I was first to report the wife of a South Florida public company executive Andy DeFrancesco, who makes investments in Marijuana companies, filed court documents to end their nearly 20-year marriage. Andy’s questionable investing style has been the subject of numerous recent press reports as an investor in a cannabis stock called Aphria ($APHA) and now as the chairman of Sol Global ($SOL). Mr. DeFrancesco’s wife Catherine was mentioned last year in a widely read investigative report by journalist Chris Carey of ShareSleuth because she showed up with sizable investments in stocks accused pump and dump artist Barry C. Honig was running. Andy often brags about Catherine’s looks and what a family man he is, according to stock brokers that worked with him, giving the impression the two are together. Now the odd arrangement the couple has with separation of financial assets and masked LLC’s is coming to light.

According to a records search of LLC’s filed with state register offices, this publication has found over 30 companies set up in Andy’s wife name. Half of the LLC’s in Catherine’s name were started after the DeFrancesco’s financial separation agreement had been signed in 2016. Some of the LLC’s on this list are used to buy shares in public companies or make investment in private companies that are later sold to public companies Andy DeFrancesco is invested in or is an officer or board member. Yet rarely, like in the case I just reported of Cannabis Cures Investments buying Florida-based medical marijuana business 3 Boys Farm and then selling it to Sol Global where Andy is CIO and Chairman, do we see that an affiliated party transaction has occurred or that share ownership with combined LLC’s and individual stock ownership constituent a known ‘group’ of investors. U.S. securities law considers an investment in a wife’s name, if a couple is still legally married, to be an affiliate transaction and the law requires disclosure of that, according to 2 securities transaction lawyers interviewed for this story.

But there are also work-arounds that lawyers like Catherine’s brother, Curtis Cusianto a former transaction lawyer and partner at Big Law firm Stikeman Elliott LLP, could set up for the couple that would give Andy some deniability if regulators came calling. According to a person familiar with the couple’s financial asset separation agreement, that Catherine recently asked the State of Florida to finalize via a divorce, the separation agreement was set up to give Andy an excuse to tell regulators that anything set up in Catherine’s name is a ‘non-related’ party transaction because he doesn’t know how she runs her finances now. I have found little evidence to show Catherine knows anything about high-finance investing. She owns a yoga studio.

Additionally according to attorney Wesley Paul of Paul Law LLP, “If Andy is truly in control of the LLCs that are in his (former) wife’s name, then these affiliate transactions are required to be reported under SEC rules and regs. Keep in mind that the separation agreement and a number of other agreements, including power of attorney or proxy voting rights, could be in place that could legally put Andy in a non-control position.”

Andy DeFrancesco at unknown marijuana farm

Andrew Anthony DeFrancesco and Catherine Johanna Brewer DeFrancesco were in a contested divorce battle for three and half years starting in September 2012 according to Broward County, Florida court records. Catherine (or Cathy) even had to resort to holding Andy in contempt during the proceedings. As Canadian transplants they had only been residents living together in Fort Lauderdale for a few years when Catherine first filed for divorce. Andy DeFrancesco had done business with alleged mobster Bobby Genovese and had a competitive friendship with him, according to DeFrancesco’s own testimony in a deposition about the controversial purchase of his first Florida home. It was Genovese who introduced him to the real estate broker who found his first Floridian mansion which was bought for $2.2 million. Court filings showed, the broker eventually sued the seller of the home because he had made a deal with Andy to under-report the sale price by a million dollars to cut the broker’s commission. The DeFrancesco’s ended up owning the house for nearly ten years and then sold it for a multi-million dollar profit to one of Barry Honig’s right hand guys John Stetson for $5.2 million last summer. The sale happen just two months after Catherine filed her petition for a final divorce decree and three months before the SEC charged John Stetson in the Barry Honig-led pump and dump ring.

Catherine DeFrancesco Three Months after filing for Divorce July 2018

Before the Florida move Andy was investigated by a regulator in Canada in 2009 but through fancy legal work has never been charged for securities fraud or trading as a group of undisclosed affiliates by the DOJ or U.S. securities regulators; which is something he’s been recently bragging about in interviews.

When he got acclimated to the South Florida microcap investing scene Andy started investing with Barry C. Honig and his associates. One of those deals was with an apple re-seller company called CoolTech who became Cool Holdings. The Securities and Exchange Commission brought a multi-year enforcement action against Honig and his associates this September for trading as a group of undisclosed affiliates and conspiracy to commit stock fraud. Andy is now trying to playoff how close the two worked together over the years on his twitter account and in interviews with journalist.

Yesterday this publication was leaked a series of text conversations from 2017 by Andy DeFrancesco and a broker at Laidlaw & Co. The broker was responsible for the first private stock offering CoolTech was doing for retail investors. A copy of the PPM obtained by this publication shows the offering was raising a minimum of $2 million and a max of $6 million with a share price of $2.50. According to the multiple brokers at Laidlaw Barry Honig brought the deal to Laidlaw. Honig was not an officer of the company. Then Andy DeFrancesco became the point person for the company as Chairman of the board. Barry also got John O’Rourke involved in the company. Both DeFrancesco and O’Rourke talked directly to Laidlaw brokers about the company and how they were doing in the capital raise. Then there was a problem with Laidlaw reaching the minimum $2 million raise—they needed help selling it.

Here are two text Andy DeFrancesco sent from his cell phone to a Laidlaw Broker in June 2017. Broker= blue text:

Andy DeFrancesco text to Laidlaw Broker about CoolTech private stock offering 6.17

Here the Laidlaw broker is trying to understand the valuations for the company:

DeFrancesco Text to Laidlaw Broker

According to internal customer records at Laidlaw seen by this publication Andy DeFrancesco’s account was set up under Delavaco Holdings Inc. Account number 1895-9110. Address 2300 E. Las Olas Blvd Ft. Lauderdale FLA.

Delavaco Holdings Inc is in Catherine DeFrancesco’s name, according to state registration records. According to the private placement memorandum Laidlaw was selling to retail customers, Delavaco Holdings was the holder of a large chunk of series A shares equal to 9.6% of the stock. (Series A means initial investors). Then on page 38 of the PPM it says Andy DeFrancesco had 0% of shares.

Yet in the above text messages it is Andy himself stating he put his own money in the company.

When CoolTech proposed a merger with InfoSonic in February 2018, SEC filings show on page 158 that Andy DeFrancesco, a director of the company, has 0% shares. CoolTech also claimed Andy would be deemed an independent member of the board. To list on NASDAQ a majority of independent board members is required. Yet Andy in his own words initially funded the company. And most importantly Andy’s family member through Delavaco owned stock in the company, which makes it very hard to legally claim independence as a board member. The DeFrancesco’s divorce was not finalized till March 20, 2019.

CoolTech ended up taking a ride up and then a ride down making it another engineered pump and dump.

Yesterday I reached out to Andy DeFrancesco via email and ask him to confirm the last time, date and month, he worked with Barry Honig. At 4:50 pm Andy responded via email that he had ‘zero interest in speaking” to me for a comment for my story and then for some reason offered his opinion, with a few choice slanders, on my personal life. (I have never met Andy face to face or even talked on the phone nor had any conversation with anyone at any of his companies about me.) Then Brady Cobb, CEO of Sol Global, emailed that they don’t want to comment on any questions I have. I had asked Cobb if he saw Catherine DeFrancesco sign corporation documents starting the LLCs, I believe Andy set up, that she transferred to Cobb’s name as manager like Cannabis Cures Investments. And I got my response in bold “NO COMMENT”. I wanted to make sure Andy had a chance to see the text messages he wrote to Laidlaw and had a chance to explain them before I went to print given they could be seen as contradicting to SEC filings.

So I texted Andy on his cell phone a copy of one of the text he’d sent that talked about him and Barry initially funding CoolTech. I asked where in SEC filings this disclosure is? Here is the text:

Request for Comment Andy DeFrancesco

Within a few minutes Andy decided to respond for comment in a text to me with this sexual vulgar response:

UPDATE 4.8.19 : Bloomberg TV Canada, who has reported on Andy DeFrancesco’s investing in the past, got one corporate governance expert to weigh in on how the board of Sol Global ($SOLCF) should react to DeFrancesco’s behavior last week. Amber Kanwar reported “In this situation, according to Leblanc, the board should immediately meet and convene a special committee of independent directors to determine if this violates the company’s code of conduct.”

That’s a valid statement except when the board of Sol Global appears to be stacked with affiliates of Andy DeFrancesco the chance of that happening isn’t realistic.

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Comments

  1. Thank-you for the excellent article revealing Related party transactions at SOL Global.
    I made a donation to your site.

  2. Awesome work shining light into the dark corners of white collar fraud. Thank you!

  3. Clark Lehman says

    just subscribed!

  4. gambelero says

    There are people in prison for 20 years because they stole $300 from a gas station. These guys steal millions and no one even investigates it other than a few journalist who willing to swim against the tide (money). I guess robbing retail investors is so much what Wall Street has always been about, that the Defrancescos of the world get a pass.

  5. bill cundo says

    I need a bookie to bet on andy cheese going to jail with bobby g in the next two years

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