New Emails show attorney Harvey Kesner aided Defrancesco in Questionable Cannabis stock Deal: $APHA $SOLCF

Just days after Canadian cannabis company Aphria announced it was paying an exorbitant price for undeveloped marijuana farms in Jamaica and South America from Scythian Biosciences an insider, Andy DeFrancesco, was using Barry Honig’s deal lawyer to move hidden shares within his family. I am reporting for Cannabis Law Report today that new emails written by attorney Harvey Kesner on behalf of the DeFrancescos could show how the insiders skirt beneficial ownership disclosure rules. I reported last week, DeFrancesco’s alleged hidden stock ownership is at the heart of a new securities fraud lawsuit filed against him and his band of sophisticated bad actors by Aphria main street investors.

According to two people familiar with the transaction, some of Andy’s Canadian friends who benefited with him on the deal are: Canadian millionaire Michael Serruya, Marvin Igelman, Lloyd Tomlinson and Clifford Starke. The names of investors on the deal, that ran through a private equity firm Andy controls called the Delavaco Group, is redacted in documents filed with Canadian regulators. The only public details shareholders get to see is how many millions in shares Scythian paid the LLC Andy set up for the assets. You can see Team DeFrancesco celebrating in February 2018 with Andy in Jamaica at a hotspot called Prendy’s On the Beach after they closed on the private cannabis license deal. The photo was posted by Michael Serruya on his private Instagram account.

My story at Cannabis Law Report details a Scythian stock transaction by Andy’s sister Andrea DeFrancesco (a flight attendant) and his wife Catherine DeFrancesco (a yoga studio owner) that appears to show Andy controlling the shares in an off-market stock sale between family on July 23, 2018. This is six days after a C$193 million deal is announce by Aphria and Scythian, which Andy is believed to have significantly benefit from at the expense of Aphria shareholders. When the U.S. broker dealer saw attorney Harvey Kesner was pushing to get the shares through the U.S. clearing system call the DTC the transaction’s legitimacy was challenged. Harvey Kesner was also the SEC reporting lawyer for Scythian during this time, which could create a conflict of interest for the New York law firm, Sichenzia Ross Ference Kesner LLP, that use to bear his name. Read here to get a behind the scenes glimpse of how parts of the alleged securities fraud was run.

Andy Defrancesco sued for Securities Fraud for role in Aphria: $APHA

Cannabis financier and Sol Global chairman Andrew Defrancesco is front and center of a 90-page securities fraud lawsuit filed in New York federal court this week. Defrancesco, a resident of South Florida has been publicly fighting recent press reports and a short sale research paper both questioning the legality of his investments in multiple publicly traded cannabis companies. The current lawsuit is being ligated by Adam Apton of Levi & Korsinsky LLP on behalf of shareholders who lost millions in Canadian cannabis company Aphria. Aphria trades on U.S. and Canadian stock exchanges ($APHA).

Apton was recently named lead lawyer in the lawsuit after multiple law firms fought to sue the alleged masterminds of the Aphria fraud. Defendants now include Aphria executives Cole Cacciavillani and John Cervini, in addition to Defrancesco and publicly traded Scythian BioSciences (since renamed Sol Global Investments $SOLCF $SOL.cn). Victor Neufeld Aphria’s ex-CEO, remains a defendant from the original complaint.

John, Andy, Cole $APHA accused fraudsters

The amended complaint was filed May 28th along with summons issued to the new defendants. Defrancesco might try to hide from service of this lawsuit, similar to how he did in a defamation suit filed this year by a cannabis research firm. The address used for service in both lawsuits, 2300 E. Las Olas Blvd., 5th Floor Fort Lauderdale, is Andy’s work address for multiple LLC’s he owns. As first reported by this publication, Defrancesco sold his Fort Lauderdale home at, 811 SE 26th Avenue Fort Lauderdale, in July 2018 to one of Barry Honig’s right hand guys, John Stetson. Real estate records show Stetson bought the home for an inflated value of $5.2 million in cash while the home was assessed at $3.6 million. A few months after the home sale Stetson was named as a defendant in the pump and dump enforcement action by the Securities and Exchange Commission. Since then, there is no paper trail showing where Andy lives or if he is still lives with his recently divorced wife Catherine Defrancesco.

This week I obtained new records that show Andy could be loading up on Florida real estate possibly in an attempt to keep assets out of reach of lawsuits or the government. The most recent purchase is a 7-bedroom, 11-bath, 9,500 square foot custom-built home with a dock and water front view in the Flamingo Bay area of Miami Beach, FLA. State records show 4395 Pine Tree, Miami Beach, Fl. sold for $19.9 million in July 2018 to a new LLC named ONJ Holdings. Florida is a homestead state, which means it is harder to attach a person’s main residence in case of judgments or liens.

4395 Pine Tree

Florida corporate records show that ONJ Holdings LLC was established on 7/26/2018 and the Pine Tree property was purchased 5 days later on 7/31/2018. The state records also show that none other than Andy Defrancesco buddy Michael Galloro is the manager of ONJ Holdings. Galloro is, or was, the COO of Delavaco Capital. He was also the interim CEO of Liberty Health Sciences, and the principal of ALOE Finance, a company that operates out of Delavaco’s offices and has offered CFO services to Scythian BioSciences/SOL Global. Andy Defrancesco is the founder of Delavaco, the corporate entity to which Aphria was paying high consulting fees for buying cannabis related assets, according to the lawsuit.

The consulting fees earned by Defrancesco’s company are highlighted in the new amended class action shareholder lawsuit against Aphria and Andy Defrancesco. On top of the consulting fees Defrancesco and Sol Global are accused of selling cannabis farm licences to Aphria in an overseas area called LatAM for allegedly inflated prices with the help of Aphria executives John Cervini, Cole Cacciavillani and Aphria president Vic Neufeld. The lawsuit states these actions were designed to benefit insiders at the expense of public shareholders, and the Aphria executives aided Andy to hide his role in the alleged scheme.

Andy Defrancesco Chairman of Sol Global

This is the first complaint in which Andy Defrancesco is a named defendant tied to securities fraud. There are currently two other potentially damaging lawsuits playing out in federal court. One is a defamation suit in South Florida filed by a cannabis research firm New Frontier Data, and a second lawsuit names his recently divorced wife, Catherine Defrancesco, in an amended shareholder fraud suit, filed in New Jersey, against RIOT Blockchain. Andy has admitted in press reports to Bill Alpert at Barron’s that he runs the deals in Catherine’s name.

Brady Cobb, the president of Sol Global told me in an email two weeks ago that the New Frontier defamation lawsuit was settled and signed, and the parties would be making a joint statement on the settlement. But a check of the court docket still shows the lawsuit is active and there have been no joint statements made. Repeated request to Cobb to understand why he made potentially misleading statements about this lawsuit settlement went unanswered this week. Further, Sol Global has also not updated filings with the CSE mentioning the New Frontier Lawsuit against its chairman.

Andy appears to be leasing the $20 million waterfront mansion in what could be a move to hide his current address. Andy does live there according to a person I interviewed in the Defrancesco’s circle but would not go on the record for fear of retribution. Additionally, a records check in WestLaw found that a utility bill for 4395 Pine Tree was transferred into Andrew Anthony Defrancesco name in March 2019.

The home also just happens to be down the road from his mega-millionaire friends, the Schottensteins. Property records show 4555 Pine Tree is owned by Joseph Schottenstein and is a six minute walk from where Andy is believed to be living. The Schottensteins and Defrancesco (and Barry Honig) applied for and were granted a cannabis store license in Ohio. Schottenstein was also the lead architect behind the trumped-up hostile takeover for Aphria this year after two short sellers published a report in December highlighting the self-dealing and possible fraud at Aphria and Defrancesco’s role in it. The stock price tanked after the report, which is why there is class action lawsuit against Aphria executives and Defrancesco.

In February, Green Growth Brands aided Aphria in its PR damage control campaign by offering what Aphria called a low bid for their assets so Aphria could try and show the company was more valuable, at the same time that the press and stockholders were seriously questioning the accuracy of their public statements and financials. Then on April 15th, Green Growth withdrew the bid. The same week Aphria admits that its LatAM assets had to be written down by $50 million Canadian dollars (a decrease of 35%) after the Ontario Securities Commission said the company was required to perform an asset impairment test.

This asset write-down, is what helped lawyers in the class action lawsuit add Defrancesco and Sol Global to the securities fraud lawsuit. In the U.S. discovery is not allowed until the class action survives a motion to dismiss, so it will be important to watch if the aggrieved Aphria shareholders can keep Defrancesco’s name in the suit. If so, it could be a gold mine of much needed hidden info for shareholders in other companies in which Defrancesco invested. Defrancesco has consistently been able to claim he is an independent shareholder and didn’t direct the actions of Aphria’s executives in buying the LatAM assets. The investors in the private companies he sells for alledgley inflated prices are also hidden because of recent shareholder privacy rules by the Canadian Stock Exchange (the CSE). Andy has said in press reports to the Globe & Mail and Bloomberg Canada that he is proud of the price he got for the assets. Defrancesco likes to brag in his twitter feed about beating market players and crushing them. His boasting about how much money his deals made, while structured in the names of others or hidden LLC’s he owns, could now set him up for trouble with lawsuits and regulators. Andy’s own statements are now used throughout the amended Aphria shareholder suit to allege misconduct and self-dealing.

The amended complaint reads like a rewrite of the Hindenburg Research short seller report written by Nate Anderson and Gabriel Grego of QCM. But it does include new photos from May showing the alleged worthlessness of the cannabis farms and offices. It also talks about a significant problem with the Columbia cannabis deal, ColCanna, that Vic Neufeld said would be Aphria’s best growth asset after the short seller report came out. The lawsuit says, “According to the Colombian Agriculture Institute, ColCanna was not granted authorization as a ‘selected seed producer for psychoactive cannabis and hemp’ until October 30, 2018.” You need 4 levels of a licenses in Columbia to make a go as a profit making cannabis company. Following that a company must receive ‘quota approval’ from the government to determine the quantity it is allowed to produce.
According to emails from the Colombian Justice Ministry and the Health Ministry in December 2018,seen by this reporter, the ministries confirmed ColCanna had NOT applied, nor been granted, a regular quota for 2019, nor had they applied for a supplemental production quota in 2018.

The lawsuit states that the, ColCanna quota is currently ZERO. That is because the company missed the mandatory April 30, 2019 deadline that dictated how much it could grow in the next year, according to the lawsuit. The lawsuit also shows photos of just five people working in an office listed for ColCanna.

Corporate filings for Aphria and Scythian/Sol Global show the land in Columbia was valued at $120,000 yet photos showed no cannabis was grown on it at the time the valuation was reported. Notwithstanding ColCanna’s apparent lack of operations, Aphria paid C$84 million to Scythian for a controlling stake in the entity, according to the lawsuit. Defrancesco and affiliates acquired the assets at an undisclosed price, then sold them to Scythian/Sol Global, which in turn marked up the assets when selling to Aphria.

At press time I did not hear back from the Colombian government to confirm the 2020 status of the ColCanna quota as detailed in the lawsuit.

Vic Neufeld, Defrancesco’s friend, is no longer CEO of Aphria, after suddenly resigning in January 2019. Neufeld was replaced by Irwin Simon, who was in charge when the company recognized the write-down of the assets at the heart of the lawsuit.

Andy Defrancesco did not respond to an email requesting comment about being named in the amended Aphria lawsuit. Brady Cobb, CEO of Sol Global, responded “no comment” to the lawsuit.

Update 7pm: This story has been updated with emails from the Colombian government regarding ColCanna’s quota

SEC admits Team Honig is under the criminal investigation I warned about in 2016

The Securities and Exchange Commission has now confirmed there is a parallel investigation into the Team of bad actors that work with Barry C. Honig in the microcap pump and dump ring he allegedly leads. I was first to report in the fall of 2016 that the San Francisco Dept. of Justice was investigating this group, which included Honig, Michael Brauser, and Miami billionaire Philip Frost.

Nancy Brown, the lead lawyer for the SEC in the Team Honig case, said during a hearing on May 15 that “there is a parallel criminal investigation. It’s not a dual investigation, it’s a parallel investigation,” according to a court transcript from the SEC’s case against Honig, Brauser, Frost and friends.

I was first to report the Northern California DOJ flipped their first witness against Barry Honig back in 2014 via a small cap CEO named Joel Noel who plead guilty to securities and wire fraud. Noel, who ran a company called YesDTC, said that Honig knew how to buy shell companies set up by a lawyer who would release shares that should be restricted as unrestricted so trading in their pump scheme could begin fast. Noel also said Honig told him to pay a promoter, named David Zazoff, to get false press releases out to push the stock price up. The lawyer who sold the shell, Gregg Jaclin, was also arrested by the Northern California DOJ in 2017. According to a person involved in the investigation Jaclin and Honig had worked together before and Jaclin could be a viable witness for the DOJ to build their case. Jaclin’s case has been sealed since the SEC brought their charges against Honig.

Why the San Francisco office of the DOJ has waited this long to bring their case while investors in companies like $RIOT, $MARA, $MGT, and $MBVX have gone through Honig lead pump and dumps has been a mystery till now. That’s because at the May 15th hearing about a discovery schedule John O’Rourke’s lawyer Gregory Morvillo tells Judge Ramos he knows some of the defendants in the SEC vs. Honig case have signed tolling agreements with the San Francisco DOJ. This is a stunning admission. Tolling agreements allow the DOJ an extension of time to bring a case past the standard statue of limitations. Attorney Morvillo also said he thinks the tolling agreements have expired as a reason for why the San Francisco DOJ would be bringing an indictment soon. How Morvillo knew about the tolling agreements could signal his client John O’Rourke is one of the defendants that signed one of them.

Scott Zamost and Jenny Schlesinger, two CNBC print reporters, apparently went down to the SDNY court house yesterday and read a copy of the public transcript in the SEC vs Honig case. They were first to report on what the SEC said about the existent of a parallel criminal investigation. The transcript also shows John O’Rourke’s lawyer telling the judge that he thinks someone in the SEC Honig case has become a DOJ cooperating witness now and by that person being a songbird the DOJ could bring an indictment soon. The conversation started because Michael Brauser along with Robert Ladd, CEO of MGT Capital, have been pushing the SEC to show them their evidence via writing aggressive letters to the judge. O’Rourke’s attorney spoke up in court to join that argument. Attorney Morvillo told Judge Ramos “We are behind the eight ball here” in reference to how the SEC has been holding up their evidence.

Morvillo went on to say, “If one or more of our clients gets indicted you can bet we will be back here asking for a stay in this case. In the meantime, while San Francisco drags its feet on this, we don’t think it’s appropriate for the SEC to act as a stalking horse for the U.S. Attorney office.”

I reported this month the SEC has played a stall game putting off defendants in the case from getting discovery by delaying motion filing dates and extending times for defendants like Honig to sign a settlement agreement. The SEC said in a letter to Judge Ramos last month that Honig has agreed to settle their case in principle but it’s not a signed deal yet and the SEC commissioners have to vote on it so the judge gave them a six week extension on the defendants filing their motion to dismiss. Scott Zamost and Jenny Schlesinger at CNBC are likely wrong when they reported that Honig’s settlement was called off.

The court transcript shows SEC attorney Brown was trying to get judge Ramos to scheduled the defendants for depositions with the SEC before all the discovery is due April 30 2020. Robert Ladd, CEO of MGT, Michael Brauser, John Stetson, and John O’Rourke wanted the depositions to be latter in 2020 closer to the end of discovery. The debate in court was the SEC was worried that the defendants would get all their discovery and then assert something called “the act of production doctrine”. This would mean the defendants like O’Rourke and Brauser could tell the SEC they aren’t going to turn over their emails that the SEC has asked for because it could incriminate them in the DOJ case. The SEC said they had from 600,000 to 1.2 million of documents to turn over for discovery. The SEC also admitted a lot of the docs came from a laptop that the ex-husband of a former MGT Capital employee had. It’s unclear if those docs will be admissible since the laptop was likely stolen in a bitter divorce battle, according to a person involved in the case. The whole discovery and deadline delay drama is like an episode of Billions where the government plays dirty tricks to get convictions and the Wall St bad actors have better lawyers to outsmart them.

I don’t know who the new Honig cooperating witness is that O’Rourke’s lawyers says the DOJ has under their thumb. And I highly doubt O’Rourke’s lawyer knows if the DOJ is wrapping up their case unless he has made an agreement for his client to self surrender. Chris Carey at www.sharesleuth.com was first to notice Frost’s company $OPK had mentioned in recent SEC filings that while Frost had settled with the SEC ‘other government agencies’ could also bring a case. John Ford who lives in Northern California was the first member of the group to settle with the SEC before the case was brought and court docs show he has been cooperating. Additionally, another stock promoter who was charged criminally by the DOJ in stocks that Honig did not invest in has made a plead deal with the DOJ this week. Brian Robert Sodi, known as the Mailman, worked with a lot of bad actors in a lot of stocks and the DOJ only charged over a few stock frauds. I have confirmed the DOJ could use him to testify against Honig because Honig had worked with him. Sodi’s attorney Brent Baker of Clyde Snow LLP told me today, “Brian is looking forward to the whole truth coming out now and is now ready to put this matter behind him.” Sodi plead guilty to only one of the ten counts of wire and securities fraud against him and could be asked to pay up to $2 million in restitution. His sentenced will be delayed now until the government is done using him as a C.W.

The CNBC reporters didn’t attend the SEC vs. Team Honig hearing. Or get anyone else in the case to try and talk about who the DOJ recently flipped. They also failed to report the questionable tactics the SEC has been using to try and get the defendants to do depositions before they got all the SEC’s discovery.

Schlesinger and Zamost also mislead their readers when they reported this was the first time a criminal investigation into Team Honig had been confirmed. They broke basic journalistic ethics by not reporting the San Francisco DOJ investigation was first confirmed and reported by me at this publication a few years ago. I had confirmed in 2016, via a lawyer for an investor victim in the case who was interviewed by the SF-DOJ, an interview with a Honig co-conspirator who was also interviewed by the SF FBI, and had a copy of a FBI case number for the Team Honig investigation before I went to print. I did on-the-ground shoe-string reporting to get this important news out to investors unlike the CNBC print reporters who simply read a court transcript first and then executed journalism theft by not linking and credit the first reporter to break the DOJ news. At this publication I always name, link and credit any publication and the journalist who reported news first because it’s likely they have good sourcing on a story and readers should know that.

Additionally Honig was so freaked about about me finding out about the SF-DOJ investigation that he used anti-media lawyer Charles Harder to sue me in 2017 and tried his best to get the story taken down and to get an apology from me. I fought the case for a year and won. Honig dismissed his suit in January 2018 and the reporting stayed up and was sourced in other news reports. Additionally now that we know there were tolling agreements signed I think Honig knew he was under criminal investigation when he sued me and so did his attorney Charles Harder, which is one of the most unethical things a lawyer could do. Clearly the point of the lawsuit was for Honig to try and figure out who I knew was talking to the FBI and SEC. But I held my ground and never told even as discovery was starting.

Criminal charges are the only thing that have a chance of stopping the Team Honig pump and dump ring given the SEC has shown they are accepting low dollar fines from defendants that have settled. Philip Frost paying $5mn is less than his spends in his bar bill in a year. A ban on being a director in a penny stocks could slow Honig down but I don’t see how it helps given he has a file-a-fax of rent a board member guys he can call. The SEC amended compliant, filed in March, clearly shows Honig is willing to break the law and pay others like John Stetson to make hidden investments he is really funding so even if he is banned he could get nominees to do his dirty work. Jail time and a felony convection is the only strong hold the government has if they really want to protect investors and clean up the microcap market. Let’s hope the DOJ gets off their butts and acts soon as there are current Honig pump and dumps happening that likely include PolarityTE, Marathon Patent and RIOT Blockchain.

This story has been updated with details of the tolling agreements with the DOJ and news about the problems with discovery in the SEC case.

May 15th Court Transcript can be read here

Bloomberg Journalist Subpoenaed in Platinum Partners Securities Fraud Trial

The criminal trial of Mark Nordlicht and his team of executives at hedge fund Platinum Partners is looking like it’s going to be a knock out fight between the federal prosecutors in the Eastern District of New York and Nordlicht’s celebrity attorney Jose Baez. The hedge fund defendants stand accused of operating a billion dollar Ponzi Scheme via securities fraud and conspiracy to commit securities fraud that includes inflating assets to earn more fees. Nordlicht’s threw the first punch by having his attorneys subpoena Bloomberg journalists for trial because they were allegedly tipped off to the government’s investigation before Nordlicht was arrested by the DOJ’s lead attorney who brought the case. That attorney is Winston Paes who left the EDNY in 2017, before the case got to trial, to go make more money at big law firm Debevoise Plimpton LLP. Attorney Paes was the deputy chief of the EDNY business and securities fraud group and has been accused, by Nordlicht, of leaking information known to the grand jury. According to a person familiar with the case the Bloomberg reporters being subpoenaed are microcap reporter Zeke Faux and long time Business journalist Patricia Hurtado. Christine Smythe, who is now an associated editor at trade publication The Insurance Insider, is also suppose to be subpoenaed. Smythe says she isn’t aware of any subpoena. Smythe worked with Zeke Faux when she was at Bloomberg to break news that the FBI and Postal Inspectors raided the New York office of Platinum Partners on June 22, 2016, which was nearly 6 months before the hedge funders were arrested. In a letter to the judge the DOJ has already complained about journalist being subpoenaed.

Smythe and Faux reported the raid was due to an investigation by the EDNY over problems with the hedge fund’s business. Their story described the scene in Platinum Partner’s lobby when the raid was happening so it looks like they were either tipped off to go see it or someone at the government told them what happen. The attorneys at the Eastern and Southern district of New York have a habit of tipping off their favorite reporters to raids in an attempt to get a visual perp-walk into the news before a defendant is even charged. It’s the same pattern of legal maneuvering we saw in the SDNY’s long running insider trading investigation into Stevie Cohen and friends at SAC capital. After the raid at Platinum, Zeke Fauk reported on August 11, 2016 that the EDNY investigation was focused on illiquid assets the fund held that were investments in oil fields. Faux reported the drops in the oil market and production didn’t match up with what Platinum was posting as returns on their oil investments. How Faux figured out Platinum asset valuation problems and the EDNY legal strategy to charge Nordlicht and team has been front and center of Nordlicht’s defense.

According to court filings and a person familiar with the case Nordlicht got a hold of internal DOJ emails and text messages between attorney Winston Paes and the Bloomberg reporters by forcing the DOJ to hand them over via a Freedom of Information filing. Because the emails showed attorney Paes was talking to the Bloomberg reporters and even met for drinks with Christine Smythe the night before the raid; Nordlicht has argued it was Paes and his team who leaked information from his investigation to Bloomberg. Nordlicht’s attorney Jose Beaz has been screaming that this is misconduct by the DOJ and the case should be thrown out. Attorney Beaz argues by tipping off journalist the DOJ forced Platinum’s investors to rush to redeem and forced the fund into Bankruptcy, basically crippling the defendants in the case before they were even arrested. According to a person familiar with the communications Paes would regularly reach out to female reporters Smythe and Hurtado.

Nordlicht’s lawyers said in opening arguments this week they don’t know for sure what info the government tipped off to the journalist or who did it but wants a chance to put people involved on the stand to prove their theory. The judge isn’t buying the DOJ misconduct theory though and ruled team Nordlicht couldn’t use that as a strategy before the trial started. Attorney Jose Beaz side-stepped that decision in his opening arguments on Tuesday and brought up the idea of DOJ misconduct in a move that got his theory in the juries mind and the DOJ is freaking out. Letters to the judge filed in the last few days show the DOJ is trying to get the judge to ‘punish’ Nordlicht’s lawyers. Additionally team Nordlicht has subpoenaed a lawyer at the law firm attorney Winston Paes is now working at. There is a motion to squash the subpoena and the judge has not decided on it as of press time. The Debevoise lawyer subpoenaed, Micheal Mukasey, did a due diligence review for Platinum in 2013. It was designed as a third party review to give institutional investors confidence in the returns and asset values Nordlicht was posting. Team Nordlicht would likely want to argue that Winston Paes violated some kind of DOJ conflicts policy by going to work for a law firm who previously represented Platinum but the judge has made statements it doesn’t matter because the DOJ actions don’t have anything to do with the crimes being argued. The DOJ misconduct strategy could be used if Nordlicht’s case goes to appeal.

A few months prior to the Bloomberg stories in question, Reuters investigative journalist Lawrence Delevingne was first to report how is was very curious that Platinum got bond holders in Black Elk Energy to vote to give Platinum, an equity investor, money from the sale of assets. Bond holders always get paid before equity in the capital structure. Delevingne figured out that the voters in the bond ran a fund called Beechwood and had previously worked for Platinum. When the DOJ eventually charged the Platinum executives, the questionable actions Delevingne highlighted in his reporting were front and center in the DOJ complaint.

What Delevingne didn’t report in his April 2016 story (we are going to assume because he didn’t know it), was the money Platinum got from the alleged bond rigging vote was desperately needed to keep returns up and payoff redemptions to some of Platinum’s favorite investors. At least that’s what the DOJ says happen and now they have to prove it at trial. Nordlicht and his co-conspirators have plead not guilty and said in press reports they look forward to trial so they can clear their names.

The idea that Winston Paes colored outside the lines in his work at the DOJ isn’t surprising to anyone who has covered one of his investigations. Attorney Paes showed signs of being a media whore through out his career at the DOJ. He was actively seeking to get his name in the press like the glowing profile Christine Smythe reported on his rule at the EDNY a year before Nordlicht’s arrest. Paes like to go after Wall Street indictments that would make splashes and was involved in multiple cases he never finished at the DOJ. He acted as a lead attorney at the end of the NIR Group hedge fund fraud case and then was part of the EDNY lawyers that failed to build a case to charge NIR Group’s leader Corey Ribotsky for securities fraud. (I reported for years on Ribotsky’s fraud which led to the SEC civil securities fraud charge against Ribotsky and was in the court room when the EDNY attorneys admitted they failed to build a criminal case against Ribotsky even though they had secured a conviction against Ribotsky’s right hand man Daryl Dworkin.) I reported in 2014 for the trade publication I was working for called Growth Capitalist, that the EDNY also leaked me information about their investigation strategy into Ribotsky and his fund. The government lawyers use to call me looking for witnesses they could use to build a case. If the witnesses wanted to talk I did connect them DOJ lawyers. It was how I was able to confirm a criminal investigation was going on and pass muster to report it with my editors at DealFlow media and MarketNexus Media. If the subjects of my stories had tried what Nordlicht is doing, subpoena me to reveal sources in a criminal investigation, I wouldn’t do it and would be willing to be held in contempt. But in the case of the DOJ I don’t consider them a source especially given the fact that any seasoned investigative journalist knows they are only giving you info to prejudiced a jury before they have a chance to get to court. In my NIR Group reporting I didn’t go seeking DOJ help they proactively came to me.

With the Nordlicht case it could be someone not even working for the government that was helping reporters with research, like others familiar with the fund, who were trying to warn investors to get their money out before the fund folded or they were just pissed at Nordlicht. And the stories that were not assisted by the DOJ could be the cause of the rush to redemptions and the fund’s bankruptcy. But we don’t see Nordlicht’s lawyers arguing that. I have always been uncomfortable with the way the DOJ has some magical bat line to pubs like the Wall Street Journal who get tips to show up at dawn to video a Wall Streeters arrest then report the DOJ’s side of a story while the defendant is left being forced into silence because his lawyers have warned him not to talk. But that’s not happening with Nordlicht because he is fighting back in a very public way, which is why this case is an incredible view for reporters and their readers to see how the sausage gets made at the Department of Justice. It’s a unique chance to view the dirty tactics the DOJ is allowed to execute in the name of justice regardless of if the defendants likely did what they were accused of.

John Marzulli, press guy for the EDNY, has refused comment on this story and won’t answer basic questions like how DOJ conflict rules work. Zeke Faux did not respond did not to a request for comment. We will be watching to see if the judge allows journalist to testify and Bloomberg’s legal team will likely fight the subpoena. Nordlicht’s lawyer would not comment on the case.

This story is updated

UPDATE 5.1.19: Chris Roush of Talking Biz News got a senior press woman at Bloomberg to respond to the news their journalist have been subpoenaed. She admitted it happen and said if Nordlicht doesn’t withdraw the subpoenas Bloomberg will file a motion to squash. The DOJ has about four weeks to present their case, so the Bloomberg journalist won’t be called as defense witnesses for about a month. As of now Nordlicht is not withdrawing the subpoenas so it’s in Bloomberg’s court to put an argument into the public court docket about why their Journalist shouldn’t be forced to testify and to fight for source protection. Keep in mind the sources they’d be protecting, according to Nordlicht’s court filings, are allegedly the DOJ and FBI. Bloomberg public relations was silent today when I asked them to respond for comment.

Honig’s broker dealer Laidlaw target of FBI investigation

A bio-pharma company based in Massachusetts is the newest stock to be tied to a ring of small cap fraudsters lead by Barry Honig. Yesterday I reported Eloxx Pharmaceuticals ($ELOX) is being sued for fraud in relation to a securities transaction from 2017 that directly involves accused pump and dumpster Barry Honig and Philip Frost. I have now learned there is also a broker dealer that is under investigation by the government that helped team Honig sell shares of Eloxx to unsophisticated main street investors to create volume in the stock. According to multiple people who worked at the firm and public filings that broker is none other than Laidlaw & Co. At the time Laidlaw sold the first offering in Eloxx it was called Sevion Therapeutics.

Laidlaw is run by Matt Eitner and James (Jimmy) Ahern. The duo were subject to two investigative stories by this publication about there long-standing involvement in helping Barry Honig execute the dump portion of his scheme in multiple securities. Beginning in 2015 when Honig’s puppet CEO David Rector took over, Laidlaw pushed its staff to sell a $7 million private placement to its retail client base. Laidlaw is now being sued by a former long time client for up to $2 million for selling the client Eloxx and other stocks. The client is a retired doctor from New Jersey named Bruno Casatelli. According to a copy of the FINRA complaint, which is private because it’s in arbitration, also names Barry Honig as a nefarious insider working with Ladilaw’s Eitner and Ahern to benefit his investments over the firm retail clients. Stocks Casatelli names in the lawsuit as being sold with unsuitable recommendations and fraud are: Aethlon Medical, Inc., Actinium, Boston Therapeutics, 5G Investment, LLC., Alliqqua, Inc., Aspen Group, Inc., Brazahav Resources, Inc., Fusion Telecoms International, Inc., Protea Biosciences Group, Inc., Aeolus Pharmaceuticals, Inc., Biosig Technologies, Inc., Contravair Pharmaceuticals, Inc., Medovex Corp., Relmada Therapeuticals, Sevion Therapeutics, Spectrascience Inc, and Spherix Inc. Casatelli is being represented by Daxton White of The White Law Group out of South Florida.

Casatelli’s lawsuit list a litany of no-nos a FINRA registered broker dealer like Laidlaw knows it shouldn’t be doing but what now has the attention of the FBI and the DOJ in the Southern District of New York is the alleged conspiracy between Honig and Laidlaw executives to cheat their clients of out profits for the benefit of Honig and his other alleged bad actor small cap investors. According to a person with direct knowledge of the situation who was asked by the government to remain unnamed, at the beginning of this year the SDNY was calling in ex-Laidlaw staff to testify against the firm and were asked to wear a wire. I have previously reported there is an active FINRA enforcement investigation into Laidlaw but this is the first time I got notice the FBI in New York was recently involved.

Honig is currently battling a fraud suit led by the Securities and Exchange Commission but no criminal charges have been brought yet against the man who allegedly cheated main street investors out of millions for over a decade. The SEC amended complaint filed this month said Honig and his buddies, which include billionaire Philip Frost, Michael Brauser, John Stetson, and Marc Groussman, manipulated between 70 to 80 stocks over the course of their scheme. But only three companies are detailed in the regulators complaint. Recently, Frost’s OPKO Health made a SEC filing warning that while Philip Frost, the company head, has settled with the SEC without admitting guilt “other government agencies could still bring charges against Frost or his company”. Another agency likely means the DOJ. Which is why it would make sense for the DOJ to be building a strong case against Laidlaw’s Eitner and Ahern because if they get enough to charge them the Laidlaw duo would likely make very good cooperating witness against Honig.

Besides the client civil suits against Laidlaw, the firm nor its executives, have been charged by a government agency yet. Although they do have multiple FINRA fines imposed against the brokerage.

UPDATE 3.20.19 – Last night someone wrote into this publication saying they were a NBC journalist and were doing a story on me and stated they had proof I was accepting payment via venmo from people involved in the story. They used a nbcuni.com email address to post a comment demanding I answer that question here in the comments on this story. I have contacted NBC who had confirmed the name they used is not an NBC reporter, producer or even a name in their directory. The email was john.castletani@nbcuni.com.

This was a person pretending to be a fellow journalist trying to intimidate me.

I do not and never have taken donations from subjects of my stories. In fact in the last two stories I have reported this week I have received no donations although I need them. I was told by two former Laidlaw employees that Jimmy Ahern and Matt Eitner have hired a black ops public relations firm to try and retaliate against me for my reporting on their alleged fraud. Additionally there have been two attempts today to hack into my backend publishing platform. Luckily the software security for this news publication stopped it.

Honig & Eloxx Pharma sued for stock fraud : $ELOX

Small-cap stock investor Barry C. Honig has been embroiled in a new set of fraud accusations for his role with a bio-pharma company called Eloxx Pharmaceuticals ($ELOX). He stands accused of working with his puppet CEO, David Rector, to force a large preferred share investor to convert his stock at a higher price then promised in a deal benefiting him and Honig’s investing partner Philip Frost of OPKO Health. The investor, John Winfield, filed suit in Delaware Federal Court on March 5th against Honig, Eloxx, Rector and the prior CFO James Schmidt.

Eloxx was formally called Sevion Therapeutics and Rector became CEO in January 2015. In 2017 Rector and Honig called Eloxx’s investor Winfield encouraging him to sign a deal that would convert his series A preferred shares to common shares at a rate better than originally agreed on when he bought the preferred shares because the company claimed it was was low on capital and required new financing. Winfield bought the shares in the summer of 2016 at a conversion rate that would give him 266,666 of common stock and by January 2017 Hoing and Rector were pushing for the conversion.

Rector offered to convert Winfield’s Preferred Stock at a more favorable price of $0.25 per share, which would result in the issuance of 800,000 common shares, not the originally agreed 266,666 shares of common stock – which was three times as many common shares.

Winfield didn’t take their first offer and negotiated a deal, called the ‘favored nation clause’ that said he would convert his shares BUT if another preferred shareholder gets a lower conversion price he should get that price also, according to the lawsuit. In February 2017 Honig called Winfield to say he had or was expecting to buy all of the remaining Class A Preferred shares and that another investor had already agreed to sell at the $.25 cents conversion.

Honig would call Winfield personally to promise the deal and push him into signing, even though Honig was not an executive of the company and declared himself an independent investor. Rector told Winfield that Honig was the lead investor in the company. While the company was agreeing verbally to the deal they delayed sending Winfield paperwork that promised the favored nation clause.

Rector and Honig have worked together in the past when Rector was a director of Majesco Entertainment from June 2015 to December 2016. Majesco became PolarityTE ($PTE) and today announced the Securities and Exchange Commission has opened a formal investigation into the company which includes the merger that changed Majesco to PolarityTE. The SEC is also investing Honig’s role with PolarityTE. Rector was also the COO of U.S. Gold Corp another Honig lead deal.

Winfield eventually signed over his shares to convert in July 2017. Meanwhile it appears Honig was working behind the scenes to get a merger deal done with a biopharma company from Israel.

It wasn’t till Winfield saw a proxy statement announcing the merger and asking shareholders to vote that he realized the other preferred shareholder Honig bought shares from was none other than Philip Frost’s OPKO Health. On top of that the Frost related shares were converted for $.10; meaning he got a lot more shares than Winfield did. Honig also never disclosed to Winfield that he and Frost were affiliated. When Rector became CEO in 2015 Frost was put on the board as a director. In September 2018 the SEC charged Honig, Frost and others for manipulating stock prices by trading as an undisclosed group of affiliates.

The company never honored their ‘favored nation deal’ with Winfield and he didn’t get the lower $.10 share price. In typical Honig deal making style there was a promotional presses push on Eloxx and in a three-month period from March to June 2018 the stock went from $7 to a high of $23.27 on June 15th.

Winfield has sued for violations of the Securities and Exchange Act section 10-B which is fraud, there also claims of Section 20 violations which is executives working as a control group to commit fraud, and breach of contract. He has hired New York-based shareholder defense firm CKR Law. The same law firm currently fighting for shareholders of XpresSpa for securities fraud in a lawsuit this publication has reported extensively on. Some of the people sued in the XpresSpa suit, like Richard Abbe of Iroquois Capital, have invested as undisclosed affiliates with Honig for years.

Rector is long gone from Eloxx and it’s unclear what Honig’s position in the stock is these days. An amended SEC complaint filed this month highlighted how Honig uses his buddies investment funds to front his position in a stock so main street investors can’t see his true position in a company. Eloxx’s stock dropped from its $23 high and is trading around $13 today. On March 14th Eloxx filed its 10-k and conveniently left out any mention of the company being sued for fraud in correlation to Barry Honig as a lead investor. They added a line under litigation that there are currently no ‘material lawsuits’. Apparently investor fraud isn’t material to Eloxx.

An internal investors relations person at Eloxx did not return a request for comment asking if the SEC has also contacted the company asking for information about Honig. As we saw in today’s PolartyTE announcement the SEC started asking for info back in Oct 2018 but we only learned about that today.

Honig did not return a request for comment. CKR Law did not return a phone call for comment on behalf of their client John Winfield.

John Winfield vs Honig and … by on Scribd

Greenwich Tennis Competitor’s dad Gordon Caplan arrested in Operation Varsity Blues

UPDATE 4.5.19: Gordon Caplan is the first parent to admit guilt. His attorney circulated this statement today: “My immediate goal is to focus on making amends for my actions to try to win back the trust and respect of my daughter, my family, and my community,” Caplan said in a statement Friday. “The remorse and shame that I feel is more than I can convey.” Caplan also said his daughter Rachel, who is a junior in High School, had not applied to college yet. His white-shoe law firm Willki Farr said they have finally removed him as a partner. If Caplan’s plea remains a felony charge he will not be able to keep his law license.

Original Text
The Co-Chairman of a white-shoe law firm, Gordon R. Caplan, has been charged with a felony for making payments to help his daughter cheat on a college entrance exam. Caplan, a seasoned dealmaker for private equity firms was removed from his duties at Willki Farr Gallagher LLP today. It’s unclear if he is still getting paid but the law firm went right to work scrubbing his bio off their website. He was released on a personal signature $500,000 bond and given strict travel conditions.

Gordon, age 53, lives in uber-wealthy Greenwich, Conn. with his 49-year old wife Amy Elizabeth Caplan who grew up with family money in Greenwich and is a member of the Treibick family. Amy attended an exclusive private school called Greenwich Academy.

The Boston office of the FBI obtained wiretaps and recorded both Gordon and Amy speaking with the man who orchestrated the college entrance admission bribe scheme. That man is William Rick Singer who has already plead guilty and worked with the FBI to record parents involved in the scheme. Wiretaps show Amy saying she ‘wasn’t ok’ with the idea of payments made to a proctor of the ACT exams to manipulate the score of her daughters test. Yet the family moved forward with the plan and flew their daughter out to Southern California to take the exam at a testing center where people were placed to help rig it. Gordon eventually asked Singer to stop adding his wife to emails about the scheme and the DOJ says it was Gordon who made the illicit payment.

The complaint says the daughter was enrolled in an online high school. Research shows that daughter is Rachel Treibick Caplan. Rachel has been working on gaining recognition on the juniors national tennis circuit and plays in tournaments around the US.

Rachel Treibick Caplan

Gordon Caplan daughter. Operation Varsity Blues.

It’s unclear how much the daughter knew but their appears to be some culpability. The government said that the daughter went to see a doctor and was told to ‘play stupid’ so that she could get the doctor to claim a disability. The disability would allow her more time to take the exam. Caplan ended up paying Singer’s non-profit $75,000 to execute the cheating scheme; a payment that was conveniently set up to be tax deductible.

Gordon Caplan was taped asking William Singer if anyone had ever been caught in the scheme. Singer’s response was basically only if you tell someone and Gordon responded “his daughter wouldn’t talk”. Rachel took the test this winter and the complaint says her score was 10 points higher. Gordon alluded to thoughts of his daughter going to his college, Cornell, on the wiretaps but the complaint didn’t say if Rachel had used the fraudulent scores to apply to college yet. The DOJ decided not to charge any of the students tied to 33 parents arrested in the scheme even though they said some of the teens knew of the cheating scheme. Gordon’s wife Amy was also not charged.

Gordon was caught on tape saying “he didn’t care about the moral ethics” of the scheme. But did express concerns about his daughter being caught because “she’d be finished” if she was.

With an ethics statement like that Willkie Farr is likely already starting an internal investigation into Gordon Caplan’s work with the law firm’s clients. It’s the firm duty to report his actions to the state bar association with the idea that if you cheat once what else did you cheat at.

A phone call made to the Caplan’s Greenwich home went to voicemail and the voicemail was full. Caplan’s attorney did not return a request for comment.

Gordon was arrested around 6 am on Tuesday March 12 and had to spend some time in a holding cell in downtown New York. Two addresses were listed on his warrant. A $5.3 million mansion on 20 Brywood Lane in Greenwich Conn. and a classic-6 with park views at 25 Central Park West apt 7N, NYC, NY. He was processed and released late in the afternoon and wouldn’t comment to reporters waiting outside the courthouse.

Caplan has retained white collar criminal defense lawyer Patrick Smith who is a sole practitioner. In an odd move he also retained Peter S. Cane who practices civil litigation and is know as a ‘media lawyer’. Wire fraud faces up to five years in jail. Being found guilty of a felony is grounds for disbarment. Caplan is scheduled to appear next in Federal Court in Boston on April 3.

Gordon Caplan with attorneys Patrick Smith & Peter Cane (right)

Readers of this publication are familiar with the attorney Gordon picked Peter S. Cane who takes on some questionable clients. Cane just lost a case trying to bully and intimidate a journalist into revealing a confidential source for hedge fund manager Bruce Bernstein. Cane also lost the chance for his client to keep his divorce records sealed when a judge ordered the unsealing of the case. The divorce docs allegedly show Bernstein committed securities fraud. The journalist Cane sued was me.

EDITORS NOTE: This story has been updated. Amy attended Greenwich Academy not Brunswick. They are related schools in Greenwich.

Gordon Caplan Arrest Warran… by on Scribd

NY Journalist wins lawsuit to unseal court docs tied to Bruce Bernstein Securities Fraud Case: $XSPA

UPDATE 4.2.19: After I won a lawsuit to unseal documents that showed Bruce Bernstein and Richard Abbe mislead investors and the Securities Exchange Commission in public filings another original investor in XpresSpa has filed a similar lawsuit against the $XSPA board and its executives. Swiss resident Roman Kainz filed his securities fraud suit on March 20, 2019 and added a defendant who is William Phoenix of Mistral Equity Partners LLC. The case has been deemed related by the Southern District of New York federal court to the Binns case but the defendants will have extra legal cost litigating another case. Richard Abbe of Iroquois Capital was served with the new suit at his home at 7 Kinsington Rd, Scrasdale NY 10583. Additionally, the unsealed court filings shows that Alan Schwartz, the former CEO of Bear Stearns, was involved with the original investors in XpresSpa along side Kainz and the Binns. It’s unclear if Alan was invested in the deal personally or through Guggenheim Partners the asset management firm where he is a managing director.

Original Text
Two hedge fund mangers that invest in small cap stocks have been working together to hide documents discovered in a securities fraud lawsuit from public shareholders and regulators. Last week one of the key pieces of evidence was unsealed after I won a court case brought by Bruce Bernstein of Rockmore Capital in an attempt to force me to reveal a confidential source used in my previous reporting on his alleged fraud.

The document involves private communication between Bernstein and his ex-wife who had accused him of hiding assets during their divorce. The dispute lasted only a month but forced Bernstein to turn over balance sheet records of the fund he manages called Rockmore Capital. In the divorce communication Bernstein swears doesn’t actually have any of his own money in a $6 million debt security issued by his fund to an airport spa business called XpresSpa.

Bernstein’s statement to his ex-wife is a complete turnaround to what he told the founders of XpresSpa when he convinced them to take on debt issued by his hedge fund. That’s because the spa founders saw Bernstein led them to believe it was him lending the money. Allegedly, a similar lie was repeated in public filings with the SEC when another public company Bernstein invested in, Form Holdings, wanted to merge with XpresSpa. Securities laws require Bernstein to disclose any affiliated or related parties when a proxy statement is filed with the SEC asking investors to vote on a merger with a public company. Since the days of Enron fraud laws were even expanded to tie criminal liability if you lie in proxy statements used to inform investors about who controls or has ownership in companies that are merging.

In the case of XpresSpa, investors were completely left in the dark about the role Bernstein’s buddy Richard Abbe, of American Capital Management, was playing behind the scenes to control the debt of the Rockmore note and force XpresSpa into what became the loss of millions in a disastrous merger.

While I was reporting on the XpresSpa fraud case in federal court I was sent an anonymous email with a filing I thought was currently redacted in court records. A lot of the federal case has sealed documents and redacted motions making it hard to figure out who did what. The court filing I got explained Bernstein’s ex-wife roll in sending what’s been called the ‘Sloan Letter’ (because that’s the last name of the lawyer his ex-wife used) to show her husband likely lied to regulators and shareholders. So I reported another story explaining that.

After the story ran, it appears Abbe and others encouraged Bernstein to sue me to reveal who sent me that document. They thought I had also been leaked private divorce communications and they accused the law firm suing them on behalf of the XpresSpa founders, CKR Law, or the Ex-Wife and her law firm, of leaking them to me. On top that Bernstein chose to file, on November 28 2018, what’s called a motion for pre-action discovery in NY state court, instead of filing a motion in the federal case, and demanded his name and what he was asking for be sealed. He also included a copy of the Sloan letter and said his fund had already lost one client because of my reporting on his alleged fraud. Ironically it was now Bernstein who had given me the hidden document detailing his own alleged fraud by included it in his lawsuit against me! But for four months NY state court said I couldn’t report that!

In an unusual move a state court judge agreed to seal the entire record without any of the defendant being sued having a say. I was served the lawsuit in early December and told I had to wait months to argue that the case should be unsealed. Meanwhile I am still reporting on what’s going with Abbe and Bernstein in the XpresSpa federal lawsuit. Sealing of the case meant NY state court had inflicted prior restraint against me and I couldn’t tell anyone the subjects of my reporting are trying to intimated me with litigation cost and effectively issue a subpoena on me to turn over a source identity. There was no way I was going let that happen.

Luckily once I notified the Reporters Committee for Freedom of the Press about the nature of the lawsuit, Sarah Matthews, got on the case and found me a Big Law media lawyer. Then David Bralow and Kay Murray, attorneys on the board of the Press Freedom Defense Fund started by First Look Media, worked to secure funds to help offset litigation cost and make sure I had one of the best first amendment lawyers representing me. First Look Media owns The Intercept. Getting that call from attorney Mark Bailen of Baker Hostetler and his associate Peter Shaperio, to represent me was a great sense of relief. But I knew we still had a battle. Then the case got the attention of Yale Law professor, David Schultz, who has decades of experience in litigating for the rights of journalist to bring in almost every New York major publication ( NY Times, NY Daily News, Hearst, AP, Gannett, NY Post etc..) to file what’s called an AMICUS brief. Another giant in media law, attorney Robert Balin, of Davis Wright Tremaine, also came on the AMICUS brief team and they made a fling to join my case in support our argument that as a freelance journalist I should be granted reporters privilege and not forced to reveal a source. They wrote a strong argument for the public’s right to an open judicial system demanding the whole case must be unsealed. Attorneys Robert Balin, David Bralow and David Schultz even showed up at my hearing giving me a bench of five top media lawyers to face the judge. I had a powerhouse behind me who clearly cared about the first amendment.

Bernstein and Abbe’s plan use the courts to intimidate and tie me up financially didn’t work. Instead I got a war room of litigation help and won!

Abbe, who is also the co-founder of Iroquois Capital, has been working with Bernstein for over a decade as an alleged group of undisclosed affiliates in multiple stocks with the intent to control company boards, management, and assets for the benefit of their hedge funds. In an interview with a trade publication a few years ago Bernstein boasted his funds average return was 9 Percent. Once in control, the hedge funds allegedly manipulate the stock price while gutting company cash and then discard the carcass of the company turning it into a useless shell corporation with a stock price in the pennies. The XpresSpa litigation details similar fraudulent takeover schemes in a company called Neurotrope and TapImmune.

For years, Abbe’s fund has also partnered with Barry Honig who is currently accused by regulators of running pump and dump schemes in over 70 public companies. I have previously reported Abbe’s Iroquois Capital was also named in the SEC subpoena sent to MGT Capital asking for communications from the group of Honig related affiliates. In the new amended complaint field March 8th by the SEC the regulator mentions there are other unnamed parties that helped manipulate the stock of MGT Capital during the time Iroquois co-founder Josh Silverman was on the board. It’s unclear why the SEC didn’t name Iroquois as a new defendant for their likely role in the MGT Capital pump and dump.

After I won the Bernstein lawsuit and his name became public I received a new tip from a person familiar with the situation that Bernstein and Rockmore had been through their own SEC investigation surrounding accusation that they shorted the same stocks they were doing PIPE investment with. The New York bucket shop lawyer Bernstein had hired to sue me, Peter Cane, started threatening me on Thursday after I asked if the past SEC investigation was true. Eventually attorney Cane admitted on behalf of Bernstein that the SEC had investigated but no charges were brought and the investigation ended in the summer of 2008. Cane called the investigation routine.

In my decade of reporting on securities fraud I have never seen a ‘routine’ SEC investigation. This kind of bully tactic by Cane was not a surprise. Once we got to court on March 5th, my attorneys saw what I had said from day one. This is case is about trying to discredit and intimidate me and less about trying to find out who leaked divorce documents. You can see in the court transcript below that attorney Cane began by trying to argue I was not working as a journalist when I first reported on Abbe and Bernstein but instead was being paid by Short Sellers to discredit the company. This is absolute not true and is never true in any of the reporting I have ever done here or any of the major media companies I have reported for. In the case of XpresSpa that short seller argument doesn’t even make sense. As of Friday I checked on how many shares could actually be borrowed to start a short trade on XpresSpa. The answer was only 20,000 shares. The interest to borrow those shares was as low as 9 percent. Joe Spiegel of Dalek Capital who runs a short selling fund told me, “there isn’t much demand to short XpresSpa. Sometimes borrow fees can get to 100%-200% or higher, like for Tilray. 9% shows no cares about shorting XpresSpa.”

Judge Franc Perry who presided over my case put Attorney Cane in his place pretty fast when he started the argument that I am not a journalist. Judge Perry said ‘Ms Buhl is conducting news gathering”. Judge Perry also said Cane had shown no evidence to support any other conclusion. Page 19 of the court transcript says in the eyes of New York Supreme court “the Court has not seen any evidence to show that your client is not a journalist, and for the purpose of the Court, in reading this, the Court understands that your client is a journalist, is a newsperson, under the law.” This was a strong on the record statement to the testament of my reporting work because these days you never know how judges are going to view freelance journalist who report online, especially ones running their own publications.

Judge Perry also grilled down on if the Sloan letter was even a confidential document. In the federal court case, Judge Stanton has said it will be sealed because it was part of a divorce proceeding, unless anyone can prove other wise. A notion CKR Law lawyers Rosanne Felicello and Michael Maloney have sought challenge in court documents for their clients the co-founders of XpresSpa. Given Bernstein also sued his ex-wife and the law firm she hired to see if he was hiding martial asset; they hired lawyers who showed up at my hearing. Both told the judge this letter was written after the divorce was finalized and as a result neither of them considered the letter confidential nor did they agree in writing to make it confidential. So once again Bernstein’s attorney Peter Cane had now brought forward a reason for a state court court to rule the docs a federal court judge thought should be seal shouldn’t!

If attorney Cane had never brought this action against me the documents Bernstein and Richard Abbe have worked so hard to keep hidden likely wouldn’t be front and center of a news story and available to the public for free.

XpresSpa isn’t a stock with a lot of trading volume these days. It trades on the low end tier of the NASDAQ under $XSPA. But if this group wants to start another pump and dump on the stock they have the control to do it. More importantly it’s Bernstein and Abbe’s history of hiding ownership of debt notes or even stock ownership that makes their actions newsworthy. There are so few journalist covering small cap stocks these days which is why I pick stories like these to report on with the intent to inform the investing public because history shows the SEC isn’t going to move fast to protect investors in real time.

EDITORS NOTE: I want to first thank my attorneys Mark Bailen and Peter Shaperio. They wrote incredible legal arguments and provided a zealous defense. I also want to thank New York Daily News journalist Stephen Rex Brown for reporting on my case twice and showing up for the two hour hearing. The Reporters Committee for Press Freedom and the Press Freedom Defense Fund really stepped up to help a freelance journalist and as a result we now have case law in New York that recognizes reporters privilege for freelancers and rules on how important it is to have a court system with open records. Additionally, readers who donated additional funds needed to cover reporting cost were critically to getting this story out.

Editor’s Note: This story has been updated.

Unsealed Court Document in XpresSpa fraud lawsuit:

Unsealed Bruce Bernstein Di… by on Scribd

New York Supreme Court case #655887/2018 Transcript Bernstein vs. Journalist Teri Buhl:

Bruce Bernstein vs. Journal… by on Scribd