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9 Apr

VistaJet’s IPO Pitch Looks a Lot Like a Liquidity Fix

Vista Global is talking to bankers about an IPO while telling investors the market is not open to refinancing its near-term debt.

On an April 7 investor call, CFO Charlotte Colhoun said Vista will not get favorable terms to refinance its 2027 maturity in the current market and that the company is keeping its options open, while also confirming discussions around a potential public listing. The two messages were delivered in the same conversation, even as the company’s unsecured bonds continued trading below par at yields that suggest refinancing is still a problem rather than a solved one.

Put those pieces together and the sequencing of VistaJet founder Thomas Flohr’s behind-the-scenes financing moves starts to matter. Vista is not approaching the IPO market after fixing its balance sheet. It is approaching the IPO market while the balance sheet still needs fixing, and at a moment when its most immediate refinancing option does not appear to be available on acceptable terms.

Vista’s own audited private financials, reviewed by this reporter, point in the same direction. The company’s 2025 annual report includes a going concern disclosure tied directly to the 2027 maturity, stating that refinancing risk has been mitigated by an underwriting commitment from an unnamed shareholder. The wording stops short of describing that support as secured or fully committed, a distinction that suggests the backstop exists but may not be sufficient on its own if market conditions do not improve.

The IPO is arriving before the balance sheet is settled

The way that disclosure lines up with Colhoun’s comments is notable. There was no discussion of a committed facility, no detail on the size or structure of the shareholder support, and no indication that the company expects to access the refinancing market in the near term. Instead, the emphasis was on optionality, which tends to be the language used when a solution has not yet been finalized.

That context makes the timing of the IPO discussions more relevant. Vista raised $600 million of equity from RRJ Capital in early 2025 and followed it with a $700 million term loan, steps that reduced leverage and were presented as part of a broader balance sheet improvement. A company that has fully addressed its near-term maturities would typically spend time demonstrating stability before approaching public markets, allowing credit metrics to normalize and building a track record that supports a higher valuation.

Vista is instead engaging with IPO bankers while acknowledging that refinancing markets are not currently offering acceptable terms. That sequence suggests the IPO is not simply a continuation of the balance sheet repair story, but potentially part of the mechanism needed to complete it.

The underlying capital structure helps explain why. Vista carries roughly $1.9 billion of secured debt supported by aircraft and related financing structures, sitting ahead of $2 billion of unsecured notes. Total IFRS debt stands at just over $4.1 billion, with net leverage around 4.4x adjusted EBITDA. At the same time, the company reports more than $1.1 billion in net current liabilities, driven largely by deferred revenue from prepaid flight hours.

That deferred revenue provides upfront liquidity, but it also represents future service obligations that must be delivered. In a steady operating environment, that model works. In a stressed scenario, it can add pressure, particularly for unsecured creditors who sit behind both secured lenders and customer obligations.

One detail in the cash flow statement adds another layer to the capital story. During the same period that Vista raised nearly $600 million of new equity, the company paid out $100 million in distributions to shareholders. Vista has not publicly disclosed the recipients of that distribution, though Thomas Flohr’s controlling stake makes the likely outcome clear.

The timing of that payment alongside a capital raise intended to strengthen the balance sheet introduces a different interpretation of how that equity was used. Rather than a pure deleveraging, the transaction begins to resemble a recapitalization that included a return of capital to existing shareholders, even as the company continued to carry a large near-term maturity and unsecured debt trading at stressed levels.

Membership growth is not translating cleanly into stability

Beyond the balance sheet, the operating metrics present a mixed picture that would likely receive close attention in any IPO process.

Membership reached 1,490, which the company highlighted on its earnings call as 16% year-over-year growth alongside 85,700 flight hours. That data supports the growth narrative Vista is presenting to investors.

The more relevant question is not whether membership is growing, but how that growth is being supported. The number of members per aircraft has more than doubled over the past several years, moving from 3.3x in 2022 to over 7x in 2025. For a business built around guaranteed availability, that shift makes delivery more difficult as the customer base expands faster than capacity.

At the same time, average member balances have declined materially since 2022, suggesting smaller upfront commitments or faster usage patterns that reduce the predictability of cash flows. Those dynamics do not contradict growth, but they do change the quality of that growth.

There is also an outstanding gap between management-reported sub-charter costs and IFRS financial statements that has not been fully reconciled in public disclosures. That type of discrepancy is typically addressed in detail during an IPO process, where investors expect clear alignment between reported metrics and audited figures.

Taken together, the financial disclosures, market signals, and management commentary point to a company that has made progress but has not fully resolved its capital structure. Vista has built a recognizable brand and continues to generate meaningful revenue, but it is also approaching a 2027 maturity without a clear refinancing path at current market conditions.

In that context, the IPO begins to look less like a discretionary growth step and more like a potential solution to a liquidity issue that remains unresolved. That does not preclude a successful offering, but it does shape how the story is likely to be received once it is presented in a public market setting.

The question now is whether Vista gets ahead of that narrative in its disclosures, or whether investors are left to piece it together the way the bond market already appears to have done.

Editors Note: We asked Thomas Flohr’s team to clarify a few things but VistaJet did not respond. Here are our questions:

1.On the April 7 investor call, CFO Charlotte Colhoun stated that market conditions are not favorable for Vista to refinance its 2027 debt maturity. Can you comment on that characterization and describe what options the company is currently considering to address that maturity?

2. Note 4 of the 2025 annual report references an underwriting commitment from one of the Group’s Shareholders to mitigate 2027 refinancing risk. Who is that shareholder, and what are the terms and size of that commitment?

3.On the same April 7 call, Colhoun indicated the company is in discussions with bankers about a potential IPO. Can you confirm those discussions are underway and describe the timeline and structure being considered?

4.Is the potential IPO being considered as a vehicle to address the 2027 debt maturity, or is it a separate strategic initiative?

5.Who received the $100 million shareholder distribution paid in Q1 2025 concurrent with the RRJ Capital equity raise, and was that distribution a condition of the equity raise terms?

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18 Mar

VistaJet selling more debt- Equity holders get cash

This story has been updated with Vista’s 2024 full year private financials

Private jet company VistaJet is attempting to raise $500 million in new money via a six year term loan B, according to an investor presentation, that allows for a $100 million distribution to equity holders. Pricing for the proposed term loan has not been set yet and investor commitments are due by March 27th. The deal was pitched to investors on a call Tuesday, March 18.

Sources say assuming a 1-1.5% OID, the cost to Vista (based on current price talk) would be ~8-8.5% on a floating basis. Also while the term loan B is NC1 and par thereafter, the investors’ return might be slightly higher if the loan is called early.

The term loan raise is on top of a $600 million convertible preferred equity (dividend rate accretion PIK-only) raise led by RRJ Capital which is expected to close March 28th, according to the company. The pref share raise has taken months to sell by Jefferies with a small concentration of investors and also includes Vista’s long time investor private equity fund Rhône Group. As of the end of 2024 Vista’s unaudited estimate of its total debt is $4.237 billion, according to the private presentation.

VistaJet says it will use the new money to repay some of its existing debt that includes paying off some of the $670 million of aircraft financing debt and repay its RCF/bank debt ($229mn). The $100 million cash out to equity investors is what is known as a dividend recapitalization. This is when the company uses new money from debt it raised and not actual profits from running the business to pay early investors in its private stock, which includes the VistaJet founder Thomas Flohr.

The offering will use eligible aircraft (jets worth around $700 million in collateral value according to VistaJet) for collateral with some carveouts. What’s notable is the fact that they are not using the raise to do typical EETC financing and have instead appear to be approaching a different kind of investor group. As of the end of 2024 Vista holds $900 million of EETC financing on its books.

Additionally, Vista listed the value of the planes at retail not mark to trade (wholesale) which a creditor would likely have to sell at wholesale prices if the loan wasn’t paid back and they had to take the collateral. Look at Vista’s Global 7500 tail number VH-VIL which is one of its newer planes (2.8 years old). It’s bluebook retail value is $66 million but its wholesale value is $58.57 million.

If Vista was doing a loan directly with a bank the standard would be the most conservative valuation. Retail assumes you sell when you want in a controlled fashion.

Valuing at retail is like saying we can sell all our bonds on the offer side during a liquidation without a problem. And if there was a liquidation and all the planes had to hit the market at once well then assuming basic supply and demand the value of the planes/collateral would drop (like a lot!).

Also, Vista’s fleet is typically older planes (avg 10 years of the collateral listed in the deal) and aerospace experts familiar with Vista’s fleet told this reporter they are known to be not always well maintained.

If Vista is selling into CLO funds who are typically very passive funds, without an experienced airline credit analyst, then they might not even pick up on the difference in valuation or be aware of how aggressively valued some experienced airline investors think Vista’s jets are. That said, if the term loan prices in the 8% range (there is a ton of HY money in the U.S. to put to work right now) investors could find that enough of an attractive rate and at least one sophisticated credit investor I spoke with thought the collateral was good enough.

S&P issued a new rating yesterday for the term loan B at BB-. The rater warned it would lower its rating if Vista Global is unable to achieve a weighted average FundsFromOpeations-to-debt ratio higher than 12% in 2025 and 2026, or if its free operating cash flow (FOCF) after lease payments remains negative or liquidity weakens. VistaJet’s bonds traded up on the news of the new capital raise and the issuer rating held at B+.

VistaJet’s parent Vista Global is a privately held company led by Swiss-born billionaire Thomas Flohr.

This story has been update with Bluebook airplane values and S&P’s rating

Update 4.1.25: Vista was telling the street last week it had oversubscribed on commitments in the new secured term loan to the tune of $700 million. Today the company announced the term loan B closed and the total new debt raised between the two new financing vehicles is $1.3 billion.

Update 4.17.25: Vista lost more money (again) in 2024. According to private financials seen by this reporter its consolidated net loss was $124.6 million compared to $138.9 million the prior year. Total loans and borrowings were $4.532 billion compared to $4.493 million the prior year. Vista does all kinds of adjustments to its EBITDA so I am not going even bother talking about a number that can be so easily manipulated.

Additionally, when Vista announced its ability to borrow against its RCF went up a few weeks ago the company apparently forgot to mention that the RCF is also HEAVILY over collateralized–almost double in aircraft value is pledged compared to what the company has drawn against, according to its 2024 financials.

One market participate who reviewed the private financials told this reporter they see the company as having millions in negative equity as of the end of 2024. Here is how:

Vista had investors that put in capital over the years in the form of equity: $200m
Some shares were sold for more than face value (let’s call it a share premium): $426m
Reserves for employee stock: $61m
Total Capital Raised: $694m

Accumulated Losses (not cash that is worse, this is just International Financial Reporting Standards) -$488m
Accounting write downs: -$137m
Fx losses : -$28m
Impairments: -$96m
Total bad news = $749m

$694m – $749m = negative $55 million in equity

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17 Jan

MPT moves toward new Secured bond offer – $MPW

This story has been updated

Medical Properties Trust has hired Goldman Sachs to soft market a $1-2 billion new issue secured bond at 10% interest, according to multiple sources familiar with the deal. Questions remain on what the use of proceeds would be restricted to and it’s unclear on who would be allowed to participate in the offering.

MPT currently has $1.2-1.3 billion of structurally senior bank debt and the next unsecured 3.325% 500 million sterling bond maturity is March. Bondholders who spoke with this reporter think MPT needs to raise at least $2bn to cover their liquidity gap and hope the proceeds would be used to pay off all the bank debt and the 2025 bond.

On January 15th MPT drew down its RCF to pay a $700 million term loan leaving them virtually with no liquidity according to multiple credit analyst interviewed by this reporter. Bloomberg first reported the term loan payoff.

MPT did not respond for comment as of press time.

UPDATE 1.21.25 – sources say the new secured bond offering would be priced next week and could be at a 9% coupon now. But that seems too low given one large current investor who is long the bonds said they wouldn’t buy unless its 12% or higher. Just look at what MPT got for the private credit deal it did on Circle assets just ten months ago; a 8% yield to maturity with fees and analysts have said the mortgages that backed that deal are estimated to be some of MPT’s best assets.

Question is what are MPT’s good unencumbered assets to secure these days to back a new $2 billion secured bond? 9fin’s crack credit analyst team of Varun Gianchandani and Emmet Mc Nally highlighted in their last MPT report that total non-distressed unencumbered assets are $3.575 billion. This includes: Priory, Lifepoint, Ramsay, and Ernest Heath. But given how MPT has a history of not realistically valuing their assets because the company is allegedly slow to take impairments and floats their tenants working capital loans to pay the rent; a credit investor is taking some risk on accepting secured assets thus you would think the coupon has to be higher. Bond funds and analyst I spoke with today point out that to raise a $2 billion secured bond Goldman likely has to show new investors MPT has around $4 billion of good assets for collateral.

There is a catch 22 for MPT and credit investors right now. Because of the Unsecured Leverage Ratio covenant MPT’s bank lenders have a lot power to control which assets and how many can be attached to a new deal. Sentiment I am hearing is MPT needs to have enough money to take out those bank lenders if it wants more control in selling new issue bonds at the prices they want.

UPDATE 1.22.2025 – MPT’s ‘non deal roadshow’ is now circulating. I have seen the presentation which is very light on facts regarding their current financial situation and long on magically retenanted Steward operators rent estimates into 2026 that have no supporting backup on how they get there— like what are the required investment cost guys to get to $160 million of rents in a year?

But what did stand out is in the Forward Looking Statements talking about risk, page 2 of the slide show folks, which now magically tells investors that they MIGHT NOT be in compliance with their financial covenants under their debt facilities! Or obtain additional debt covenant relief under its credit facilities, which is their credit agreement not the bonds. You can see in MPT’s release ,from January 12, on the Prospect bankruptcy this risk is not mentioned. The press release went out to the general public. So now only private investors invited to see the roadshow know MPT’s real risk?

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8 Jan

U.S. Government charges Andy Defrancesco with Securities Fraud

This story has been updated

Canadian small cap financier Andy Defrancesco has been accused by the U.S. stock market regulator of securities fraud for his role in leading a pump and dump scheme of Cool Holdings ($AWSM). The SEC filed its complaint in the Southern District of New York on Friday, January 6 and also named his ex-wife Catherine Defrancesco and his long time executive assistant Nikola Faukovic for aiding him in secret payoffs for stock promotions and using nominee accounts to hide Andy Defrancesco’s actual ownership of the Apple reseller phone business. Cool Holdings CEO and CFO are also defendants in the securities fraud suit. None of the defendants responded if they plan to fight the case or settle and agree to the SEC demands.

The SEC’s case focuses on trading in 2018-2019, false promotional campaigns, and SEC stock ownership forms that didn’t report the correct percentage of stock ownership. The complaint list two additional people who aided Andy Defrancesco in his stock violations. A person who worked for him at Delavaco Group called ‘affiliate A’ and a stock promoter who bills himself as an IR consultant or analyst.

The government doesn’t name the protomer who allegedly published false information about the health of Cool Holdings in September 2018 but it’s not hard to fact check that person is James Stafford who owns oilprice.com and Advanced Media Solutions Ltd. The article title, “Small NASDAQ Company Just Got a Huge $900 million Opportunity From Apple”, can be found at safeheaven.com and has a disclaimer that ties back to Advance Media Solutions. James Stafford’s work is often seen under other names and few know were the man actually resides. The Globe and Mail was first to report on his alleged ties to Cool Holdings and Defrancesco in a story from February 2019 called “How two Canadian financiers took an obscure Apple reseller for a wild ride”.

It only took the SEC four years to use the road map Milstead’s detailed reporting laid out against Defrancesco and Stafford. Meanwhile Defrancesco or his affiliates appear to have been using Cool Holdings and all its future version of the company to the benefit of themselves instead of building a company that benefits main street shareholders.

In 2018 I had been leaked a series of internal documents from a questionable New York-based broker dealer called Laidlaw & Co. As a result I reported on a series of deals Laidlaw had been running for Barry Honig. One of those deals was Cool Holdings and in September 2018 I had even warned sources close to Laidlaw believed the firm was currently helping Honig and associates run a pump of Cool Holdings. It wasn’t till 2019, when I was leaked Andy Defrancesco’s text messages with a broker at Laidlaw did I see in his own writing that Defrancesco was working with Barry Honig on Cool Holdings.

In September 2018 Barry Honig was finally charged by the SEC for running pump and dump schemes in over forty companies but only three were detailed in the SEC case against Honig and Cool Holdings wasn’t one of them. Honig has since agreed to a penny stock ban but is still litigating how much of a fine and restitution he will pay the SEC for his schemes.

Meanwhile James Stafford has been busy. He is currently a named defendant in a defamation and harassment suit filed in Canadian courts by a hedge fund and it’s owner Moaz Kassam. Andy Defrancesco’s right hand man Andrew Rudensky is also a defendant who is accused of working with a Cannabis twitter analyst named Robert Doxtator, who goes by the handle @BettingBruiser, to smear Anson Funds and it’s leader reputation as investment professionals. The lawsuit says Stafford is retaliating for others who pay him because Anson Funds had called out a company Defrancesco had invested in called Facedrive. Kassam is suing the trio for $100 million and Andy Defrancesco is believed to be paying for Robert Doxtator’s legal defense. Doxtator’s Canadian attorney Joe Goria is an attorney Defrancesco regularly uses. The legal theory is Stafford, Rudensky, and Robert Lee Doxtator have been working together recently to discredit short sellers that Andy Defrancesco perceives as his enemies or opponents in a stock deals. The lawsuit says Stafford’s business are registered in Wales, England, the BVI’s and he has an office in Mexico.

Stafford did not respond to a request for comment at an email address he uses at oilprice.com. Rudensky when reached at his home hung up on me. I had tried to ask Rudensky if he is ‘affiliate A’ in the SEC lawsuit or if he is cooperating with the SEC.

Additionally, Stafford is believed to have led promotional campaigns to discredit short seller funds in another company called ReconAfrica. Stafford’s online activities got so bad one of the partners of Viceroy Research, who published a short reports on the problems at Reco, had to make a compliant about Stafford to the Royal Mounted Canadian Police who followed up with an interview. The legal theory is Stafford, Rudensky, and Robert Lee Doxtator have been working together recently to discredit journalist or short sellers that Andy Defrancesco perceives as his enemies or opponents in a stock deal. Defrancesco is not yet named as a defendant in the Anson Funds lawsuit.

It’s unclear why the SEC didn’t name Stafford as a defendant or if he is cooperating with the U.S. authorities against Defrancesco.

Last year Andy Defrancesco suddenly resigned as CEO and Chairman of the board of his beloved Sol Global Investments – a public company he used to invest in cannabis companies or other start ups like the electric vehicle market. Sol Global is listed on the Canadian Stock Exchange ($SOL.c) and trades on the OTC in the U.S. under ticker $SOLCF. Two of Sol’s subsidiaries House of Lithium and Revolution Brands International are holders of the current version of Cool Holdings, called Simply, Inc., according to bankruptcy court filings in Utah.

On April 25th 2022 Sol Global issued a press release saying, “Effective today, SOL Global’s founder, Andy DeFrancesco, has ceased to be the Chief Executive Officer and a director of the Company, but will continue working with management to transition responsibilities, including investment decisions related to the management of the portfolio companies.”

Replacing Andy to lead Sol Global is man named Kevin Taylor, who is a known associate of Andy Defrancesco, according to a person who has worked with and invested with Defrancesco. Taylor along with Sol Global are listed as creditors in the bankruptcy of Cool Holdings/Simply, Inc. So are two of the men charged with Andy Defrancesco in the SEC case. In fact, according to the bankruptcy docket, on October 4, 2022 four of Cool Holdings executes and directors from 2018 told the court they knew the SEC was about to bring a case and were asking the judge and bankruptcy trustee to release a stay or hold on Cool Holdings directors and officers insurance so they could use it to defend themselves against the government. At first the trustee said no and then within a month agreed. The bankruptcy trustee also asked the court in November of 2022 to waive his privilege because the SEC had asked him to turn over all internal communication from 2018-2019 along with contracts relating to Apple Inc. and any drafts of stock promotions or press releases.

The Globe and Mail was first to report the SEC had sent subpoenas and started investigating Cool Holdings in the spring of 2019. In fact it was Globe reporter David Milstead who was first to get Defrancesco’s personal lawyer at Quinn Emanuel to admit they had gotten a SEC subpoena asking for information about Andy. Then the case appeared to go cold in 2020 and 2021. It wasn’t till the sudden resignation from Sol Global in April did the rumors start again about Andy Defrancesco being under investigation.

Last year I began emailing Andy and his lawyer Alex Spiro asking if Andy had signed a tolling agreement with a U.S. government agency…this would included the IRS, DOJ or SEC. A tolling agreement is usually for delayed prosecution or can he used if people are cooperating with the government but expect be charged under seal. For the first time in reporting on Defrancesco since 2018 he was silent and didn’t deny the possibility of a government investigation. I had heard from people who had been interviewed about Andy by U.S. government agencies, they thought a wire fraud or money laundering case was coming against Andy Defrancesco. As to my knowledge and court record searches in Canada and the U.S. Andy Defrancesco has never been charged criminally.

But both the Defrancesco’s are familiar with fighting civil fraud or misconduct cases over their investments in public companies. The SEC’s complaint this month now opens up possible litigation for other civil or criminal pump and dump cases and shows the path Defrancesco has allegedly used to pay off stock promoters to exaggerate a company’s finances for a pump of the stock and how he hides his true ownership and control of a company.

Catherine Defrancesco is currently fighting a securities fraud suit with Barry Honig over trading as an undisclosed affiliate group in crypto company Riot Blockchain ($RIOT). The suit, filed by $RIOT shareholders, says she was an 11%+ beneficial owner of shares in Riot through multiple entities: DSB Capital, Ltd., DeFrancesco Motorsports, Inc., Delavalco Holdings, Inc., Marcandy Investments Corp., and Namaste Gorgie, Inc. The SEC complaint says Andrew Defrancesco created and controlled four of those five entities and Catherine, who has no known stock investing experience, was just a nominee or president in name only, for her husband turned ex-husband. Shareholders in the Riot lawsuit are currently waiting for a judge to decided if the case will survive a motion to dismiss of its third amended complaint. It will be interesting to watch if the plaintiffs now add Andrew Defrancesco as a named defendant.

This summer Andrew was sued by a wealthy man from Georgia for not giving him the stock he had purchased in 2020 for $200,000 in a deal involving CBD company Heavenly RX which was a subsidiary of Sol Global Investments. The plaintiff, Kadirali Chunara, also sued Sol Global Investments and its CFO Peter Liabotis.

The company and Liabotis have accepted service of the suit but the court docket shows Andy Defrancesco is still dodging service. A women in Sol Global’s South Florida office told the processes server Andy lives in Canada now. Last year the double-digit million dollar home of Andy and Catherine Defrancesco was put up for sale. This summer I was told Andy had fled the U.S. and was hiding out in his lake house in Canada. He has also been regularly seen hopping around the Bay St. scene in Toronto. It’s always been unclear where Andy Defrancesco had citizenship. Some media profiles said he was a Bahamas resident and he had been working in the U.S. off a work visa. The SEC complaint says Andy Defrancesco is a resident of Miami Beach, Florida but it’s still unclear which country he has citizenship in. Catherine is listed as having residences in Miami Beach, Toronto, and Gstaad, Switzerland.

The most recent example of allegedly illegal stock deals is a lawsuit filed by a shareholder in Cool Holding-Simply Inc who accused Sol Global Investments of short-swing sales while lending the company money via PIPE deals. The compliant says Sol Global and its affiliate companies made $1.9 million of gains it shouldn’t have and securities law says if true that money has to go back to the company. After Simply Inc filed chapter 7 the trustee took over the lawsuit and amended the damages to $1 million. In November when Defrancesco likely knew he was going to be charged by the SEC, Sol Global suddenly agreed to settle with Simply Inc. and court records show they will pay the estate of Simply Inc. $500,000. Ironically, at least two of the men in the Defrancesco SEC complaint are also listed currently as creditors of Simply Inc and might get some of that settlement.

The SEC says in its complaint they want to ban Andy Defrancesco from ever being an officer or director of a public company and think he and Catherine made around $8 million off the alleged Cool Holdings stock manipulation. According to the court docket summons were issued for Andy and Catherine at the same address in Miami Beach.

UPDATE 2.10.2023: Andy and Catherine Defrancesco are avoiding service according to a letter filed by the SEC with the judge. The regulator said the Defrancescos known attorney told them they don’t represent them any more. As a result the SEC is going to have find a physical address to serve Andy and Catherine. The SEC also stated this will be a cross-boarder case and at least 15 witnesses will be called to testify.

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11 May

Barry Honig promoter Jeff Auerbach gets Three Months Jail in stock Kickback Scheme

A New York City based stock promoter and investor relations executive, Jeff Auerbach, was given a lite prison sentence for his role in bribing stock brokers to put their main street clients into microcap stocks to prop up the price of a stock. Auerbach chose to report early to Otisville, NY prison in March for a three month sentence. He was also charged by the Securities and Exchange Commission for his role in the scheme along with two others. The case involved only one stock, NXT-ID, which was surprising to people familiar with the investigation. That’s because whistleblowers who were interviewed by this reporter said the SEC had been given proof of at least 17 other allegedly illegal stock promotions Auerbach was the leader in from 2018-2019. Sixteen of those stocks were NASDAQ or NYSE listed.

Additionally, court documents show Jeff Auerbach was caught on an FBI wiretap in the investigation into pump and dump fraudster A.J. Discala for his role in working with Discala to run wash trades in Codesmart. Codesmart was a company named in the indictment against Discala and his crew of around a dozen co-conspirators. Wash trades are when two or more people agree to buy or sell stock together in a coordinated effort to influence the price of a stock or make it appear there is an active market in the stock. Auerbach was also mentioned as being a close work buddy with Discala in testimony by broker Matthew Bell during A.J.’s trial in 2018, which was attended by this reporter.

The prosecutor in the Auerbach case for the Eastern District of New York, Mark Bini, asked the judge for a sentencing of 18-24 months because he said Auerbach lied to FBI agents after he was arrested about the kickback to the broker being “just a loan”. Getting caught lying to a federal officer is considered obstruction of justice with up to a five year prison sentence. AUSA Bini also told the court that Auerbach was instrumental in the manipulation of Force Field Energy. Jared Mitchell, who worked for Auerbach, was arrested in the Force Field Energy case and got 36 months of jail time but for some reason the DOJ never named Auerbach as a defendant in the case.

Jeffrey Auerbach World Wide Holdings

Part of Auerbach’s defense to get a lite sentence was claiming Jared Mitchell, who is at least a decade younger, was the leader of the kickback scheme. The duo would approach CEO’s of small cap companies offering to help with investor relations and marketing of the stock. Then they allegedly got the CEO’s to send them some money or free trading stock and Jared or Jeff would use those funds to pay stock newsletter writers to write glowing financial analysis of a company while not disclosing the company was paying them. Stocker brokers were also paid in the scheme to put their clients into the stock even though it was likely an unsuitable investments for their risk level. According to two promoters interviewed by this reporter it was Auerbach who was in charge of the scheme not Jared Mitchell. Excelsior Global Advisors is the name of the company Mitchell and Auerbach formed.

I reached Auerbach by cell phone in 2020 after he had plead guilty and was awaiting sentencing. According to a tip by an active promoter who had previously worked with him, Jeff was still trying to work with public companies to pay for promotions. Auerbach denied the allegations when we spoke and demanded this reporter never call him again.

Court records show Auerbach had to ask the court to leave New York while out on bond. One request was for work in Chicago for a e-gamming company that is not currently public. The judge allowed Auerbach to do marketing work for the company because it wasn’t a public company. It’s unclear what kind of work restrictions Auerbach is under with the DOJ considering his SEC settlement in February 2020 didn’t included a penny stock ban. His felony conviction is for conspiracy to commit securities fraud. After he is released from prison Auerbach has to serve six months of home confinement and then three years of probation. His monetary fine was less than $200,000. Auerbach currently owns a $2 million dulpex on the Upper East Side of New York City located at First Ave and 88th street.

Jeff Auerbach worked with lots of people who have now been charged by the SEC or arrested by the DOJ. This includes pump and dump fraudster Barry C. Honig. Hoth Therapeutics is one of those companies Auerbach allegedly helped Honig promote. A review of investor newsletters show an undisclosed promotion for $HOTH ran from mid-May to mid-June in 2019. This is just months before Auerbach was arrested. Promoter Adam Garcia disclosed that World Wide Holdings, an llc controlled by Auerbach, had paid him to write about the stock but another promotion by Paul Lipp did not. Lipp runs multiple llc’s used for stock promotion, one is called Small Cap Specialist.

The SEC could have named $HOTH in their case against Auerbach but didn’t. Two executives at Laidlaw & Company are now running an alleged stock manipulation of Hoth given Honig agreed to a penny stock ban. I have previously reported on Matt Eitner and Jimmy Ahern’s role in working with Hoth CEO Robb Knie.

Knie had previously worked with Honig.

Barry Honig & Hoth executive Robb Knie

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7 May

Barry Honig settles Securities Fraud lawsuit with Eloxx Pharmaceutics investor: $ELOX

Barry Honig has agreed to settle the Eloxx securities fraud suit and drop his counterclaim against a fellow high net worth investor John Winfield. This signals Honig or the company agreed to pay up on the stock he allegedly help cheat Winfield out of. Winfield was asking for as much as $2 million for his losses, which he says are a direct result of Honig’s alleged dirty dealing. During discovery secret emails were found that detailed the conspiracy between Honig and Eloxx executives James Schmidt and David Rector. Delaware district judge Richard Andrews approved the dismissal with prejudice on April 20, 2021.

Honig’s legal defense in the case had been he didn’t have any control over the executives running the company. But according to an email leaked to this reporter Honig’s controlling roll started early on when he got his buddies at Laidlaw & Company to put their main street retail investors in the predecessor of Eloxx which was called Sevion Therapeutics.

Barry C. Honig on a pharma lab tour

According to the email, on April 23 2015, we see Honig yelling at Laidlaw head of capital markets, Jimmy Ahern, because a dealer agreement isn’t signed and turned in a week after Ahern told Honig they had raised $5 million for the company. Honig admits he is getting paid as a consultant for the company, which means he is not just a passive investor in the stock. John Stetson was also included in the email chain as it appears they are working as a group. It’s unclear if Laidlaw clients who invested in Sevion knew Honig was working as a consult to the company.

Ahearn Head of Capital Markets at Laidlaw & Co

According to two former Laidlaw brokers who sold this deal Jimmy Ahern had a habit of over promising the amount his team could raise. In this case it looks like the Laidlaw brokers needed more time to collect on verbal commitments to clients. Normally we would see the CEO of the company communicating with the broker dealer who is raising money for their company but not here.

Matt Eitner, the president of Laidlaw, would not respond to questions about who was really in charge of on this deal. Laidlaw was the sole bookrunner for Sevion and says over few years they raised $7 million for the company.

Sevion ($SVON) became Eloxx Pharmaceuticals at the end of 2017 and currently trades under $ELOX.

Honig and Stetson have settled with the SEC after they were charged with running a long time pump and dump scheme and agreed to penny stock bans. Stetson now runs a South Florida pizza joint called Stoner’s Pizza.

Stetson the Pizza guy

Broker Check records show Matt Eitner and Jimmy Ahern are still under FINRA investigation for their role in overseeing a securities fraud.

Who is charge here?

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30 Dec

Judge says Team Honig could’ve acted with Scienter in $RIOT Securities Fraud lawsuit

Shareholders in a bitcoin company called RIOT Blockchain scored a win last week when New Jersey judge, Zahid Quraishi, ruled Barry Honig & his cohorts can be added back as named defendants in the securities fraud suit filed in New Jersey federal court. Previously the federal court had dismissed without prejudice defendant Honig, Andy Defrancesco’s wife Catherine, John Stetson, and Mark Groussman because the shareholder lawsuit didn’t plead what is called scienter (intent) to hold the investor group liable for fraud.

But that changed on December 23rd when Judge Quraishi detailed in an opinion how the fact pattern presented in a second amended complaint allegedly showed the Honig group mislead investors in their SEC filings regarding how much stock they owned and how they worked as a group with company management to allegedly commit fraud. Additionally, the judge allowed a section 20(a) claim to go through which relates to individuals buying or selling stock while they have material non public information. Honig’s right hand guy John O’Rourke, who was placed by Honig as CEO the company, is also allowed to be sued, along with Riot the company, and its former CEO Michael Beeghley. The case is being lead by powerhouse class action attorneys at South Carolina-based Motley Rice LLP who came to fame after taking down big tobacco.

The judge’s ruling is some of the strongest language any court has written against Honig and friends. Barry Honig is currently fighting a Securities and Exchange Commision pump and dump case where he has partially settled for a penny stock bar but is still litigating how much in penalties and fines he will pay for being what the SEC calls the leader of a decade long securities fraud ring. The SEC says Honig executed his scheme in over 70 stocks but did not name Riot Blockchain as a victim company in their enforcement action. As a result it’s been up to shareholders to hold the former Honig investors and executives accountable for millions in losses based on false press release about the company’s health and misleading main street investors in SEC filings about owning more than 10 percent of the stock. Individuals who own more than 9.99% of a stock have different restrictions about how and when they can blindly free trade a stock.

Riot’s first line of a defense was to say they had no idea that their undisclosed large shareholders like Honig and Defrancesco were acting as a group. But the class action lawyers showed the judge how John O’Roarke, the CEO, was using the same Florida office as Barry Honig and how the Honig investors were using the same fax number to send corporate communications.

Judge Quraishi wrote, “The Court finds that these allegations are sufficient for a rational trier of fact to find that the Riot Defendants knew Honig, DeFrancesco, Groussman, and Stetson acted as a group.”

The judge goes on to note that RIOT could have violated securities laws because they did not disclose Barry Honig by name as a related party. Honig had an ownership in one of the companies RIOT bought which gave him cheap stock. The fact that the SEC’s detailed enforcement action showed how this group made parrell investments together and didn’t disclose it was also taken into consideration.

Judge Quraishi wrote, “In the broader allegations Plaintiff has made, that the Riot Defendants knew of the alleged group and purposely did not report the group under Item 403 to facilitate the group’s alleged fraud to manipulate Riot’s stock price, the Court finds, for the purposes of this Motion, that Plaintiff has alleged a strong inference of scienter.”

Meaning RIOT could have acted with intent to allow this group to manipulate the stock and it’s worth going to trial to prove it.

Catherine Defrancesco, who is believed to have invested at the direction of her then husband Andy Defrancesco, is not named in the SEC complaint. Still the RIOT shareholder’s attorney at Motley Rice had enough to convince the judge that her investment of over 10% (hidden in six different llcs set up by the Defrancescos) was tied to Honig as an alleged undisclosed investor group and that she should be sued for securities fraud. Cathy Defrancesco, a mother of four, runs a south florida yoga studio and has no prior experience with public companies. This reporter has previously reported on Andy Defrancesco’s alleged role in stock manipulation and self dealing in
cannabis stocks.

Defrancesco Family

Honig, Defrancesco, Groussman, and Stetson’s likely fault was they didn’t properly file or update what is called a 13d filling which lets all shareholders know how much stock they own. There is also issues about when they did or didn’t file what is called a Form 4 which would have informed the public when large blocks of stock was sold by this investor group. Honig’s name was already in the news for being suspected as being under SEC investigation, which was first reported by this reporter. So to not spook off main street investors into the hot cryto currency market Honig would have an advantage by not disclosing he was in a stock or that he had gotten cheap shares from private investing in the company or through consulting agreements. Once it came out he was in the stock it tanked, which is one of the allegations in the amended RIOT complaint.

Judge Quraishi wrote, “The Court finds that Plaintiff has sufficiently alleged that Honig made a material misrepresentation and/or omission by, at the very least, not filing a Schedule 13(d) or 13A throughout 2017 and promptly disclosing his material acquisitions or dispositions of Riot stock.”

The class action amended complaint points out Honig’s long time deal attorney, Harvey Kesner, was his lawyer during this time who would have helped with these SEC disclosure filings. Additionally. the complaint says Kesner also acquired stock in $RIOT via a personal investment llc he created called Paradox Capital. Harvey Kesner and his former law firm SRF llp recently settled a malpractice lawsuit filed by one of the viticum companies in the SEC pump and dump case called MabVax. According to court filing that settlement payout to Mabvax was seven figures.

“Furthermore, the Court finds Honig’s failure to promptly disclose, when taken together with Plaintiff’s allegations that Honig knew of his obligation to promptly file a Schedule 13(d), 13A, and 13G as evidenced by his 2016 practice and his apparent motives to profit, gives rise to a strong inference that Honig acted with scienter,” wrote Judge Quraishi.

It’s this action of knowing you did something wrong that affected a stock price, called Scinter in legal terms, that the Dept. of Justice could latch on to in building their criminal case against team Honig. The lead lawyer for the SEC case against Honig has admitted in open court that a parallel criminal investigation is happening with Team Honig and part of his team has admitted to signing tolling agreements with the DOJ. I have also interviewed multiple informants and witnesses in the government’s case. What we don’t know is which members of this team will be charged and when or if new names will come to light in a criminal case.

The lawyers at Motley Rice started doing some of the leg work for the DOJ though. They list at least a dozen other entities or individuals who also bought $RIOT stock and have ties to Honig, Defrancesco, Groussman or Stetson. This is important because according to two individuals, who have worked with Honig, been interviewed by the government, and spoke with me on condition of confidentiality because they fear retribution, say Mark Groussman and Barry Honig worked actively within their South Florida community and friend network to encourage other individuals to take sizable investments in companies like $RIOT and $PTE with the intent to control what is called ‘the float’.

The float of stock can be somewhat hard to figure out if you don’t have proper SEC disclosures and main street doesn’t know how many shares are actually issued by a company and free trading. The float also affects the number of shares outstanding which in turn determines how many shares are available to borrow when an individual wants to short a stock. If there are not a lot of shares to borrow then the cost of shorting a stock goes up. On Wall St the move Honig and Groussman were allegedly making is called a ‘short squeeze’. And after jouranlist, like Michelle Caruso-Cabrera, at CNBC showed on TV that RIOT likely wasn’t telling the truth about who was really running the company, a Honig led short squeeze would have helped his team retain profits.

Additionally, if Honig and Groussman are able to get their buddies into a stock, who think they have some kind of inside info like what is alleged in the RIOT complaint, then this is what helps create the pump of a stock and allows team Honig to sell off their shares before the rest of the market realizes the company isn’t as financially sound as its executives are trying to make it appear.

The Defrancescos and Groussman didn’t respond for comment. Barry Honig never responds back personally for comment.

Barry Honig with RIOT CEO

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5 Nov

Laidlaw & Co. Lawyer Warned of Sanctions in Black Stockbroker Employment Retaliation lawsuit

An attorney for Laidlaw & Co was warned he could be sanctioned by SDNY’s Judge Woods today in an employment relationation lawsuit involving an African American stockbroker, George Calhoun, who sued the New York-based broker dealer for racial discrimination and having to work in a hostile environment. The attorney, Christopher Milazzo, of CMP LLP, and his partner Ross Carmel both represent Laidlaw and were former lawyers at Sichenzia Ross Ference. Milazzo was trying to argue to throw out the retaliation claim before a December court ordered mediation hearing because the lawsuit says the retaliation happen after Calhoun was an employee at Laidlaw. But after Judge Woods heard Milazzo argue the incorrect legal standard of employment retaliation vs. discrimination, according to New York state and NYC law, he spanked attorney Milazzo with a strong verbal warning that he would have no problem using Rule 11 and issue sanctions for filing a brief with a frivolous argument not based on any actual legal foundation or case law. This is the second time Judge Woods has questioned Milazzo on arguments for Laidlaw where he could not site a single case to support what appears to be his clients version of mickey mouse law.

Calhoun initially went through pre-lawsuit litigation against Laidlaw last year, via mediation, which was not public that detailed horrendous racial comments, acts and behavior by multiple Laidlaw executives which include the President’s brother, according to people familiar with the event. Laidlaw folded and settled after their insurance heard what had happen to Calhoun, according to people familiar with the situation. Laidlaw agreed to give a whopping $650,000, with at least a third going to his lawyers at New York-based Nesenoff & Miltenberg llp, for alleged employment discrimination at Laidlaw. One of the actions previously reported by this journalist involved stockbroker manager Todd Cirella sending a text of a black man being hanged in a text conversation about Calhoun, this text was mentioned as coming out in discovery in a public hearing held last month for this case, according to a transcript obtained by this journalist.

Laidlaw’s president, Matt Eitner, has been front and center in the discrimination claims by Laidlaw staff and has been accused of not supervising or taking appropriate management actions when he became aware of the racist behavior and complaints of his staff. Eitner is also currently being investigated by FINRA for supervising securities fraud at Laidlaw, according to FINRA records, which was first reported by this journalist. According to multiple people who have spoken with Eitner after the discrimination claims became public he is deeply offended that he could be called or considered a racist for allowing the alleged behavior at his firm continue for years. Eitner is not a named defendant in the retaliation case. Retaliation claims are filed usually against a company.

After the discrimination claims settled Laidlaw went and withheld $125,000 from Calhoun’s settlement check after they had told Calhoun’s counsel they wouldn’t do that, according to the new lawsuit for retaliation and breach of contract filed in New York federal court this summer. Laidlaw claimed the $125k was taken out for a settlement with a customer who complained about being sold unsuitable investments but at a court hearing last month attorney Milazzo admitted no such settlement has even taken place yet. Additionally, there is no customer complaint filed with FINRA yet against Calhoun as is the customary practice, according to Broker Check. It’s these actions that Judge Woods grilled Milazzo on in justifying where in New York case law is this legal to withhold money from a settlement, especially after you said you wouldn’t do that.

The court transcript reads like Judge Woods sees the clear breach of contract by withholding the money and warned attorney Milazzo that discovery could be justified to show how these actions by Laidlaw aren’t retaliation for George Calhoun complaining about racism in the workplace.

Malizzo’s current law firm, where he is a named partner with former SRF LLP lawyers, braggs about the firm being ‘aggressive’ lawyers for securities litigation and business disputes. But in Calhoun’s new lawsuit it appears Judge Woods isn’t having any of their legal tactics or will allow their client to make stuff up.

Additionally, Malizzo and Carmel’s former law partner Peter DiChiara was charged by the SEC in September for assisting in a microcap stock scheme. DiChaira settled the charges with the SEC.

SRF llp, where attorney Malizzo worked for a decade, is the law firm that was sued for malpractice in the Barry Honig pump and dump scheme and recently paid out a settlement to one of the SEC’s victim companies for alleged bad legal practices by its former partner Harvey Kesner. SRF also reps Laidlaw in FINRA complaints and advises the broker dealer on securities law.

Today’s hearing ended with Judge Woods again encouraging Laidlaw to settle with Calhoun and not waste legal fees on this dispute. He specially said he likes to see money go to the aggrieved instead of the lawyers. That’s likely because Calhoun’s lawyers have a broad legal standard in their case because of New York City Human Rights law. All they have to do to prove the retaliation claim is show Laidlaw engaged in conduct that is reasonably likely to deter a person from making a discrimination claim.

Calhoun’s attornies, Nicolas Lewis and Gabrielle Vinci, wrote in a response letter to Judge Woods about Laidlaw trying to throw out the retaliation claim, “A reasonable jury could certainly find that the unilateral withholding of a substantial sum of money from an agreed upon settlement payout for reasons proven false by Defendant’s own statements would persuade a reasonable employee from engaging in the protected conduct that led Plaintiff to this point, i.e. would deter a reasonable employee from making a claim of discrimination.”

NYC and NY state law will also allow Calhoun to get a bigger payout if the retaliation claim survives. There have been some cases where an extra six figures was awarded for employment retaliation which means Laidlaw could be faced with paying Calhoun double what they withheld.

Editors Note: Below is a copy of a court transcript which shows Judge Woods grilling Laidlaw’s lawyers on their lack of court cases to support their legal arguments and also mentions what documented evidence of racial discrimination is likely to come out if this case moves to discovery. It’s a fun read for legal nerds.

Attornies Milazzo and Carmel did not respond for comment. Matt Eitner at Laidlaw did not respond to an email with questions about the ethics and legal issues in the Calhoun case.

Calhoun Letter to Court 11.1.20 Laidlaw Retaliation Case by Teri Buhl on Scribd

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