Cannabis Hydroponics Firm Embroiled in SEC Stock Fraud Case
A classic case of pump n' dump.
The Securities and Exchange Commission has filed a lawsuit against three individuals, Jonathan Farber, Aarif Jamani, and Brian Keasberry, for their involvement in a sophisticated stock manipulation scheme involving County Line Energy Inc., a small public company based in California.
According to the SEC’s complaint filed by the Southern District of New York, the scheme, which took place from 2017 to 2021, led to profits of approximately $5 million.
The main focus of the SEC’s case is on the alleged stock manipulation scheme, not specifically on the cannabis aspect of County Line Energy’s business, which was described by its founders as “manufactur[ing] and sell[ing] self-contained hydroponic systems for growing plants, vegetables, and cannabis.”
The defendants are accused of gaining control of County Line by placing associates in key management positions and then manipulating the company’s stock. The SEC alleges that they created a false appearance of market interest in County Line stock, which had minimal trading activity before the defendants began the scheme.
The complaint details how Farber, Jamani, and Keasberry coordinated to sell County Line stock to friendly buyers under their control, effectively trading the stock among themselves to simulate active market interest. The strategy was to attract retail investors to purchase the stock, which the defendants were unloading for profit.
Further allegations include that the defendants funded an online promotional campaign to falsely hype the stock’s potential. The SEC states that the trio did not disclose their control over the company or the fact that they were actively selling the majority of the stock during the promotion.
“To evade limitations placed on company insiders and sell the massive quantities of County Line stock they had accumulated, Jamani and Farber had to conceal their status as County Line affiliates,” the agency wrote. “They did so by lying to County Line’s transfer agent and by selling shares through offshore nominee accounts.”
The SEC is seeking a permanent injunction against the defendants, along with the disgorgement of all profits made from the unlawful conduct, including prejudgment interest and civil penalties. The Commission also seeks to bar the defendants from participating in any offering of penny stock and from serving as officers or directors of any public company.
