U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 25857 / September 27, 2023
Securities and Exchange Commission v. Adam E. Levin, No. 2:23-cv-08081 (filed Sept. 27, 2023, C.D. Cal.)comp25857-levin (1)
Securities and Exchange Commission v. Sheldon Richard Bentley a/k/a Rick Bentley, No. 2:23-cv-02119-JDP (filed Sept. 27, 2023 E.D. Cal.).
SEC Settles Actions Against Executives of Two Reg A Issuers for Involvement in Scheme To Fraudulently Promote Securities Offerings
The Securities and Exchange Commission today announced charges against Hightimes Holding Corp. Executive Chairman Adam Levin and Cloudastructure, Inc. Chief Executive Officer Rick Bentley for their involvement in separate fraudulent schemes to promote securities offerings that Hightimes and Cloudastructure were conducting pursuant to Regulation A, which, if certain conditions are met, provides an exemption to the Securities Act’s registration provisions. Levin and Bentley have agreed to settle the SEC charges.
According to the SEC’s complaints, Levin and Bentley participated in the fraudulent promotions of their companies’ securities by concealing payments to Jonathan William Mikula through middlemen acting on his behalf, and lavishly entertaining Mikula, in exchange for promotion by Mikula through Palm Beach Venture, a newsletter for which he served as an author and chief analyst. The complaint against Levin alleges that he participated in the fraudulent promotion of Hightimes’ securities between at least April 2020 and August 2021. A separate complaint against Bentley alleges that he participated in the fraudulent promotion of Cloudastructure’s securities between at least September 2020 and mid-2021. The charging documents further allege that Levin and Bentley made material misrepresentations and omissions to investors in connection with their offerings. According to the complaint filed against Levin, he also engaged in an offering of Hightimes’ securities that was unregistered and not covered by a valid registration exemption between June 2020 and December 2022.
This is the second set of actions that the SEC has filed in connection with this fraudulent promotional scheme. In September 2022, the SEC filed a complaint against Mikula, a recidivist securities law violator, alleging that he promoted the securities of Reg A issuers, including Hightimes and Cloudastructure, without disclosing his receipt of compensation for the promotions. As alleged, Mikula promoted the securities through Palm Beach Venture and presented the recommendations as unbiased and not paid for, while he was secretly compensated in the form of cash and lavish entertainment expenses. The SEC litigation is continuing against Mikula, as well as his associate Christian Fernandez, who allegedly acted as a middleman for the promotional scheme.
The SEC’s complaint against Levin charges him with violations of Section 10(b) of the Exchange Act of 1934 and Rule 10b-5 thereunder and Sections 5 and 17(a) of the Securities Act of 1933. Without admitting or denying the allegations in the complaint, Levin agreed to the entry of a final judgment imposing a permanent injunction, a penalty of $111,614, and a 3-year bar from serving as an officer and director.
The SEC’s complaint against Bentley charges him with violations of Section 10(b) of the Exchange Act and Rule 10b-5 thereunder and Section 17(a) of the Securities Act. Without admitting or denying the allegations in the complaint, Bentley agreed to the entry of a final judgment imposing a permanent injunction, a penalty of $111,614, and a 5-year bar from serving as an officer and director.
The SEC’s investigation was conducted by Yolanda Ochoa and Sarah Nilson, with assistance from Charles Canter and Dora Zaldivar. The case was supervised by Finola Manvelian. The SEC’s investigation is ongoing.