In the parallel criminal complaint against Fargesen and Palatnik, the U.S. Attorney’s Office for the Southern District of New York alleged that the defendants created and carried out a scheme to defraud investors.
Fargesen and Palatnik allegedly executed the scheme by doing the following:
- purchasing a Canadian shell company through a straw purchaser
- directing the reverse merger of the shell company and CanaFarma to exercise secret control of the resulting publicly-traded company
- controlling CanaFarma through a nominal Chief Executive Officer who reported to them
- supporting CanaFarma’s stock price through manipulative trading
- attempting to artificially inflate CanaFarma’s reported revenue
- making false statements to CanaFarma’s auditors.
The U.S. Attorney’s Office charged Fargesen and Palatnik with one count of conspiracy to commit securities fraud, one count of securities fraud, one count of conspiracy to commit wire fraud, and one count of wire fraud. Each of their alleged criminal offense carries a maximum prison sentence of 20 years.
