On Thursday, the Securities and Exchange Commission (SEC) announced charges against Geoffrey Thompson for illegally selling more $19 million in unregistered securities.

The SEC’s complaint alleges that Thompson, a repeated securities laws violator, and his company, Covalent Collective, Inc., directed numerous offerings of unregistered securities from 2014 to 2019, ultimately raising more than $19 million from approximately 500 investors. “As alleged in the complaint, Thompson used numerous mechanisms to solicit investors, including providing investors video and audio recordings in which Thompson encouraged investors to spread the word about the company’s securities to friends and family. The complaint further alleges that despite raising nearly $20 million, Covalent never commenced any revenue-generating operations. According to the complaint, Thompson diverted more than $2.7 million of investor funds for his own benefit.”

Repeat Offender

Green Market Report has followed the saga of Geoff Thompson and his revolving door of cannabis companies. Investors continued to complain to GMR as to why the SEC allowed Thompson to keep setting up cannabis companies and selling shares if he was really just ripping them off.  In September 2017, the SEC sued Thompson for securities fraud and registration violations in connection with another of his companies, Accelera Innovations, Inc. (See SEC v. Accelera Innovations, Inc., et al., 17-cv-7052 (N.D. Ill). In April of this year, Thompson agreed to a final judgment permanently requiring him to quit violating securities laws.

He was also required to pay $350,000, prejudgment interest in the amount of $74,000, and a $100,000 civil penalty. The court also imposed a five-year ban on Thompson from (a) serving as an officer or director of a public company and (b) offering penny stocks. Even while the SEC was investigating him for Accelera, Thompson founded Covalent Collective, Inc., f/k/a Doyen Elements International Inc. f/k/a Advantameds Solutions Inc. and would insist that any shareholder problems with Doyen were because “there were two Doyens and his wasn’t the bad one.”

Covalent

Between July 2014 through at least June 2019, the SEC said that Covalent and affiliated entities offered several different investments, all of which were connected to Covalent common stock. The Covalent securities offerings resulted in the sale of over 800 investments, to approximately 500 different U.S. investors, cumulatively raising over $19 million. Thompson directed Covalent to use offering methods including unregistered broker-dealers, press releases, an investor relations firm, a public website, and a call center operated by Fortress Legacy.

Covalent sold “special warrants” to approximately 177 different investors, raising a total of approximately $8 million. Approximately 79 of the 177 investors did not indicate that they were accredited. Between 2018 and 2019, an additional 440 subscription agreements with 293 different investors, sold more than $8 million in Covalent common stock. Other investors affirmatively disclosed to Covalent that they were not accredited, but were still allowed to invest. Thompson would email audio recordings about the stock offering and promote it through a public website. Covalent never provided the common stock investors with a prospectus or financial statements.

In a related action, the Commission instituted settled administrative proceedings against Covalent. The document read, “Covalent violated Section 5(a) of the Securities Act, which prohibits the sale of securities through interstate commerce or the mails unless
a registration statement is in effect, and Section 5(c) of the Securities Act, which prohibits the offer to sell any security through interstate commerce or the mails, unless a registration statement has been filed as to such security with the Commission.”

As recently as July, Covalent shareholders were being told of a new endeavor called Black Bear Farms and posted a YouTube video updating the shareholders. The new board says they were informal advisors to Covalent and are now the new management team. The video also mentions the company Hempcentrics. Thompson talked about Hempcentric in a 2019 podcast and it is unclear whether he is still a part of the company. Covalent shareholders can receive shares in this company if they choose.

In a recent email, the company said this about Hempcentrics, “Hempcentrics, formerly known as North American Hemp, is a company rightfully owned by CC.  Gene (Berg) is working with the current Hempcentrics team to properly and fairly carve out our equity stake, taking into account what the individuals that have worked to form this company deserve.  Once complete, Bill Gregorak and myself (Sal Milazzo) will need to approve it.”

Where Did $19 Million Go?

According to the SEC case, despite raising $19 million, Covalent never started any revenue-producing moves. Instead, Thompson is accused of giving $2.7 million to himself, his wife, and other companies he owed. Covalent asked Thompson to resign when this was discovered. The SEC is asking for disgorgement of ill-gotten gains and prejudgment interest, and civil money penalties from Thompson.

Cultive

At the end of August, Covalent sent an email saying it was rebranding to the name Cultive. Just two weeks prior to the SEC prohibiting the company from offering securities through the mail, the company said in its email,

We have decided on a structure that will offer all CC shareholders an equity stake in Cultive without having to further invest personal funds.  Thus, you will have interest in Cultive based on having shares in CC.  Furthermore, accredited CC investors will be invited to purchase additional shares, equal to the number of shares they originally bought in CC.  Basically, Covalent Collective will be issued 5% of our parent company.   46% of the company will be made up of CC accredited shareholders that choose to take advantage of our invitation to invest further in the business, along with those people that loaned Cultive funds to develop the farm and acquire the property and capital for the extraction facility and distribution center.  The remaining 49% ownership, as we have reported prior, is owned by the Joint Venture partners.

In Closing