A court filing recently revealed that Ignite International Brands Ltd., a Canadian cannabis company run by Dan Bilzerian, a U.S. social-media influencer, is under investigation by the U.S. Securities and Exchange Commission (SEC). The company is said to be facing a civil and criminal investigation for fraud in the U.S.A as well as a regulatory investigation in Canada.
Headquartered in Markham, Ont., Ignite International Brands Ltd. carried out its operations in the Canadian cannabis market until last year October. The company was run by CEO Dan Bilzerian, an Armenian-American social media influencer and poker player based in Los Angeles, having more than 33 million Instagram followers. Known for his cannab-bro culture and heavy reliance on bikini-clad women, many found his message offensive and out-dated.
The company now focuses on consumer goods such as vape and CBD products, apparel, performance drinks, and spirits, including vodka, seltzers and tequila. Until the company went private on the 29th of August, 2022, it traded publicly under the symbol BILZ-CN on the Canadian Securities Exchange.
With a peak stock value in 2019, Ignite International Brands Ltd had a market capitalization worth over $750 million. However, immediately after the firm stopped trading publicly in the United States and Canada, the value dropped to approximately $170 million.
The U.S. Securities and Exchange Commission (SEC) vs Ignite International Brands Ltd.
On the 29th of August, 2022, the U.S. Securities and Exchange Commission (SEC) filed a petition with a California court to order Ignite International Brands Ltd to cooperate with an investigative subpoena issued to the firm in May 2022. The court filing revealed that Ignite International Brands Ltd faces several warrants in the criminal justice system of the United States. Likewise, in Canada, court documents revealed that the company is facing a series of requests from regulatory bodies.
Patricia Pei, a SEC staff member, explained in the court filing that the agency is looking for information about possible antifraud provision violations by Ignite International Brands Ltd.
She further said that the SEC had uncovered information that suggests that Ignite has filed financial statements that include misleading or false data in its 2020 revenue.
According to a statement published on the SEC website, the agency affirmed that it would proceed with its investigation as no evidence has surfaced that any entity or individual has violated any securities laws. The Ontario Securities Commission (OSC), the agency that compelled Ignite to show the disclosures in its financial statements at the beginning of the year, did not issue any comment on the matter.
Based on the details in the U.S. court documents, there’s been a back-and-forth between Ignite and the SEC since a subpoena was issued on the 20th of May, 2022. Paul Holden, the general counsel of Ignite in an August message affirmed that the company has been in constant communication with SEC. He said the firm had provided thousands of documents to the agency in response to the subpoena issued in 2021. When asked for a comment after the latest warrant was issued, Mr Hughes did not reply.
Mr Hughes replaced Paul Holden as Ignite’s general counsel but not before Paul Holden issued a statement saying he was leaving the firm due to personal reasons. He then asked the SEC to allow Ignite more time to comply.
Mr Hughes settled in fast into his new position. On the 1st of August 2022, he sent an email attached to the court file, asking for the SEC subpoena to stay. Mr Hughes argued that the Justice Department’s subpoena issues have a high chance of significant overlap with the SEC’s.
He went on to say that asking the firm to address the civil problems and tending to grand jury subpoenas simultaneously is nothing but inappropriate. Mr Hughes affirmed that the company has also been aware of other grand jury subpoenas.
On the 22nd of August 2022, Mr Hughes sent a follow-up letter acknowledging the queries sent by the Canadian regulatory. However, the letter did not specify which regulators were making enquiries. In the letter, Mr Hughes affirmed that the purpose of the subpoenas issued by the Justice Department remains unclear to the company.
Mr Hughes explained that Paul Holden’s sudden departure from the firm and his endeavour to get updated on the issues delayed the whole process. Hence, it gave an impression that the company is looking to avoid the entire SEC inquiries, which Mr Hughes affirmed is not the case. However, the SEC rejected the company’s request stating that the initial deadline was the 15th of June 2022.
An extravagant Lifestyle
The CEO of Ignite International Brands Ltd, Dan Bilzerian, has built the company’s identity and brand around his extravagant lifestyle. In May 2022, a news report by Bloomberg News claimed Mr Bilzerian hosted a massive party at his Los Angeles mansion. The report claimed he hosted about 2,700 guests, which included pop artists like the Weeknd, Chance the Rapper, and Blink-182 drummer. The party featured fire-breathing bartenders, a tattoo parlour, a lingerie contest, and neon-illuminated skydivers jumping from a helicopter to the driveway. The party was said to be the launching of a premium vodka that contains alkaline water.
In October 2021, Ignite International Brands Ltd announced to the general public that the company would vacate the Canadian cannabis market due to many obstacles, such as the government’s stringent regulations. In May, the company made public that after reviewing its disclosures by the OSC, it would be filing a yearly report encompassing a contract agreement between another business owned by Mr Bilzerian and Ignite.
The company also added several items to the analysis and discussions surrounding its management while rectifying deficiencies in previous period reports evaluated by the OSC. Ignite achieved that by adding more information about standards of profit that were initially ignored, which must be calculated using generally accepted accounting principles.
While the SEC and Ignite continue to go back and forth on fraudulent accounting issues, Bilzerian continues to live his extravagant lifestyle, flooding his social media page with his social outings. The CEO is said to throw luxurious parties at his Bel-Air mansion, which boasts a 12-foot waterfall, a bowling alley, a movie theatre, a nine-car garage, seven bars, and a walk-in bong closet.
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