DD Support Board and Research Team

[1manband]

SEC Charges Canadian Company, Recidivist Paul Bilzerian, and Others with Scheme to Falsely Inflate Revenues

Is was never a question of if, but when. I can't imagine anyone is even remotely surprised by these allegations. Criminal charges have also been filed.

https://www.sec.gov/enforcement-litigation/litigation-releases/lr-26138

On September 27, 2024, the Securities and Exchange Commission charged Canadian consumer goods company Ignite International Brands, Ltd., recidivist Paul Bilzerian, and six other defendants for improperly recognizing and reporting revenue in 2020.

The SEC's complaint alleges that from late 2020 to 2021, Ignite engaged in a scheme, orchestrated primarily by Bilzerian, who controls Ignite's finances and operations, to report approximately $5 million in non-existent sales of disposable vape pens as part of the company's fourth quarter 2020 results. According to the complaint, Ignite issued a series of false invoices to one of its customers for the vape pens in November and December 2020, despite the fact that the customer had never ordered the product. In fact, the SEC claims, the customer repeatedly disputed the invoices after receiving them, including voicing its objections directly to Bilzerian and to Ignite's then-President and COO, John Schaefer. Nevertheless, Ignite allegedly went on to tout its historic 2020 performance in a January 2021 press release, which noted that the company's fourth quarter revenue "exceeded revenue for the previous three quarters combined." The SEC further alleges that, once the customer refused to confirm the accuracy of the false invoices to Ignite's auditor, Ignite retroactively shifted supposed responsibility for the purchases to International Investments, Ltd., another entity also controlled by Bilzerian. The complaint further alleges that despite the purported sale to International Investments, Schaefer continued to track the inventory and issue invoices nominally on behalf of International Investments, as the product was subsequently sold to ultimate customers. The complaint claims that Ignite, Bilzerian, Ignite's then-CFO Paul Dowdall, and Bilzerian's deputy Scott Rohleder concocted and relayed a false story about International Investments' purchase of the vape pens to Ignite's auditor, Accell Audit & Compliance, PA, and its engagement partner, Christopher Hiestand. According to the complaint, in April 2021, Ignite publicly released its 2020 audited financial statements, including the false sales figures. The SEC further alleges that despite numerous red flags concerning the sale to International Investments, and despite knowing or being reckless in not knowing that International Investments had not agreed to the supposed purchase until 2021, Accell and Hiestand issued a report opining that the 2020 audited financial statements fairly presented Ignite's financial position as of year end.

The complaint, filed in the U.S. District Court for the Southern District of New York, charges Ignite, Bilzerian, Dowdall, Rohleder, Schaefer, International Investments, Accell, and Hiestand with violating the antifraud provisions of Section 10(b) of the Securities and Exchange Act of 1934 and Rule 10b-5 thereunder. The complaint seeks permanent injunctive relief and civil penalties, as well as officer and director bars against Bilzerian, Dowdall, Rohleder, and Schafer.

In a parallel action, the Fraud Section of the Department of Justice and the U.S. Attorney's Office for the Central District of California today announced charges against Ignite, Bilzerian, and Rohleder.

The SEC's investigation was conducted by Patricia Pei and Deborah Russell, with assistance from Robert Nesbitt, and was supervised by Spencer E. Bendell and Rhoda Chang. The litigation will be led by Charles Canter and supervised by Douglas Miller.