(This story has been updated with additional details and quotes from an attorney for Brent David Willis.)
A former CEO of a publicly traded CBD beverage company that marketed drinks licensed by the estate of Bob Marley lied to investors and the public about the size of distribution deals with Walmart and the U.S. military in an attempt to boost the struggling firm’s future, according to federal securities regulators.
In charges filed Oct. 18 in federal court in Denver, the U.S. Securities and Exchange Commission alleged that Brent David Willis, the former CEO of NewAge, “made numerous materially false and misleading public statements” about the company’s fortunes during investors conferences and earnings calls as well as in the media between July 2017 and July 2019.
The agency alleged that Willis was engaged in a “multi-year fraud.”
The lies pumped the share price of NewAge’s stock – once a high-flier with a market capitalization of more than $500 million before it was delisted from the Nasdaq in September – to a peak of $8.47 a share, according to the SEC.
The agency also alleged that Willis, who joined the company in 2016 and secured a deal to distribute Bob Marley-branded products with the late reggae and counterculture icon in 2017, “cashed in” by banking more than $2 million from selling company stock during a six-month period in 2019.
Denver-based NewAge is currently listed on the pink sheets, and shares in the company – which previously was called New Age Beverages Corp. – were trading for less than a penny on Tuesday.
Willis, who now works at Vaya Space, a Florida-based hybrid rocket propulsion and small spacecraft launch company, could not immediately be reached by MJBizDaily for comment.
But Michael Diver, Willis’s attorney, pushed back on the SEC’s allegations and promised to fight the agency in court.
“At no time did anyone come to him with questions about the existence or scope of the distribution arrangements referenced in the SEC’s complaint; nor did anyone question whether NewAge was committed to developing CBD products,” Driver said in a statement.
“These are black-and-white issues and we expect to prevail in litigation.”
In annual filings posted in 2019, NewAge conceded that new federal regulations after passage of the 2018 Farm Bill might not allow for CBD products to be distributed in the United States.
Later direction from the U.S. Food and Drug Administration clarified that adding CBD to food products violated federal law.
According to the SEC, Willis’ false claims about NewAge included an April 2019 announcement that the company had inked a deal with Walmart for “national distribution” of its “Marley Mate” CBD-infused drinks at all of the retailer’s locations nationwide.
In reality, the drinks appeared “in less than 7%” of Walmart stores in 21 states.
But Willis’ claim was enough to pump NewAge stock by 38%, the SEC said.
Willis also claimed in January 2018 to have reached a deal with the U.S. military to carry NewAge drinks at more than 3,340 on-base stores around the world.
That, too, was bogus, the SEC said.
These “misstatements artificially boosted NewAge’s share price and increased the liquidity of its stock, which enabled the Company to turn around its finances and grow” when epic oversupply and consumer saturation was causing other CBD companies to struggle, according to the SEC.
The SEC is seeking a permanent injunction against Willis, 62, from participating with public companies in the future as well as financial penalties, including paying back his “ill-gotten gains,” according to the complaint.
No court date has been set, according to records.
Chris Roberts can be reached at firstname.lastname@example.org.