If Dan Bilzerian had listened to his father and not taken his marijuana company public, the brash Instagram celebrity’s Ignite International Brands might not currently be under investigation by both the U.S. Securities and Exchange Commission and the Department of Justice.
“There is no reason to have a public company unless you intend to raise capital” from public markets, as Dan Bilzerian’s father, Paul, told MJBizDaily in an interview last month.
Paul Bilzerian, who said he is now serving as an unpaid adviser to his son’s company, was speaking on behalf of Ignite because Dan was unavailable to comment.
The elder Bilzerian himself is a notorious one-time corporate raider who served time in prison for securities fraud and famously managed to hide most of a $62 million SEC judgment from being collected.
Before Ignite went private in August, investigators from both the SEC and the FBI subpoenaed the company for a vast number of documents, according to recently unsealed court records and Paul Bilzerian.
Ignite had made a brief and unsuccessful play for a share of the legal cannabis market in both the United States and Canada before public filings revealed the firm was hemorrhaging cash in ways that a later lawsuit alleged were suspicious.
The business made headlines in the summer of 2020 when mandatory public filings revealed the company had lost nearly $50 million, nearly half of which the company reported spending on “marketing and promotion.”
Dan Bilzerian has defended his company’s record, comparing Ignite to big companies such as Uber that posted big losses.
Uber is worth 80 billion, it has never had a profitable month since it started and it lost over 5 billion in one quarter last year.
— Dan Bilzerian (@DanBilzerian) October 14, 2020
But according to an ongoing wrongful-termination lawsuit filed in June 2020 by Curtis Heffernan, a former Procter & Gamble executive who briefly served as Ignite’s acting president, it was Ignite company cash that funded Bilzerian’s opulent lifestyle of constant yacht vacations to exotic locales – always surrounded by women in bikinis, always carefully documented for Bilzerian’s tens of millions of social-media followers.
On May 20, SEC investigators served Ignite with a grand jury subpoena as part of an investigation into “a potential accounting fraud,” according to documents first unsealed Aug. 29.
“SEC staff has uncovered information that indicates that (Ignite) may have filed public financial statements that include false or misleading representations regarding revenues earned and recognized in the company’s fiscal year ending December 31, 2020,” the agency wrote in a filing.
After Ignite filed motions on Sept. 28 to delay the subpoenas, a federal judge ordered the company to comply with the subpoena and cough up documents, which it did, Paul Bilzerian said.
In its filings, the SEC mentioned that Ignite had sought to delay the agency’s subpoena while a separate criminal investigation by the Justice Department wound its course.
As for what those federal officials want, that’s anyone’s guess, Paul Bilzerian said.
“Nobody knows what the DOJ is looking at,” he said. “They don’t tell you and you don’t know.”
The Justice Department did not reply to an MJBizDaily request for comment.
An SEC spokesperson said via email only that the agency had no comment beyond public filings.
Heffernan’s lawsuit alleges that Ignite accountants flagged almost $850,000 in company expenses as more closely resembling a slush fund that served as Dan Bilzerian’s allowance for luxury spending.
Among other expenses, Bilzerian spent $50,000 on a bed frame and a half-million on a yacht rental, the lawsuit alleged. That lawsuit is still pending.
Public persona questioned
The public filings and the lawsuit paint a picture of Bilzerian and his success that contradicted the narrative his social-media presence created.
A positive CNBC Money interview at Bilzerian’s supposed $65 million, 31,000-square-foot Los Angeles mansion had to be amended with an editor’s note, for example, after Heffernan’s lawsuit revealed that the mansion was in fact rented for $200,000 a month.
Heffernan’s allegations might also have prompted the SEC investigation, Paul Bilzerian speculated.
“This is my theory, for what it’s worth,” he said.
“I would think the regulators would have an obligation to investigate Heffernan’s allegations, once that lawsuit is out there in the public.”
Tamara Freeze, Heffernan’s attorney, said her client would have no comment.
But Paul Bilzerian dismissed the notion that Ignite would have toyed with his books to inflate revenue in part because the company used a legally required independent auditor, he said.
“Whether or not Dan had personal or business expenses, those things are arguable,” he said.
“But revenue? How do you inflate revenue without the auditor being aware?”
After the massive losses in 2020 – during which time the company also received a $1 million Paycheck Protection Program loan, more than a quarter of which the company reported spending on rent – Ignite enjoyed a remarkable turnaround, reporting $8 million in profits through the first six months of 2022, according to unaudited financial statements filed after the company went private on Aug. 24.
Success in the nicotine vaporizer market is behind that reversal, filings and Dan Bilzerian’s public statements claims.
In addition to federal investigators in the United States, Ignite is also dealing with a Canadian probe.
The company also provided “massive” amounts of documents to regulators from the Ontario Securities Commission, Paul Bilzerian said.
Going public a mistake?
Until Ignite went private in August, the company’s shares were traded on the Canadian Securities Exchange, the same exchange that lists many U.S. plant-touching marijuana companies.
Though Ignite was publicly traded, about “90%” of the company’s shares are owned “by Dan and friends,” the elder Bilzerian added.
“Ignite has never gone to the public markets to raise capital,” Paul Bilzerian said, “so my advice to my son was he should never have had a public company unless he intended to raise money from the public.”
In 2019, the then-named Ignite Cannabis Co. made a splash on its launch when it plastered Los Angeles with risque billboards featuring bikini-clad women next to cheeky puns such as “Nice Grass,” which critics called sexist.
However, the company failed to make an impact in the competitive legal cannabis marketplace in both the U.S. and Canada.
The company exited the legal THC cannabis sector last year, in part because of lax regulation, Dan Bilzerian told an interviewer at the time.
Ignite still markets CBD products, according to the company’s website.
Since the transition from marijuana, Ignite deals in “synthetic and tobacco-derived nicotine e-liquid, spirits, apparel, beverage, and cannabidiol (CBD)” products, the company said in its most recent public filings.
On Aug. 1, Ignite “wrote a letter to the SEC … discussing a criminal investigation by the U.S. Department of Justice,” which had served the company with its own grand-jury subpoena, the SEC said in its filings.
Ignite requested the SEC’s investigation be delayed “until the conclusion of the criminal investigation” and also requested the SEC delay until September “any further discussions given” its lawyer’s personal schedule,” according to filings.
The SEC said it had asked for “responsive accounting records, purchase orders, invoices, and other documentation related to sales of Respondent’s products, or any communications between Respondent and its auditor,” all of which were missing from an initial tranche of documents, according to a filing.
Who is the feds’ target?
For almost a decade, speculation has swirled that the source of Dan Bilzerian’s seemingly inexhaustible fortune – money he has claimed he won playing private poker games – might actually be the fortune Paul Bilzerian successfully hid from the feds via a sophisticated network of shell companies.
Asked if the feds are after Dan Bilzerian’s company because of his father’s documented success in evading judgments, Paul Bilzerian demurred.
“Are they after me? Maybe,” he said. “Are they after Dan? Maybe. Are they after Ignite? Maybe.”
However, the FBI agent who wrote the grand-jury subpoena seeking information from Ignite works in the same Justice Department district where Heffernan’s lawsuit was filed, Paul Bilzerian noted.
“My guess would be, unless you believe in huge coincidences, that this is a function of Curtis Heffernan’s lawsuit, that we know prompted the Ontario Securities Commission investigation, (two years ago)” he said. “But we just don’t know, and I think it’s impossible to find out.
“Honestly, we have no idea what they’re looking for.
“All I know is that the object of the company is to give them whatever the hell exists that they want. We’ll let them do their thing.”
After praising “Ignite management and employees” – with whom he said he’d worked for the past two years – as “honest, hardworking, law-abiding men and women,” Paul Bilzerian could not resist one last dig at the feds.
“In 1987, my lawyer at the time, Art Mathews, once advised me to cooperate fully with federal investigators and have faith in my government and the legal system,” Paul Bilzerian said, referring to his own case.
“That did not work for me. But I am hoping it will work for Ignite and my son Dan.”