New York Securities Lawyer Blog
On November 17, 2015, the Securities and Exchange Commission (“SEC”) filed a Complaint against Jammin’ Java Corp. d/b/a Marley Coffee, Shane G. Whittle, Wayne S. P. Weaver, Michael K. Sun, Rene Berlinger, Stephen B. Wheatley, Kevin P. Miller, Mohammed A. Al-Barwani, Alexander J. Hunter, and Thomas E. Hunter (the “Complaint”) for allegedly running a ‘pump-and-dump’ scheme involving Marley Coffee stock, which generated at least $78 million in profits.
A ‘pump-and-dump’ scheme involves a fraudster’s use of false or misleading statements to raise the price of a stock. After the price is inflated, the fraudster then sells his or her own shares, creating a profit but at the same time flooding the market with shares and causing investors to lose money as the price of the stock plummets. When the fraudsters sell large quantities of such stock to the public without registering the transactions, they might be violating the Securities Act of 1933 (the “Securities Act”). Further, manipulative trading used to inflate a stock’s price may be violations of antifraud provisions in the Security Act as well as the Securities Exchange Act of 1934 (the “Exchange Act”). Furthermore, fraudsters who attempt to conceal their control of the stock may violate the Exchange Act’s reporting requirements.
Jammin’ Java Corp. is a Nevada corporation that is currently headquartered in Denver, Colorado. The Complaint states that “[f]rom its inception until at least September 2011, Jammin’ Java [Corp.] was a shell company, without any significant operations or assets. Jammin’ Java [Corp.] has failed to earn positive operational cash flow or an accounting profit, and consistently disclosed going-concern risks in its SEC filings. As of January 31, 2015, Jammin’ Java [Corp.] had accumulated a deficit of $24 million in operating losses.” Shane G. Whittle served as the CEO, Treasurer, Secretary and director of Jammin’ Java Corp., and continued to direct the business as a de facto officer and then as a consultant after his resignation in April and May of 2010 from his board and executive officer positions.
The Complaint charges the various defendants with the following offenses: (i) unregistered offer and sale of securities, in violation of Sections 5(a) and 9(c) of the Securities Act; (ii) failure to file beneficial ownership reports in violation of Section 13(d) of the Exchange Act and Rules 13d-1 and 13d-2 thereunder; (iii) failure to file beneficial ownership reports in violation of Section 16(a) of the Exchange Act and Rule 16a-3 thereunder; (iv) fraud in connection with the purchase or sale of securities in violation of Section 10(b) of the Exchange Act and Rules 10b-5(a) and 10b-5(c) thereunder; (v) fraud in connection with the purchase or sale of securities in violation of Section 10(b) of the Exchange Act and Rule 10b-5(b) thereunder; and (vi) touting securities for compensation without disclosure in violation of Section 17(b) of the Securities Act.
According to the Complaint, Jammin’ Java Corp., operating under the name Marley Coffee and formed by one of Bob Marley’s sons, Rohan Marley, “owns a license to use trademarks of the late reggae artist Bob Marley for licensed coffee products.” Before Jammin’ Java Corp.’s 2008 reverse merger into a publically traded shell company that allegedly dealt in waste management, Shane G. Whittle surreptitiously acquired control of millions of shares that had been issued to foreign nominees, during the timeframe in which he served as Jammin’ Java Corp.’s executive officer and director. Since that reverse merger, Jammin’ Java Corp.’s stock has been publically traded and quoted on the over-the-counter market. In 2010, Shane G. Whittle executed an “illegal offering and fraudulent promotion” of Jammin’ Java Corp.’s stock. Alexander J. Hunter and Thomas E. Hunter fraudulently promoted the stock offering, at the direction of Shane G. Whittle. In addition, and in preparation for the offering, Shane G. Whittle “distributed a portion of the nominee stock through a complex network of offshore entities” controlled by, among others,” Wayne Weaver, Michael Sun, and Rene Berlinger – all of whom also perpetrated a fraudulent financing deal that involved Jammin’ Java Corp. In March 2011, and as part of the fraudulent ‘pump-and-dump’ scheme, Alexander J. Hunter and Thomas E. Hunter distributed fraudulent newsletters promoting Jammin’ Java Corp.’s and Marley Coffee’s stock. These newsletters only exacerbated the stocks’ price inflation, which began with Jammin’ Java Corp.’s public and internal announcements and coordinated trades.
According to the Complaint, from late 2010 to mid-2011, Jammin’ Java Corp.’s share price and volume rose from $0.17 and no volume, respectively, to an intra-day high of $6.35 and 20 million shares. During this period of fraudulent inflation, Shane G. Whittle made another distribution of significant amount of shares through Wayne S.P. Weaver, Michael K. Sun, and Renee Berlinger’s “network of offshore intermediaries,” including Stephen B. Wheatley, Kevin P. Miller, and Mohammed A. Al-Barwani. Through this fraudulent scheme, over 45 million shares were sold, generating more than $78 million in profits from February to May 2011. Jammin’ Java Corp., Shane G. Whittle, Wayne S. P. Weaver, Michael K. Sun, Rene Berlinger, Stephen B. Wheatley, Kevin P. Miller, Mohammed A. Al-Barwani, Alexander J. Hunter, and Thomas E. Hunter transferred $2.5 million of those profits to Jammin’ Java Corp. pursuant to the fraudulent financing agreement that had been previously arranged. On May 9, 2011, Jammin’ Java Corp. disclosed that it had become aware of “an unauthorized and unaffiliated internet stock promotion.” Subsequently, the price and volume of the shares began to plummet, which was only worsened by Jammin’ Java Corp.’s May 17, 2011 release of its Form 10-K, which revealed negative results. As a result of Jammin’ Java Corp. d/b/a Marley Coffee, Shane G. Whittle, Wayne S. P. Weaver, Michael K. Sun, Rene Berlinger, Stephen B. Wheatley, Kevin P. Miller, Mohammed A. Al-Barwani, Alexander J. Hunter, and Thomas E. Hunter’s fraudulent ‘pump-and-dump’ scheme, investors lost millions of dollars.
The attorneys at Lax & Neville LLP have extensive experience in successfully prosecuting claims on behalf of customers who have suffered losses or been defrauded. If you are a victim of fraud, please contact Lax & Neville LLP today at (212) 696-1999 to schedule a consultation.