Image above from company website.
The Securities and Exchange Commission has filed charges against the former CEO of CPG marketer NewAge Inc. for what the agency terms a “multiyear fraud” involving false public statements that boosted the company’s stock.
From 2017 to 2019, Brent David Willis made numerous false and misleading public statements concerning a wide range of matters material to NewAge's business—including that the company had developed a CBD beverage when it had not, according to the SEC.
When NewAge told the SEC in January that Willis had retired, the company described itself as selling a D2C “portfolio of organic and healthy products” across more than 50 countries.
Some of the allegedly false statements the SEC cites relate to NewAge gaining retail distribution in the United States.
One of Willis’ motivations was to create the illusion that NewAge was “a pioneer and first mover in the potentially lucrative CBD beverage market and was well-positioned to capitalize once CBD products became legal to sell in the United States and internationally,” according to the civil action.
The complaint alleges that Willis “engaged in this fraudulent conduct in order to artificially inflate NewAge's stock price, improve its financial position and financially benefit himself.”
In addition to investor conferences and earnings calls, the primary conduit for the those alleged fraudulent statements was press releases.
For example, between January and August of 2018, the SEC says Willis authorized NewAge to make a series of “materially false and misleading” public statements announcing a deal to distribute beverages to U.S. military commissaries and exchanges worldwide.
“In reality, NewAge never entered into a distribution agreement with the military; never had plans to sell its products at all commissaries and exchanges worldwide; and did not even have the inventory to do so,” the SEC said.
Between September of 2018 and January of 2019, Willis allegedly stated that NewAge had secured retail and distribution orders and commitments to sell its CBD products and that the products were being sold in retail stores.
“In fact, NewAge never completed the development of a CBD beverage product and never received orders or commitments from any retailer for CBD beverage products.”
Such statements led to increases in NewAge’s stock price “increased focus from investors and equity analysts alike about the potential impacts on NewAge’s share price and financial metrics.”
The SEC is seeking from Willis “the disgorgement of ill-gotten gains” derived from his alleged actions.
Utah-based NewAge has agreed to cooperate with the SEC in the matter.
Originally called New Age Beverages Corporation Inc., NewAge Inc. filed for Chapter 11 bankruptcy protection in August, as reported by Reuters.
A lawyer for Willis denied the accusations in a statement to Denver Business Journal.