In light of recent developments surrounding an alleged campaign to destroy the publicly traded company’s share price. CEN Biotech (OTC: FITX), a Canadian subsidiary actively engaged in seeking a licence to grow marijuana under Canada’s newly formed MMPR, has had approximately 100 documented negative and defamatory articles written against the company over the span of just 1 year, almost exclusively (60+) by just a few individuals. One of these individuals, Matt Finston, has contributed over 20 articles to this… “pool of libel”.
Today, we would like to expound further upon some of the evidence MMJ.TODAY brought to light in a recent article, and also to explain, just why Mr. Finston could in fact soon be facing criminal indictment for his feracious attacks on the company’s publicly traded value.
The Securities Exchange Act of 1934 is a law governing the secondary trading of securities (stocks, bonds, and debentures) in the United States.
Section 10 prohibits the willful manipulation of stock and the stock price as well as other fraud. It also grants a private right of action in the statute. Section 10 is the predominant all-purpose fraud provision, which includes similar conduct to that identified in Section 9, but less of a threshold of intent than that required by Section 9 and, unlike Section 9, Section 10 is applicable to unlisted/OTC companies.
- SEC. 10. REGULATION OF THE USE OF MANIPULATIVE AND DECEPTIVE DEVICES
- General Purpose and violations of Rule 10b-5 of the 1934 Act
The purpose of the 1934 Act is, among other things, to ensure a fair and honest marketplace.
Rule 10b-5 of the 1934 Act makes it unlawful in the connection with the purchase or sale of any securities for any person directly or indirectly by the use of any means or instrumentality of interstate commerce or of the mails, to: 1) to employ any device, scheme or artifice to defraud; 2) make any untrue statement of a material fact; 3) to engage in any act, practice or course of business which operates as a fraud or deceit upon any person.
- Prohibition of Fraudulent Short Sales
Subsection(a)(1) states, to effect a short sale, or to use or employ any stop loss order in connection with the purchase or sale, of any security other than a government security, in contravention of such rules and regulations as the Commission may prescribe as necessary or appropriate in the public interest or for the protection of investors.
(b) To use or employ, in connection with the purchase or sale of any security not so registered, any manipulative or deceptive device or contrivance in contravention of such rules and regulations as the Commission may prescribe
- Satisfaction of Essential Elements
- Fraud or Deception
- Concerning a material fact
- In Connection with purchase/sale of a security
- Scienter (fraudulent intent – knew or should have known it was false when stated)
- Reliance and Causation – Plaintiff must have relied (detrimental reliance) on deception/fraud causing damages
The “in connection with” element is an essential one going to the reliance aspect of the tort. As any fraud action, the plaintiff must have relied on the misrepresentation. In Semerenko v. Cendent Corp., 223 F. 3rd 165 (3rd Cir. 2000), cert. denied, 531 US 1149 (2001), where the Plaintiff shows the defendant’s fraudulent conduct caused the loss, the “in connection” element in satisfied, however, showing the conduct was in connection with the transaction does not necessarily prove reliance. See, Semerenko v. Cendent Corp., 223 F. 3rd 165 (3rd Cir. 2000), cert. denied, 531 US 1149 (2001).
- Venue for a Rule 10b-5 Suit
Federal courts have exclusive jurisdiction over Rule 10b-5 claims, thus they must be filed in federal district court. Plaintiffs may file such actions in the federal district court of any district in which any act or transaction in violation of the rule occurred; or by traditional venue provisions, in the district where the defendant is found, resides or transacts business.
- State court claims.
State claims for common law fraud can be brought in the federal court (Rule 10b-5 action).
From our viewpoint, Matt Finston has engaged in obvious and admitted fraudulent conduct and willful misrepresentations with the intent to manipulate the price of FITX and cause a loss of value to shareholder’s stock – as sellers or purchasers. His alleged fraudulent conduct satisfies all of the elements (identified above) necessary to constitute a Rule 10b-5 violation. Finston has stated on more than one occasion on Twitter that he likes to bash FITX stock and he wanted to short it. He states, “I want to short it.” “I tried shorting it when it was $.067 would have made a nice 30% return.” On another occasion Finston tweeted, “I wish your CEO would reverse split so that the share price would be higher so it’s be easier to short”. On yet another occasion Finston states the following about FITX, “I’ll bash them all on fb, twtr, I’ll write their names on the doors of ___________ if I have to. F—k these guys”.
In a one year period commencing with one of the first articles on April 14, 2014, Matt Finston wrote in excess of twenty articles and hundreds of tweets bashing Creative Edge; a seemingly inordinate amount of negative articles for one writer to publish about a single company. Each time an article was published, the stock would suffer a loss in value. In the year long period during Finston’s fraudulent assault (reasonably concluded as such), the stock went from $0.068 on May 29, 2014 to $0.0085 on May 4, 2015. If you add the articles written by Chris Parry and Grant Robertson to Finston’s, it totals over 60 bash articles in the same year long period, and that does not include other associated websites and bloggers who jumped in on the action based upon the information from these writers. Between the three “reporters”, not one positive article was written about the Company. Each and every one of Finston’s articles published false information with apparent intent to damage and devalue the Company’s stock price.
- Latest Finston Article Aimed at Shareholders
During the month of April 2015, fed up with the lack of protection they were receiving from regulatory authorities, CEN Biotech’s corporate office was cc’d on close to 300 letters shareholders written to the Security and Exchange Commission to identify the many instances of fraud perpetrated against FITX, (including the alleged fraud perpetrated by Finston), and inquiring into the reason why the SEC refused to investigate such fraud and requesting that an investigation be commenced. On May 3, 2015, Finston wrote an “article” on the blog site “Seeking Alpha” mocking the hundreds of letters that shareholders had written to the various SEC offices, by writing his own letter to the SEC offices in Chicago.
The May 3rd article included the content of Finston’s letter to the Chicago SEC office, which espoused to counter the claims of fraud elicited from FITX shareholders.
Although none of the shareholders who wrote letters of complaint received anything more than a form letter in response to their complaints, Matt Finston actually received a personal email from an SEC agent in the Chicago office, within 12 hours of emailing his letter to the office. The response from the SEC agent stated, “Mr. Finston, if possible can you contact me regarding the information that you sent to the SEC, Regards, ________”. A second personal email from this SEC agent was sent to Finston stating, “[c]an you call me at: _________”. Unbelievably, although we will not show the name and contact information for this SEC agent, Finston actually published the name and personal contact info of this agent as well as showing screen shots of the actual emails. Conduct that almost certainly violates SEC internal procedure. Unfortunately, this SEC agent learned the hard way, or at least should have learned, that Mr. Finston is a person completely out for his own gain who cannot be trusted.
In summary, we have the SEC immediately responding to Finston, a person whom they learned cannot be trusted, yet upon information and belief, the SEC has as of yet essentially failed to address any of the Complaints and concerns raised by the hundreds of shareholders, whom the SEC was empowered to protect. At the very least, the shareholders certainly weren’t afforded a personal email response from a specific agent giving them the agents personal contact number, requesting that they call. Therefore, the basher is treated with more respect than the shareholders.
- The concept of “Bashing”
As a side note, I found it interesting that the “Bashers” deny on the “boards” that such a thing actually exists, yet even Wikipedia acknowledges it as a widely known method of stock manipulation, identifying it as a common method of such Fraud. The entry states
Stock Bashing: “This scheme is usually orchestrated by savvy online message board posters (a.k.a. “Bashers”) who make up false and/or misleading information about the target company in an attempt to get shares for a cheaper price. This activity, in most cases, is conducted by posting libelous posts on multiple public forums. The perpetrators sometimes work directly for unscrupulous Investor Relations firms who have convertible notes that convert for more shares the lower the bid or ask price is; thus the lower these Bashers can drive a stock price down by trying to convince shareholders they have bought a worthless security, the more shares the Investor Relations firm receives as compensation. Immediately after the stock conversion is complete and shares are issued to the Investor Relations firm, consultant, attorney or similar party, the basher/s then become friends of the company and move quickly to ensure they profit on a classic Pump & Dump scheme to liquidate their ill-gotten shares. (see P&D)”
Consequently, it is somewhat incomprehensible that many regulators don’t seem the least bit concerned with Matt Finston and his cronies’ bashing and stock manipulation.
The company CEN Biotech is now going through the process of Judicial Review with the Federal Courts in Canada in response to a denial letter of their license. A denial letter that the company believes was issued on false pretenses or insufficient evidence, such examples of which can be found through factual and systematic analysis of the company’s progress, coupled with the articles and misrepresentations mentioned in this article by certain writers.
Disclaimer: This article does not constitute a recommendation to buy or sell securities. If you have any doubts as to the merits of an investment, you should seek advice from an independent financial adviser. Investment in the securities of smaller companies can involve greater risk than is generally associated with investment in larger, more established companies that can result in significant capital losses that may have a detrimental effect on the value of the fund. You should not buy securities unless you are prepared to sustain a total loss of the money you have invested plus any commission or other transaction charges.
This article constitutes reasonable opinions of MMJ and the general public based upon a plethora of evidence in support of it’s subject matter, as well as hundreds of written accounts from the public. Readers are advised to determine their own opinions based upon any and all evidence available to them from MMJ.TODAY and other sources.
[…] nature of these articles were brought to light by MMJ.TODAY in an article entitled, “Potential Criminal Indictment of Stock Basher Matthew Finston“. We believe the article published by MMJ.TODAY was factually accurate, and represented the […]