The SEC has sued former NewAge CEO Brent Willis for fraud.
In response to the regulator, Willis instructed porky pies which contributed to NewAge’s “progress and success”.
As alleged by the SEC, Willis lied about “product distribution offers” in “traders conferences, earnings calls, media interviews, and in a minimum of 12 press releases.”
In actuality, these distribution offers both didn’t exist or have been considerably smaller than claimed within the public statements.
One lie cited is Willis, in early 2018, claiming NewAge had a distribution settlement with the US army.
In actuality, NewAge by no means entered right into a distribution settlement with the army; by no means had plans to promote its merchandise in any respect commissaries and exchanges worldwide; and didn’t even have the stock to take action.
Willis additionally cashed in on the CBD pattern in MLM again in late 2018, claiming the NewAge was growing “a portfolio of CBD-infused drinks”.
Willis falsely acknowledged that NewAge had secured substantial retail and distribution orders and commitments to promote its CBD merchandise, and that
NewAge’s CBD merchandise have been being offered in retail shops.Actually, NewAge by no means accomplished the event of a CBD beverage product and by no means obtained orders or commitments from any retailer for CBD beverage merchandise.
Regardless of not truly even having CBD merchandise in growth, not to mention obtainable for distribution;
At an off-site assembly organized by Defendant and attended by retailers, distributors, and traders throughout the October 2018 NACS commerce present in Las Vegas, NewAge distributed promote sheets … that included the false and deceptive statements that
(i) NewAge’s “full spectrum” CBD merchandise have been manufactured through a “proprietary manufacturing course of”;
(ii) that the purported merchandise have been a “proprietary in-house formulation developed by New Age Well being Sciences”;
(iii) that “each batch” of the purported merchandise “is third-party examined”; and
(iv) that the purported merchandise benefited from a “full spectrum nano technology-amplified entourage impact.”
Different NewAge distribution lies Willis instructed embrace:
- XingTea being distributed by 7-Eleven in ~1500 throughout the US, when in truth the distribution settlement pertained solely to ~250 shops in Colorado (2017);
- Aspen Pure Probiotic water being distributed by means of 2000+ Ahold Delhaize shops, when NewAge didn’t have the stock to take action and Ahold Delhaize solely dedicated to 74 shops (2017);
- Unified Methods Group would distribute NewAge drinks by means of “greater than 1 million merchandising machines, 5,000 micro markets, and over 1,800 shopper eating amenities all through the USA”, when the settlement didn’t specify at distribution commitments (2017);
- Coco-Libre and Bucha Reside Kombucha was being distributed all through Loblaws and Sobeys in Canada, when no such distribution settlement existed (2018;
- Bucha Reside Kombucha could be distributed by “the biggest meals and beverage distributor in South Korea to broaden to all main stores all through the nation efficient instantly”, when all that was offered was licensing with no distribution settlement (2018); and
- Marley drinks was being distributed by means of Walmart “throughout the USA … in all Walmart shops”, when the settlement pertained to “lower than 7% of Walmart shops” (2019)
The SEC alleges Willis’ lied to
artificially inflate NewAge’s inventory worth, enhance its monetary place, and financially profit himself, regardless of figuring out, or recklessly failing to know, that the statements have been false and deceptive.
The SEC claims Willis was “fixated” on NewAge’s declining share worth, which mirrored the monetary state of the corporate.
All through 2017 and 2018, NewAge was in dire monetary straits.
In 2017, NewAge incurred losses and struggled to pay for stock and its working bills.
For the 12 months ended December 31, 2017, NewAge reported a web lack of roughly $3.5 million and had solely roughly $285,000 in money.
For the primary six months of 2018 (ending on June 30, 2018), New Age reported a web lack of roughly $3.4 million and had solely roughly $213,000 in money.
NewAge’s share worth additionally declined considerably in late 2017 amid the Firm’s incapacity to safe nationwide accounts for its current manufacturers or develop promising new merchandise.
Issues bought worse in 2018, finally resulting in NewAge taking out a “high-interest mortgage in an effort to meet primary monetary obligations.”
Willis repeatedly expressed frustration with the Firm’s incapacity to safe distribution with main retailers and imposed substantial strain on his workers, notably his gross sales personnel, to generate constructive information for the corporate.
And whereas this was happening, “this” being NewAge tanking, Willis was begging the Board of Administrators for a pay rise.
Willis was additionally pissed off along with his compensation at NewAge and repeatedly urged the Firm’s Board of Administrators to extend it, partly to pay private tax liabilities.
In or round 2017 and early 2018, the Board instructed Defendant that after the Firm was on higher monetary footing, it will revisit his compensation package deal.
Be aware the years 2017 and 2018, which coincides with Willis’ porky pies – which finally led to him delivering on NewAge’s share worth.
Willis additionally personally benefited from the false and deceptive statements described above.
For instance, whereas NewAge’s share worth and liquidity have been nonetheless artificially inflated because of the misstatements described above, between April and October 2019, Defendant obtained cash or property by promoting 425,000 NewAge shares for web proceeds of over $2 million.
As well as, the Board awarded Defendant a major compensation improve beginning in 2019 as a result of Firm’s improved monetary place, profitable inventory choices, and the completion of the Morinda acquisition, all of which resulted from the above misstatements.
Willis finally bailed as CEO on January tenth, 2022.
NewAge would go on to file for Chapter 11 chapter in September 2022. Along with Willis’ lies, the lead as much as NewAge’s chapter was mired with sabotage and extortion.
Because of his conduct, the SEC has accused Willis of a number of violations of the Securities and Trade act.
The regulator is searching for an injunction, in addition to disgorgement of ill-gotten good points and a civil financial penalty.