Litigation Releases (Swaffer, et. al.)

U.S. SECURITIES AND EXCHANGE COMMISSION

Litigation Release No. 26119 / September 23, 2024

Securities and Exchange Commission v.

Swaffer, et. al.

, No. 1:22-cv-1554 (N.D. Ohio September 1, 2022)

Court Enters Final Judgments Against All Defendants in Marijuana Company Fraud

On September 5, 2024, the U.S. District Court for the Northern District of Ohio entered final judgments by consent against Kris A. Swaffer ("Swaffer"), the president of POHIH, Inc., and Sean K. Williams, the chief operating officer of a related entity, and relief defendant Rosalyn K. Swaffer. On September 13, 2024, the Court also entered a final default judgment against POHIH.

The SEC's complaint, filed on September 1, 2022, alleges that, from at least September 2016 through February 2020, Swaffer and Williams, through POHIH and other now-defunct related entities, raised approximately $14 million from approximately 75 investors in at least 14 states for a start-up marijuana business with operations in Europe, through a series of unregistered securities offerings. According to the complaint, while some funds raised from investors went to fund operations, Swaffer and Williams misappropriated investor funds for personal use while also misrepresenting the risks associated with investment. The complaint alleges that Swaffer misappropriated at least $2.4 million for his personal use between September 2016 and March 2020. The complaint also asserts that Williams, in addition to being aware of Swaffer's misappropriation, himself misappropriated investor funds for personal use between April 2017 and January 2020. Finally, the complaint alleges relief defendant Rosalyn K. Swaffer received ill-gotten gains to which she had no legitimate claim.

The final judgments against Swaffer and Williams, which were entered by consent and without admitting or denying the allegations, enjoin Swaffer and Williams from future violations of the antifraud provisions of Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, and Section 5 of the Securities Act. The judgments also bar Swaffer and Williams from acting as an officer or director of any issuer that has a class of securities registered pursuant to Section 12 of the Exchange Act.

Swaffer was also ordered to pay $2,318,981 in disgorgement, $513,982 in prejudgment interest, and a $2.25 million civil penalty. Williams was ordered to pay $931,662 in disgorgement, $206,945 in prejudgment interest, and an $880,000 civil penalty.

The final judgment against relief defendant Rosalyn K. Swaffer, also entered by consent, orders her to pay $865,707 in disgorgement and $191,877 in prejudgment interest. Of the total amounts ordered against Swaffer and relief defendant Rosalyn K. Swaffer, they are jointly and severally liable for $676,362 in disgorgement and $149,910 in prejudgment interest.

The final default judgment against POHIH permanently enjoins POHIH from future violations of Section 5 of the Securities Act and orders POHIH to pay a $115,231 civil penalty.

The SEC's litigation in this matter is now concluded.

The SEC's investigation was conducted by Matthew T. Wissa and Jean M. Javorski and supervised by Amy S. Cotter in the Chicago Regional Office. Michael Foster led the litigation.

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