The U.S. Securities and Exchange Commission has accused a Yorktown Heights executive of scheming with “recidivist” fraudster Paul Bilzerian to misrepresent revenue of a Canadian company.
The SEC accused John Schaefer of violating anti-fraud regulations in a complaint filed on Sept. 30 in U.S. District Court, Manhattan.
Bilzerian, Schaefer and others concocted “a way to keep the fraudulent revenue on the 2020 financial statements” of Ignite International Ltd., according to the complaint.
Ignite is based near Toronto and sells disposable nicotine vape pens, vodka, and clothing. It is traded on a Manhattan over-the-counter system.
Schaefer served as its chief operating officer and then president, from mid-2019 to early 2022, according to his Linked-In profile, and is the chief operating officer of BrightFarms, an Irvington company that operates massive greenhouses and sells leafy greens and salad kits. A spokesperson for BrightFarms said Schaefer is not the company’s COO and is not currently working for the company.
Bilzerian, of St. Kitts in the West Indies, was convicted of securities fraud in 1989 and was ordered in 1991 to disgorge $33.1 million in ill-gotten gains. Despite 30 years of litigation, the complaint states, he has yet to satisfy the judgment.
Ignite’s website does not show Bilzerian as part of its leadership team, but the SEC claims he controlled the finances and operations.
Bilzerian allegedly orchestrated a scheme to overstate Ignite’s 2020 fourth quarter revenue by $4.6 million.
Most of the purported revenue was based on three fraudulent invoices for disposable vape pens that Ignite had issued to a customer. The customer had not ordered the pens, did not take possession of the goods, and repeatedly disputed the invoices with Schaefer, the complaint states.
Then Ignite issued a press release on Jan. 19, 2021 claiming that fourth quarter results exceeded revenue for the previous three quarters combined. Schaefer was quoted as stating that “the substantially improved fourth quarter results reflect the successful efforts of the new management team to reduce costs and increase revenue.”
Ignite’s share price on the OTC market increased by 144%. Average daily trading volume of 77,000 shares increased to 1.4 million shares on the day after the press release was issued.
Schaefer “was a maker of the false and misleading statements in the press release,” the SEC states. “Schaefer knew or was reckless in not knowing that the press release was false.”
The company’s auditor and chief financial officer are also named as defendants.
The SEC accused Schaefer of engaging in a scheme to defraud. It is seeking to impose an unspecified civil penalty and to bar him from serving as an officer or director of  SEC-registered securities.
