After a couple of years, the Securities and Exchange Commission has wrapped up its case against the SHE Beverage company. In 2021, they slapped charges on the bigwigs Sonja F. Shelby, Lupe L. Rose, and Katherine E. Dirden, accusing them of duping investors during the 2017-2019 period. Now, the final judgments are in.
SHE Beverages
As ace cannabis reporter, Deb Borchardt of Green Market Report first posted, SHE Beverages was a scam from the very beginning of their public fund raising efforts.
While scams are common in the cannabis industry as shady characters looked to take advantage of the “Green Wave”, this one hurt more because it preyed on the notion that you were also doing “good and well” if you supported women in the cannabis space. The lesson learned is that fraudsters will use any means neccessary to get into your wallet, including playing on moral heart strings to “do the right thing” in the marijuna space.
What did SHE Beverages do and how did they take advantage of marijuana legalization hysteria?
Accusations flew as the women were alleged to have engaged in a deceitful offering, raking in a whopping $15.4 million by manipulating investors. The SEC dropped the bomb, revealing that the so-called “proprietary” and “FDA approved” tags slapped on their bottled water drinks were nothing but a charade.
Adding fuel to the fire, claims of million-dollar acquisition offers were debunked, with the SEC exposing them as fabrications. And if that wasn’t enough, their assertions of pouring millions of their own money into the company were shattered, with the SEC asserting it was less than a mere $200,000.
Rose, the co-founder and owner, held many titles at SHE Beverages – CEO, president, and chair of the board of directors. Shelby, another co-founder, wore multiple hats, too – owner, vice president, treasurer, vice chair, CFO, principal financial officer, and board member. Dirden, the third in the trio, took on the roles of COO, investor relations director, and yet another board member.
As the trio weaved their web of deception, investors were led to believe that a public offering loomed on the horizon. The reality, however, was starkly different, as the SEC dropped the bombshell that no paperwork had ever been filed with them.
To add to the list of transgressions, the SEC spotlighted their grand claims about acquiring a cannabis-related company. It was then revealed that it was sourced from affiliates, sisters of one of the Defendants, with no independent valuation and, worse, no operations or sales.
False Offering
SHE Beverages opted for a fundraising route sans SEC registration, leaving investors in the dark about the company’s financial standing. According to the SEC complaint, the defendants pulled in funds from thousands of investors across various states, including those who weren’t accredited.
The company dabbled in widespread online solicitation, urging investors to deposit through cash, checks, credit cards, and electronic payment processors. They offered referral bonuses, two-for-one deals, and other incentives to sweeten the deal, often exciting the urgency with claims it was the last chance to invest before the IPO.
The lone Form S-1 registration statement submitted by the defendants in January 2020 never saw the light of day, remaining ineffective and eventually declared abandoned in 2021.
Adding to the saga of deception, the women painted a rosy picture for investors, boasting that SHE Beverages raked in a hefty $4-5 million in revenue. The truth, however, was a stark contrast, with the actual figure hovering around $1.7 million, predominantly stemming from events rather than product sales.
Extravagant Spending
Surprisingly, according to the SEC, a mere 2% of the raised funds found their way into SHE Beverages’ coffers. However, the bulk of the money took a detour into the personal realms of the women, financing extravagant expenses, luxury indulgences, and cash withdrawals.
Their spending far surpasses any disclosed salary or compensation figures for the principals.
The SEC detailed the lavish spending spree:
- Around $6 million vanished through cash withdrawals and transfers to the personal bank accounts of Rose, Shelby, and Dirden.
- A staggering $1.2 million went down the drain at casinos.
- Roughly $180,000 was splurged on acquiring eight cars and trucks for personal use, along with settling a title loan on Shelby’s Porsche.
- A cool $100,000 was forked out for the lease on the residence shared by Rose and Shelby.
- Not to forget, an additional $50,000 was tossed into the abyss through purchases at luxury clothing havens like Gucci and Louis Vuitton.
CBD Water
According to the SEC, on or around September 9, 2018, SHE Beverage purportedly acquired Elite Green Solutions, a company dealing in cannabis-related products, using a mix of cash and stock. The company underwent a facelift, transforming into The Pink Leaf, with enthusiastic promotion to investors.
The narrative spun for investors included claims of recent hires for a cannabis grow farm and imminent production of CBD, THC, and Cannabis Products. Shockingly, none of these assertions held water.
What’s more, Elite Green, the acquired entity, conveniently belonged to Shelby’s sisters – a crucial detail deliberately withheld from investors.
The SEC’s complaint didn’t stop there. It revealed that around 2019, SHE Beverage shelled out approximately $26,007 to a Florida distributor. The purpose? Acquiring CBD bottled water to be sold under the SHE Beverage brand name.
Court Ruling
In the legal aftermath, the Court handed down a significant judgment against SHE Beverage Company and its key figures – Rose, Shelby, and Dirden. The collective weight of their wrongdoing culminated in a joint and several payment mandates of $12,021,500, earmarked as the relinquishment of ill-gotten gains, coupled with an additional $738,774 in prejudgment interest.
The Court, aiming to underscore individual accountability, also levied civil monetary penalties. Rose faced a penalty of $669,687, while Shelby and Dirden each bore a penalty of $334,842.
In a decisive move, the Court cemented the repercussions by permanently prohibiting women from assuming roles as officers or directors of any public company. This enduring restriction serves as a resounding reminder of the gravity of their actions and the imperative need for accountability in the financial landscape.
Conclusion
The Securities and Exchange Commission (SEC) concluded its case against SHE Beverage Company and its principals, Rose, Shelby, and Dirden, revealing a web of deceit involving false offerings, financial misrepresentation, and extravagant spending of raised funds.
The Court’s ruling mandates a substantial payment of $12,021,500 as disgorgement, coupled with individual penalties and a permanent prohibition from holding positions in public companies for the defendants. This decisive judgment underscores the gravity of their actions and emphasizes the imperative need for accountability in the financial landscape. (Full Story)