United States District Court, D. Colorado
OPINION AND ORDER REGARDING MOTION FOR TEMPORARY
RESTRAINING ORDER AND ASSET FREEZE
S. Krieger, Chief United States District Judge.
MATTER comes before the Court pursuant to the Plaintiff's
(“SEC”) exparte Emergency Motion for Temporary
Restraining Order, Asset Freeze, and Other Relief (# 2).
the Complaint (# 1) and Motion (# 2) are lengthy, the
pertinent alleged facts are fairly straightforward. Defendant
Jeffrey Friedland is a businessman and influential figure in
the medical marijuana community. As relevant here, he also
owns or has substantial control over two businesses: Global
Corporate Strategies (“Global”) and Intiva Pharma
2014, Mr. Friedland became involved with a company now named
OWC Pharmaceutical Research Corp. (“OWC”), which
is active in the field of marijuana-based pharmaceutical
products. In August 2014, Intiva (at Mr. Friedland's
direction) purchased approximately 1.3 million shares of OWC.
January 2016, Mr. Friedland and OWC entered into a contract
by which Mr. Friedland promised to provide public relations
services to OWC, touting OWC to investors, journalists, and
others. In exchange for his services, OWC transferred
approximately 5.1 million shares of OWC stock to Global. The
crux of the SEC's Complaint here is that neither Mr.
Friedland, Global, OWC, or any other person, disclosed to the
public the fact that Mr. Friedland or Global received OWC
stock as compensation for promoting OWC.
February 2016 and January 2017, Mr. Friedland made public
appearances touting OWC. It is not necessary to quote, in
detail, the representations that Mr. Friedland made during
these appearances; it is sufficient to note generally that he
indicated that he had made a personal investment in OWC
(through Intiva), that he was bullish on the company and its
prospects, and that investors should pay attention on OWC and
buy its stock. The SEC does not allege that Mr. Friedland
made any affirmative false representations during these
appearances, but the SEC alleges that Mr. Friedland engaged
in misleading omissions when he failed to disclose that he
had been compensated for promoting OWC, with OWC stock.
January 2017, Mr. Friedland began to move the 5.1 million
shares of OWC stock from Global to a new entity, Relief
Defendant Lane 6552, LLC (“Lane”), an entity that
Mr. Friedland's wife had recently formed. In order to
allow restrictive legends on that stock to be removed, Mr.
Friedland provided the Transfer Agent with a letter falsely
stating that Global had paid OWC approximately $51, 000 for
the shares, when, in fact, Global had paid nothing. The
letter also falsely stated that Lane would be paying Global
some $200, 000 as consideration for the stock, when, in fact,
no such payment would occur. When the 5.1 million shares were
transferred to Lane in February 2015, Mr. Friedland then
directed Lane to sell OWC shares. Between March 2 and March
21, 2017, Lane liquidated most of the 5.1 million shares,
with a rough return on the sales of $6.5 million.
in April 2017, Mr. Friedland also directed that Intiva sell
its OWC shares. Again, Mr. Friedland made certain false
representations in an effort to remove the restrictive
legends on Intiva's OWC shares, including asserting that
no one associated with Intiva had sold OWC shares in the past
3 months and denying that Intiva was promoting OWC securities
through third parties. The restrictive legend was eventually
removed and between June and September 2017, Mr. Friedland
sold most of Intiva's holdings of OWC stock, receiving
nearly $500, 000 from those sales.
this time, and continuing to September 2017, Mr. Friedland
promoted OWC in public appearances and written statements
encouraging investors to purchase it's stock. Once again,
the SEC does not allege that Mr. Friedland made any false
affirmative representations during these appearances, but the
SEC does allege that Mr. Friedland engaged in material
misrepresentations by omission, insofar as the failed to
disclose that he had received OWC stock as compensation for
his activities and that he was in the course of selling the
OWC stock that owned.
on these allegations, the SEC alleges three claims against
Mr. Friedland, Global, and Intiva: (i) nondisclosure of
compensation in violation of 15 U.S.C. § 77q(b); (ii)
securities fraud in violation of 15 U.S.C. § 78j(b) and
17 C.F.R. § 240.10b-5; and (iii) securities fraud in
violation of 15U.S.C. § 77q(a).
Motion for Asset Freeze
with the Complaint, the SEC filed the instant ex parte Motion
(# 2) seeking a freeze on assets of Mr. Friedland, Intiva,
Global, and various Relief Defendants. According to the
affidavits supplied by the SEC, the funds received from the
sale of the OWC stock -- roughly $7.5 million worth - can be
traced as follows:
Lane received approximately $6.5 million from the sale of
the OWC stock. Docket # 3-2. Nearly all of those funds were
then wired from Lane's brokerage account into an
account held by Lane at the First American State Bank
(“the 426 account”). Docket # 2-2, ¶ 4.
Between March 2017 and January 2018, the entire contents of
the 426 account were disbursed through, the following
• $168, 000 was transferred to a bank account owned
by Global at First American State Bank (“the 215
• $4.15 million was transferred to Lane's account at
Fidelity (“the Fidelity 466 account”)
• $45, 500 was paid by check to Kuni Lexus and $32, 200
was paid to Groove Mazda. The SEC appears to assume that
these payments are connected to the Friedlands' purchases
of automobiles, but the SEC neither identifies the particular
vehicles nor specifies how it associated particular
automobiles with these payments.
• $25, 000 was transferred to Ms. Friedland's
checking account (the account No. is not specified).
• $1.95 million was transferred to Stewart Title
Company, apparently to purchase real property located at 466
Meadow Road in Snowmass, Colorado. The nominal purchaser