CanaFarma Hemp Products Corp.; Frank Barone; Kirill Chumenko; Igor Palatnik
U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 26284/ April 14, 2025
SEC v. CanaFarma Hemp Products Corp., et al., 1:21-cv-8211 (filed Oct. 5, 2021, amended complaint filed Nov. 28, 2023) (S.D.N.Y.)
SEC Obtains Final Judgments Against Two Former Hemp Company Executives for Fraudulent Offerings
On April 10, 2025, the U.S. District Court for the Southern District of New York entered final judgments against Frank Barone and Kirill Chumenko, both former Senior Vice Presidents of Sales & Marketing at CanaFarma Hemp Products Corp., enjoining them from violating certain provisions of the federal securities laws and imposing five-year officer-and-director and penny stock bars.
The SEC's amended complaint, filed on November 28, 2023, alleged that, in 2019 and 2020, Barone and Chumenko, along with CanaFarma and its two co-founders, Vitaly Fargesen and Igor Palatnik, raised millions of dollars from investors. While raising these funds purportedly to operate CanaFarma, Fargesen and Palatnik allegedly made misrepresentations to investors, including claims that CanaFarma was a fully integrated company that was processing hemp from its own farm, when in fact it had not processed any hemp and its products used hemp oil supplied by third parties. The amended complaint alleged that Barone and Chumenko, at the direction of Fargesen, made unsupported changes to CanaFarma's financial model in order to disguise an expected series of payments to Fargesen and Palatnik. Additionally, the amended complaint alleged that Fargesen and Palatnik - in some instances with the assistance of Barone and Chumenko - misappropriated at least $4 million of investor funds.
The SEC's amended complaint charged Barone and Chumenko with violating Sections 17(a)(1) and 17(a)(3) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rules 10b-5(a) and 10b-5(c) thereunder. Previously, on December 1, 2023, the Court entered consent judgments against Barone and Chumenko in which they agreed to be permanently enjoined from violations of these charged provisions and agreed to officer-and-director and penny stock bars, the length of which were to be determined at a later date. The final consent judgments against Barone and Chumenko, entered by the Court on April 10, 2025, reimposed that permanent injunctive relief for violations of the charged provisions and imposed five-year officer and director and penny stock bars.
Previously, on February 21, 2024, the Court entered a consent judgment against Palatnik in which he agreed to be permanently enjoined from violations of Section 17(a) of the Securities Act and Section 10(b) of the Exchange Act and Rule 10b-5 thereunder, and agreed to permanent officer-and-director and penny stock bars. On November 14, 2024, the SEC voluntarily dismissed its complaint against CanaFarma. The entry of the final judgments as to Barone and Chumenko conclude the SEC's litigation in this matter.
The litigation was handled by John C. Lehmann, Rusty Feldman, and Lindsay S. Moilanen and supervised by Daniel Loss and Thomas P. Smith, Jr. of the SEC's New York Regional Office. The SEC appreciates the assistance of the United States Attorney's Office for the Southern District of New York.