The Securities and Exchange Commission today charged North Carolina resident Martin A. Sumichrast with defrauding Stone Street Partners, LLC, a private fund that he managed, and its investors by misappropriating fund assets and by engaging in several unauthorized transactions designed to benefit himself at Stone Street's expense.

According to the SEC's complaint, Sumichrast became Stone Street's sole manager following the death of the fund's co-manager in December 2016. Shortly thereafter, he began using his position to engage in undisclosed conflict-of-interest transactions that advanced his personal interests over those of Stone Street and its investors. In particular, the complaint states that Sumichrast misappropriated $300,000 from Stone Street by impermissibly doubling his annual salary between 2017 and 2019. The complaint also states that Sumichrast engaged in a series of self-dealing transactions with entities in which he personally had an interest, including several transactions with cbdMD, Inc., a now publicly traded company of which Sumichrast is CEO and Chairman of the Board of Directors. Finally, the complaint alleges that Sumichrast failed to disclose to, or obtain consent from, Stone Street or its investors prior to engaging in any of these conflict-of-interest transactions.

The SEC's complaint, filed in the Western District of North Carolina, charges Sumichrast with violating the antifraud provisions of Section 17(a)(1) and (3) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5(a) and (c) thereunder, and Sections 206(1), 206(2), 206(3), and 206(4) of the Investment Advisers Act of 1940, and Rule 206(4)-8 thereunder. The SEC seeks injunctive relief, disgorgement with prejudgment interest, civil penalties, an officer-and-director bar, and a penny stock bar.

The SEC's investigation was conducted by Mark Eric Harrison and Elizabeth P. Skola, and supervised by Thomas B. Bosch, all of the SEC's Atlanta Regional Office. The litigation will be handled by Pat Huddleston and Mr. Harrison, and supervised by M. Graham Loomis.