Eleazar Kauderer, GPL Ventures LLC, et al.

U.S. SECURITIES AND EXCHANGE COMMISSION

Litigation Release No. 25734 / May 24, 2023

Securities and Exchange Commission v. Eleazar Kauderer, No. 23-cv-04099 (S.D.N.Y. filed May 17, 2023)

Securities and Exchange Commission v. GPL Ventures LLC, et al., No. 21-CV-6814 (S.D.N.Y. filed Aug. 13, 2021)

SEC Obtains Final Judgments Against Stock Promoter and Microcap Issuer in Penny Stock Fraud Scheme

The Securities and Exchange Commission obtained final judgments against a stock promoter and a microcap issuer for their roles in an $11 million penny stock fraud scheme first charged in August 2021.

On May 23, 2023, the U.S. District Court for the Southern District of New York entered a final judgment against Eleazar Kauderer, a professional stock promoter, for his role in the scheme. The SEC's complaint, filed on May 17, 2023, alleged that, from 2017 through 2019, Kauderer conducted a fraudulent promotional campaign for shares of HempAmericana, Inc., a struggling microcap issuer, funded by the company's largest investor while it was selling shares into the market. Kauderer allegedly acted as a middleman and hired other "downstream" promoters to conceal the stock purchaser's contemporaneous stock sales and role as the ultimate source of funding for the promotions.

On May 2, 2023, the U.S. District Court for the Southern District of New York entered a final judgment on default against HempAmericana. The SEC's complaint against HempAmericana and others, filed on August 13, 2021, alleged that, from 2017 through 2019, HempAmericana schemed with the largest investor in the company's Regulation A stock offerings to use a significant percentage of the offering proceeds to secretly promote the stock so that the investor could sell its shares at a profit. The promotions funded by HempAmericana did not disclose the source of the funding, or the investor's intent to sell stock during the promotions. HempAmericana allegedly further misled the public by failing to disclose in offering circulars filed with the Commission that a significant percentage of its Regulation A offering proceeds would be used for stock promotion.

Without admitting or denying the allegations in the SEC's complaint, Kauderer consented to the entry of a final judgment permanently enjoining him from violating Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The court also imposed a five-year penny stock bar and ordered Kauderer to pay $888,012 in disgorgement and $23,782.74 in prejudgment interest. Due to Kauderer's significant cooperation, no penalty was sought.

The final judgment against HempAmericana, entered on default, enjoined the company from future violations of the antifraud provisions of Section 17(a) of the Securities Act of 1933, Section 10(b) of the Exchange Act and Rule 10b-5 thereunder.

The SEC has separately obtained final judgments against four other participants charged in the August 2021 complaint. Those judgments, amongst other relief, enjoined each defendant from violating the antifraud provisions of Section 17(a) of the Securities Act, Section 10(b) of the Exchange Act and Rule 10b-5 thereunder.

The SEC's investigation was conducted by Brenda Wai Ming Chang, John C. Lehmann, Peter A. Lamore, and Adam S. Grace, and the litigation, which remains ongoing against other defendants, is being handled by Paul G. Gizzi, Ms. Chang, and Mr. Lehmann. The case is being supervised by Thomas P. Smith, Jr.