U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 23807 / April 14, 2017
Securities and Exchange Commission v. Christopher R. Esposito, et al., No. 16-CV-10960 (D. Mass. filed May 26, 2016)
Court Enters Final Judgment Against Microcap Industry Consulting Company Involved in Fraudulent Scheme
On April 14, 2017, a federal court in Boston, Massachusetts, entered a final default judgment in an ongoing SEC enforcement action against Lionshare Ventures, LLC, a Massachusetts-based privately-held corporation that the SEC alleges was a business incubator for microcap companies.
The SEC's complaint, filed in federal court in Boston, Massachusetts on May 26, 2016, charges Lionshare and its owner, Christopher Esposito, of Topsfield, Massachusetts, with allegedly raising more than $550,000 in investor funds in an unregistered offering of Lionshare securities and misappropriating $375,000 for his personal benefit. According to the SEC's complaint, Esposito and Lionshare raised the funds from investors between June 2011 and June 2012, spending almost $300,000 of investor funds for personal expenses, and using $75,000 of investor funds to acquire control of a Massachusetts-based publicly-traded company, Cannabiz Mobile, Inc., by purchasing all of its convertible debt. The SEC's complaint further alleged that, between May 2012 and August 2015, Esposito and Lionshare, together with Anthony Jay Pignatello of Manhattan Beach, California, concealed Esposito and Lionshare's de facto control of Cannabiz and a large percentage of Cannabiz's securities in order to profit by evading SEC Rule 144, which limits securities sales by affiliates, such as control persons. Esposito and Lionshare allegedly did this by, among other things, installing James Gondolfe as the sole officer and director of Cannabiz - even though Esposito secretly controlled the company - to make false statements in Cannabiz's public filings and other documents. Esposito paid third-party stock promoters to tout Cannabiz stock in order to increase its stock price and trading volume; he sold significant amounts of Cannabiz convertible debt to others for almost $304,000; and with Pignatello and Renee Galizio of Loxahatchee, Florida, sold millions of shares of Cannabiz stock directly into the public market.
The final default judgment, which was entered by the Honorable Allison D. Burroughs of the U.S. District Court for the District of Massachusetts, enjoins Lionshare from future violations of Sections 5 and 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The judgment also orders Lionshare to pay disgorgement and pre-judgment interest in the total amount of $1,107,413 plus a $775,000 civil penalty. The court previously entered final default judgments against Gondolfe and Cannabiz on January 27, 2017. The SEC's litigation in this matter continues against Esposito, Pignatello and Galizio.