In the high-stakes world of finance, tales of deception and fraud are not uncommon. But even in this arena, some stories stand out. One such tale involves Ignite International Brands, Ltd., a Canadian consumer goods company known for its cannabis products, and its ties to Paul Bilzerian, a recidivist with a long history of securities fraud.
The recent charges brought by the Securities and Exchange Commission (SEC) against Ignite and Paul Bilzerian highlight a longstanding suspicion: while his son, Dan Bilzerian, a controversial internet personality, was listed as the CEO of Ignite, it seems he was merely a figurehead, with his father orchestrating operations from behind the scenes. Either that, or he’s going to let his father, who already has a long history with the SEC, take the fall.
Ignite, Bilzerian Scheme Unveiled By SEC
On September 27th, the SEC charged Ignite International Brands, Ltd., Paul Bilzerian, and six other defendants for improperly recognizing and reporting revenue in 2020. The SEC alleges that between late 2020 and 2021, Ignite engaged in a scheme to report approximately $5 million in fictitious sales of disposable vape pens as part of its fourth-quarter results for 2020.
Ignite reportedly issued false invoices to a customer for vape pens in November and December 2020, despite the customer never placing an order. The customer raised concerns directly to Bilzerian and Ignite’s then-President and COO, John Schaefer, yet Ignite continued to promote its strong 2020 performance, claiming in a January 2021 press release that its fourth-quarter revenue “exceeded revenue for the previous three quarters combined.”
When the customer refused to confirm the false invoices to Ignite’s auditor, the company retroactively shifted the supposed responsibility for the purchases to International Investments, Ltd., another entity controlled by Bilzerian. The complaint states that Schaefer monitored the inventory and issued invoices for International Investments while selling the products to end customers. The SEC claims that Ignite, along with Bilzerian, then-CFO Paul Dowdall, and deputy Scott Rohleder, created a misleading narrative regarding the purchase to deceive their auditor.
In April 2021, Ignite publicly released its audited financial statements for 2020, which included inaccurate sales figures. The SEC argues that despite the numerous red flags surrounding the sale to International Investments, the auditor, Accell and Hiestand, issued a report affirming that Ignite’s 2020 audited financial statements accurately reflected the company’s financial position.
A Pattern of Deception
Paul Bilzerian is no stranger to the SEC. Described as a recidivist due to his repetitive criminal behavior, Bilzerian was first convicted of securities fraud in 1989. In 1993, the SEC obtained civil judgments totaling approximately $62 million against him. However, over the years, the SEC has managed to collect only $547,000, while the original amount has ballooned to $180 million due to interest reports Green Market Report.
While Bilzerian claimed poverty, the SEC alleges he used his hidden wealth to fund Ignite and buy shares in the company. When the SEC began to catch on, Bilzerian and Rohleder downplayed their involvement with Ignite, characterizing themselves as unpaid consultants.
Dan Bilzerian, the son of Paul Bilzerian, is known for his brash social media presence. Although he served as CEO and the marketing face of Ignite, the SEC is not charging him; instead, they are focusing on his father, Paul Bilzerian. This raises questions about whether Paul was the true mastermind behind the company’s operations.
Although Dan has not been implicated in the case, ongoing speculation surrounds the sources of his extravagant lifestyle. He frequently claims that poker winnings and a trust fund from his father fund it. In a 2020 interview with Beard Bros Pharms, CloutKing described Ignite as” mids marketed by hot girls and a rich kid”
Legal Battle Ahead
The SEC’s complaint, filed in the U.S. District Court for the Southern District of New York, charges Ignite, Bilzerian, Dowdall, Rohleder, Schaefer, International Investments, Accell Audit & Compliance, PA, and its engagement partner, Christopher Hiestand, with violating the antifraud provisions of Section 10(b) of the Securities and Exchange Act of 1934 and Rule 10b-5.
In a parallel action, the Fraud Section of the Department of Justice and the U.S. Attorney’s Office for the Central District of California announced charges against Ignite, Bilzerian, and Rohleder.
The SEC is seeking permanent injunctive relief and civil penalties, as well as officer and director bars against Bilzerian, Dowdall, Rohleder, and Schaefer. If found guilty, the defendants could face significant fines and potentially jail time.
