You have probably never heard of Bart Mackay, a 57-year-old Las Vegas lawyer who works on various ventures like Dot Vegas, which operates the .Vegas top-level domain. But on paper, Mackay is the first pot-stock billionaire.
Mackay's holdings in CannaVest
), which bills itself as the world's leading hemp-based investment company, are valued at $1.8 billion. That figure might seem like a drug-induced hallucination, but it's technically true. CannaVest is the top-performing stock in America in 2014 with a market capitalization greater than $1 billion.
Its thinly-traded shares, which change hands on the Over-The-Counter Bulletin Board, or "pink sheets," have soared by 680 percent in the last year. They are already up more than 300 percent in 2014. The average daily volume of about 10,900 shares has been light this year, but someone is buying the stock and the $117 it closed at on Friday makes Mackay the world's first pot stock billionaire thanks to his 15.7 million shares in CannaVest.
Mackay, however, doesn't think he is actually a billionaire. He says he has never sold a share of CannaVest and even if he wanted to sell some stock he couldn't unload much before crashing the stock. "In my view, it's a paper valuation and certainly not something I can take to the bank," Mackay said in an interview. "I went through the dot.com period and there was a bubble that existed there, there is probably a bubble in this stock somewhere, or in this industry."
Mackay believes that CannaVest's stock rise is partially a result of the company being categorized by speculators as a marijuana stock, an idea he says that is not even true because CannaVest is focused only on hemp-based products. With Colorado and Washington implementing laws that allow the sale and use of marijuana for recreational purposes, some stock promoters have been pushing marijuana and hemp stocks big time in recent months. "The company doesn’t have anything to do with pot," says Mackay. "The public views it as a pot stock, but for me it's a completely different play."
The Financial Industry Regulatory Authority warned investors back in August about marijuana stock scams, saying "the con artists behind marijuana stock scams may try to entice investors with optimistic and potentially false and misleading information that in turn creates unwarranted demand for shares of small, thinly traded companies that often have little or no history of financial success." It's not hard to figure out that some of the people behind the penny pot stock boom have questionable backgrounds.
Take Raymond Dabney. In 2005, the British Columbia Securities Commission up in Canada slapped a five-year trading ban on Dabney and barred him from being an officer or director of a publicly-traded company for five years after Dabney admitted to issuing 22 bogus news releases that contained misrepresentations about the revenue of Xraymedia, a Minnesota company in which Dabney was a controlling shareholder. The Securities & Exchange Commission also sued Dabney and in 2010 obtained a final judgment against him that included a disgorgement and penalty of about $190,000. The SEC launched the enforcement action against Dabney and three others in connection with a scheme to manipulate the price and trading volume of Alliance Transcription Services.
Today, Dabney works as a management consultant for Cannabis Science
), a cannabis formulation-based drug development company that trades on the OTCBB. Dabney is described in SEC filings as the trustee of the Bogat Family Trust, which owned 6.5 percent of Cannabis Science last year.
Bruce Perlowin, CEO of another Las Vegas-based OTCBB stock called Hemp Inc
), is completely open about the nine years he spent in prison for drug smuggling, which he describes on his own web site. "This is a dot-com explosion except there is a real product behind us, not air," Perlowin recently said in an interview he scored on Bloomberg Television. The Southern Investigative Reporting Foundation last fall exposed the background of Vincent Mehdizadeh, the founder of a marijuana stock called Medbox, which included arrests or no contest pleas for things like trespassing and credit card fraud.
A year ago, an anonymous poster on Seeking Alpha exposed that Michael Llamas, the former president of publicly-traded Medical Marijuana
), had been indicted by federal prosecutors in California for his alleged involvement in a mortgage fraud that caused $10 million in losses. Llamas has pleaded not guilty to the federal charges and Medical Marijuana separately disclosed last year that it was being investigated by the SEC.
So there are some shady characters behind the penny pot stock boom. Mackay, who says he has in the past represented other companies with OTCBB stock listings, says CannaVest CEO Michael Mona, Jr., partially brought him aboard to help navigate the OTCBB underbelly. "I am familiar with a lot of the garbage that goes on with over the counter stocks, the pitfalls, and I guess that is one of the reasons why I decided to help Mike and help this process to avoid some of the pitfalls," Mackay said.
Nevertheless, the indicted Llamas is connected to Mona, Mackay and CannaVest. Mackay’s path to obtaining most of his $1.8 billion of shares in CannaVest starts with Roen Ventures, a company that last year agreed to lend $6 million to CannaVest. Roen Ventures was formed by Mona and Llamas, according to a lawsuit filed against Mona and Mackay in Nevada state court.
The lawsuit, filed in February by Far West Industries, claims that Far West obtained a $17.7 million judgment in 2012 against Mona and others relating to a fraudulent land transaction in California. According to the second amended complaint, Mona testified in the judgment debtor exam that he received $3 million that he loaned to Roen Ventures, which lent the money to CannaVest. Mona then testified that in the last year he sold his interest in Roen Ventures and its $3 million note to Mackay for $500,000 -- making Mackay and Llamas the owners of Roen Ventures, the second amended complaint says.
Mona testified that there is another $22 million judgment pending against him connected to another real estate deal, the second amended complaint says. Far West claims in its second amended complaint that Mona’s loan to Roen Ventures was fraudulent and "intended to prejudice creditors like Far West by concealing and wasting assets." Mackay declined to comment on the lawsuit, except to say that "from my perspective, it's frivolous and doesn't hold water." Mona did not return a call seeking comment for this article.
In January of 2014, CannaVest said in an SEC filing that Roen Ventures is now wholly owned by Mackay, who acknowledged in an interview that he has bought out the stakes of Llamas and Mona in Roen Ventures. According to the January SEC filing, Mackay, through Mercia Holdings and Mai Dun Limited, now owns 100 percent of Roen Ventures, which has converted its loans to CannaVest to 10 million shares of CannaVest stock.
How did Mackey get the rest of his shares in CannaVest? In November of 2012, two of Mackay's companies started acquiring shares of a publicly-traded OTCBB company called Foreclosure Solutions, mostly from H.J. Cole. The man behind the deal was Stuart Titus, who loaned the Mackay companies the money and whose General Hemp also participated, taking a 7.1 percent stake. Foreclosure Solutions became CannaVest and last week for some reason CannaVest moved to distance itself from Titus, saying in a press release that Titus no longer has any affiliation with CannaVest and owns less than 2 percent of the company.
There is another connection between CannaVest and Llamas. On the last day of 2012, CannaVest agreed to buy assets from something called PhytoSphere, including a license to use its brands, for $35 million in five payments of either cash or stock. When the deal closed last year, CannaVest issued 900,000 shares to PhytoSphere, which distributed the shares to its sole owners, Medical Marijuana and Hemp Deposit and Distribution Corporation, according to an SEC filing. Llamas used to be president of Medical Marijauna and its financial statements have previously described Llamas as the president of Hemp Deposit and Distribution Corporation. Llamas' LinkedIn
) page says he is the founder of Hemp Deposit's CannaBank business.
"To draw an inference that Mike Llamas has something to do with CannaVest is absolutely wrong," says Mackay. "Llamas is not a member of the board and has absolutely no influence. I know Michael Llamas and am familiar with him but he has no control on any aspect of CannaVest. He may be a shareholder of CannaVest."
CannaVest’s most up-to-date books show $10.7 million of assets. For the nine months ending Sept. 30, 2013, the last time period for which CannaVest reported financials, revenues were $1.35 million and losses were $28.4 million. Mackay concedes these fundamentals don't really support a sky-high stock valuation.
"What you have here is in some ways, in my mind, is a perfect storm where for some reason marijuana stocks are getting some probably under normal reasonable terms outlandish valuations. I can't control that because we don't put out a lot of news, we are not out pumping stock," says Mackay. "I am focusing on CannaVest and the fundamentals of this business as a member of a board of directors rather than pumping stock in a stock play."