Loop Industries, a Terrebonne company in which Quebec has invested, finds itself at the heart of a preposterous scandal from which its CEO, Daniel Solomita, allegedly benefited.
A major shareholder of Loop allegedly defrauded a wealthy senior by hiding his real identity. That's what the Securities and Exchange Commission (SEC) alleges in a lawsuit filed Friday in California.
Daniel Solomita < i>Big boss of Loop Industries
In 2015, Loop Industries merged with Nevada-based First American Group. This transaction allowed Loop to enter the American stock exchange OTC Markets.
What was not said at the time was that the controlling shareholder of First American was Canadian David Stephens. Such silence went against stock market rules governing insiders.
According to the SEC, Stephens subsequently sold a large number of shares of Loop, resulting in a profit of US$4.7 million (CA$6.4 million). . Had he disclosed his significant stake in the company, as he was required to do, these transactions would have been made public, which would likely have driven down Loop's stock price.
The main buyer of the securities was a wealthy senior whom the SEC does not name. From 2015 to 2018, he invested more than US$7 million (CA$9.6 million) in the company. His stock purchases drove Loop's stock up several times, accentuating Stephens' gains.
It was two unregistered financial advisers, Donald Danks and Jonathan Destler, who introduced Stephens to Mr. Solomita in 2014, SEC claims.
According to the regulator, Danks paid a portion of the proceeds from the fraud – approximately US$400,000 (CA$545,000) – to Daniel Solomita.
The CEO defends himself
“We did nothing wrong, we are not accused of anything”, reacted the latter, yesterday, to the Journal.
“We really had no idea where the [First American Group] funds were coming from,” he added. […] It's really unfortunate that our name came out in there.”
The businessman, who founded Loop Industries in 2014, maintains that the Quebec company has developed “the best technology in the world”. to recycle PET plastic, found in particular in beverage bottles.
Recall that in 2019, the Minister of the Economy, Pierre Fitzgibbon, granted financial aid of 4.6 millions of dollars to Loop.
In 2020, an American short-selling firm, Hindenburg Research, released a damning report that questioned the viability of Loop Industries' technology.
That didn't stop industrial giants like France's Suez and South Korea's SK from partnering with Loop later.
Loop Industries' stock plunged 10. 2 % to close at US$3.89 yesterday on the Nasdaq.
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Katrine Johns has been a reporter on the news desk since 2013. Before that she wrote about young adolescence and family dynamics for Styles and was the legal affairs correspondent for the Metro desk. Before joining The Gal Post, Katrine Johns worked as a staff writer at the Village Voice and a freelancer for Newsday, The Wall Street Journal, GQ and Mirabella. To get in touch, contact me through my firstname.lastname@example.org 1-800-268-7128