SEC Enforcement Spotlight – Bob Marley-Linked Jammin’ Java Charged with Massive Pump and Dump Fraud Scheme
By Tim McCormack
The Securities and Exchange Commission filed fraud charges yesterday against nine people in connection with a classic pump and dump market manipulation scheme involving the stock of Jammin’ Java, also known as Marley Coffee. See SEC Press Release. According to the SEC’s complaint, Jammin Java’s former CEO Shane Whittle orchestrated the fraud, which culminated in 2011 with the collapse of the stock’s share price and a $78 million profit for the alleged fraudsters.
Whittle allegedly befriended Rohan Marley, a son of the late music legend Bob Marley, who had recently purchased a small coffee farm in Jamaica. The coffee farm did business under the name Marley Coffee and promoted the brand using the trademarks of the Reggae legend. Whittle used Marley Coffee as the foundation to create a seemingly large coffee operation, which was, in fact, a mere shell. According to the SEC complaint, at the time the dump portion of the scheme was executed in 2011: “Jammin’ Java’s public filings . . . reflected no sales revenue for the Company up to that point in time. The filings also showed no employees or cash and only nominal operations.”
The fraud has numerous classic hallmarks of a pump and dump stock manipulation scheme. First, Whittle created the Jammin’ Java entity by executing a reverse merger between a small unregistered company (Marley Coffee) and a publicly-traded shell company. Whittle secretly controlled a substantial share of the stock of the shell company. Whittle, along with the others charged by the SEC, then allegedly engaged in a promotional campaign designed to create the impression that Jammin’ Java was a growing and thriving business, including the false announcement that Jammin’ Java had entered into an investment financing agreement with a third party. The fraudulent promotion also hid Whittle’s involvement with the management of the company, and his functional ownership and control of a substantial portion of the stock of the company. Once the fraudulent promotional campaign had succeeded in inflating the price of the stock, defendants allegedly sold their shares in the company. They reaped a massive profit, the share price collapsed, and the rest of the shareholders were left with a company in shambles.
As part of the scheme, Whittle arranged for two of the other defendants, twin brothers Alexander and Thomas Hunter, to promote the stock by disseminating false information about the company’s operations through an internet newsletter. The Hunter brothers are independently famous (infamous) for having been caught running a scam “defrauding investors through an internet-based pump-and-dump scheme in which they touted a fake ‘stock picking robot’ that purportedly identified penny stocks set to double in price. Instead, the brothers were merely touting stock that they were being paid separately to promote.” SEC Complaint.
The SEC is seeking injunctions, disgorgement, prejudgment interest, and penalties as well as penny stock bars against all of the individuals and an officer-and-director bar against Whittle.