On May 26, 2016, the Securities and Exchange Commission (SEC) announced charges against four individuals and two companies for their roles in conducting a scheme to defraud investors.  The SEC filed charges against Christopher R. Esposito (“Esposito”), Anthony Jay Pignatello

(“Pignatello”), James Gondolfe (“Gondolfe”), Renee Galizio (“Galizio”), Lionshare Ventures LLC

(“Lionshare”), and Cannabiz Mobile, Inc. (“Cannabiz”), collectively called the “Defedants”.

The fraudulent scheme executed by the Defendants involved misappropriating investors funds and conceling the ownership and control of a publicly-traded company in order to enrich themselves. The Defendants were able to accomplish this by colluding in the sale of hundreds of millions of shares into the public market, in violation of SEC statutes and regulations.

On February 12, 2024, the U.S. District Court for the District of Massachusetts entered a final judgment against Anthony Jay Pignatello of Winchester, Virginia, one of the Defendants of the SEC v. Christopher R. Esposito, et al., Civil Action case. Pignatello was a consultant and Secretary for Cannabiz Mobile, Inc., a publicly traded company purportedly servicing medical marijuana businesses.

Case Summary

In May 2016, the SEC filed a complaint against several individuals and entities, including Christopher R. Esposito, Anthony Jay Pignatello, James Gondolfe, Renee Galizio, Lionshare Ventures LLC, and Cannabiz Mobile, Inc. 

The complaint alleges a scheme to defraud investors by misappropriating funds, concealing ownership and control of a publicly-traded company, and engaging in illegal securities sales.

Furthermore, the SEC complaint outlines two phases of the fraudulent scheme. In the first phase, Esposito allegedly raised funds from investors for Lionshare and misused a significant portion of those funds for personal expenses. Additionally, he used investor funds to acquire control of Cannabiz, publicly-traded company servicing businesses in the medical marijuana industry.

Esposito (a) raised more than $550,000 from investors between June 2011 and June 2012 in an unregistered offering of securities in his company Lionshare, (b) spent almost $300,000 of Lionshare investor funds for unauthorized personal expenses; and (c) used $75,000 of Lionshare investor funds to acquire control of Cannabiz by purchasing all of its convertible debt.

During the second phase of his fraudulent scheme, which occurred between May 2012 and August 2015, Esposito, along with Pignatello, worked to conceal his control of Cannabiz and a substantial portion of its securities. Their aim was to profit by circumventing SEC Rule 144, which imposes limitations on securities sales by affiliates, including control persons like Esposito.

To achieve this, Esposito employed various tactics:

a) He installed James Gondolfe as the sole officer and director of Cannabiz, despite secretly controlling the company himself. Gondolfe was used to make false statements in Cannabiz's public filings and other documents, thereby masking Esposito's actual control.

b) Esposito paid third-party stock promoters to promote Cannabiz, aiming to artificially boost its stock price and trading volume.

c) He sold significant amounts of Cannabiz convertible debt to other parties, generating proceeds of nearly $304,000.

d) Alongside Pignatello and Galizio, Esposito sold millions of shares of Cannabiz stock directly into the market, further enriching themselves through these sales.

These actions allowed Esposito and his associates to evade regulatory scrutiny and profit from their illicit activities by manipulating the stock market.

The Defendants' conduct violated several statutes, rules, and regulations enforced by the Securities and Exchange Commission (SEC). Specifically, they contravened:

• Sections 5(a), 5(c), and 17(a) of the Securities Act of 1933 ("Securities Act"): These sections pertain to registration, disclosure, and antifraud provisions regarding the sale of securities. Section 5 requires registration of securities offerings with the SEC unless an exemption applies. Section 17(a) prohibits fraudulent activities in the offer or sale of securities.
• Section 10(b) of the Securities Exchange Act of 1934 ("Exchange Act") and Rule 10b-5: Section 10(b) prohibits fraudulent activities in connection with the purchase or sale of securities, while Rule 10b-5 prohibits fraud and misrepresentation in the sale or purchase of securities in interstate commerce.

The Defendants' actions, as outlined in the allegations, such as misappropriating investor funds, concealing ownership and control, making false statements in public filings, and manipulating stock prices, are indicative of violations of these securities laws and regulations.

Based on these violations, the Securities and Exchange Commission (SEC) seeks the following relief:

(I) PERMANENT INJUNCTIONS

The SEC seeks to prohibit Christopher R. Esposito, Anthony Jay Pignatello, James Gondolfe, Lionshare Ventures LLC, and Cannabiz Mobile, Inc. from engaging in future violations of Section 10(b) of the Exchange Act and Rule 10b-5 thereunder, as well as Section 17(a) of the Securities Act. This injunction aims to prevent them from committing similar securities violations in the future.

(II) PERMANENT INJUNCTIONS AGAINST SECTION 5 VIOLATIONS

The SEC also seeks permanent injunctions against all defendants from engaging in future violations of Section 5 of the Securities Act. This section relates to the requirement of registering securities offerings with the SEC.

(III) DISGORGEMENT AND PRE-JUDGMENT INTEREST

The SEC requests an order requiring all defendants to disgorge any ill-gotten gains obtained through their fraudulent activities and to pay pre-judgment interest on these gains.

(IV) CIVIL MONETARY PENALTIES

The SEC seeks an order requiring all defendants to pay appropriate civil monetary penalties for their violations of securities laws and regulations.

(V) OFFICER AND DIRECTOR BARS

The SEC seeks to bar Christopher R. Esposito, Anthony Jay Pignatello, and James Gondolfe from serving as officers or directors of public companies. This request is pursuant to Section 20(e) of the Securities Act and Section 21(d) of the Exchange Act.

(VI) PENNY STOCK OFFERING BARS

(vi): Finally, the SEC requests an order barring Christopher R. Esposito, Anthony Jay Pignatello, James Gondolfe, Lionshare Ventures LLC, and Renee Galizio from participating in any offering of penny stock. This request is pursuant to Section 20(g) of the Securities Act and/or Section 21(d) of the Exchange Act.

Defendants

Defendants involved in the case include:

1. Christopher R. Esposito: A 49-year-old resident of Topsfield, Massachusetts, serving as the Managing Director of Lionshare.

2. Anthony Jay Pignatello: A 46-year-old resident of Manhattan Beach, California, who worked as a consultant to Cannabiz and formerly served as its Secretary.

3. James Gondolfe: A 48-year-old resident of Cambridge, Massachusetts, acting as the Chairman and President of Cannabiz.

4. Renee Galizio: A 44-year-old resident of Loxahatchee, Florida.

5. Lionshare Ventures LLC: A privately-held corporation headquartered in Danvers, Massachusetts, presenting itself as a "business incubator for microcap companies." Lionshare's securities have not been registered with the SEC, and it has not conducted any registered securities offerings.

6. Cannabiz Mobile, Inc.: A corporation purportedly based in Cambridge, Massachusetts, but operated out of shared office space with Lionshare. Cannabiz claimed involvement in mineral exploration in Brazil and later in servicing businesses in the medical marijuana industry. 

It previously operated under different names, including ReBuilder Medical Technologies, Inc. and Lion Gold Brazil, Inc. Cannabiz's stock is not registered with the SEC, and it has not conducted any registered securities offerings. Since at least March 2007, Cannabiz (and its predecessors) has been quoted on Over-the-Counter (OTC) securities markets.

The Fraudulent Scheme

A. ESPOSITO USES LIONSHARE INVESTOR PROCEEDS FOR UNAUTHORIZED PERSONAL PURPOSES

The fraudulent scheme orchestrated by Esposito and Lionshare involved the misuse of investor funds for unauthorized personal purposes, contrary to representations made to investors. Here's a breakdown of the key elements:

1. Unregistered Offering

Between June 2011 and June 2012, Esposito and Lionshare raised over $556,452 from investors through an offering of Lionshare "Class 'B' Membership Interest Shares." They did not file a registration statement with the SEC for this offering.

2. False Exemption Claim

On October 16, 2012, more than a year after the offering began, Esposito and Lionshare filed a form with the SEC claiming that the offering qualified for an exemption under Rule 506 of Securities Act Regulation D. However, they failed to meet the requirements of Rule 506, including conducting a general solicitation and providing audited financial statements to investors who didn't meet the accredited investor definition.

3. Misuse of Funds

Investors were informed that offering proceeds would be used to acquire Lion Gold, an OTC public company, for mineral interests and mining operations. However, Esposito diverted over $290,500 of investor funds for unauthorized personal and business expenses unrelated to the acquisition. This included transferring funds to personal bank accounts and spending on personal expenses such as clothing, groceries, and entertainment.

4. Formation of Lion Mineracao

Between August 2011 and November 2012, Esposito used approximately $153,000 of investor funds to establish Lion Mineracao Ltda., a private Brazilian corporation for mining purposes. Despite using investors' money, Esposito owned 99.99% of Lion Mineracao, with investors having no ownership stake.

These actions demonstrate a deliberate misuse of investor funds for personal gain, misrepresentation of the use of proceeds, and a failure to comply with securities laws and regulations regarding registration and exemptions.

B. ESPOSITO USES INVESTOR FUNDS TO SECRETLY ACQUIRE AND HIDE CONTROL OF CANNABIZ

In late May 2012, Esposito and Lionshare devised a plan to acquire and conceal control of the publicly-traded company Cannabiz, formerly known as ReBuilder. They utilized approximately $75,000 of investor funds from Lionshare to purchase five convertible promissory notes (ReBuilder Notes) totaling $711,238, which covered all of ReBuilder's outstanding debts.

These ReBuilder Notes effectively granted Esposito control over ReBuilder, as they could be converted into a substantial number of ReBuilder common stock shares, far exceeding the company's outstanding shares at the time. Esposito assigned one ReBuilder Note to Lionshare and the remaining four to his brother-in-law (referred to as the "Family ReBuilder Notes"). However, Esposito retained control over the Family ReBuilder Notes, which could be converted into approximately 628 million ReBuilder shares.

To further conceal his control of Cannabiz and evade SEC regulations, Esposito took steps to install R.A. as the President, CEO, CFO, Chairman, and sole member of the Board of Directors of ReBuilder. Esposito then instructed R.A. to hire Pignatello as a consultant to ReBuilder in May 2012, and later as Secretary in June 2012. Pignatello's responsibilities included assisting with regulatory filings and providing necessary documents, such as "opinion letters," to facilitate public sales of Cannabiz securities.

Despite holding no official position within ReBuilder, Esposito secretly maintained control over the company and financially supported its operations. These actions were aimed at concealing his ownership and control of Cannabiz while manipulating its operations to serve his fraudulent scheme.

C. ESPOSITO USES INVESTOR FUNDS TO SECRETLY ACQUIRE AND HIDE CONTROL OF CANNABIZ

Esposito engaged in deceptive practices to cause stock certificates to be issued without restrictive legends, enabling the sale of ReBuilder (later known as Lion Gold) shares into the public market. Here's how he carried out this fraudulent scheme:

1. Affiliate Status Concealment

Esposito and Lionshare, as controllers of ReBuilder, were affiliates of the company under Rule 144 of the Securities Act. However, they concealed this status to profit from transactions prohibited by securities laws.

2. Misleading Transfer Agent

Esposito provided false documents to ReBuilder's transfer agent, misleading them into believing that Lionshare was not an affiliate of ReBuilder. These documents included a Seller's Representation Letter, a legal opinion letter, and a corporate board resolution, all falsely asserting that Lionshare was not an affiliate.

3. Issuance of Stock Certificates

Based on Esposito's misrepresentations, the transfer agent issued 47 stock certificates without restrictive legends to Lionshare investors on July 27, 2012, representing 18,236,000 shares of ReBuilder common stock. Esposito personally received over 3,675,000 of these shares.

4.  Additional Transfers

In October 2012, Esposito directed the transfer agent to issue additional certificates without restrictive legends to transfer 3.3 million of his personal shares to investor relations consultants. These transfers were made as payment for promotional emails about Lion Gold.

5. Illegal Stock Sales

Consultants received stock certificates without restrictive legends and sold 2,396,000 shares into the public market, generating profits. Esposito also sold 94,500 shares, yielding personal profits of over $1,950. These sales violated Rule 144, which imposes a one-year holding period for shares held by affiliates.

6. Knowledge of Violations

Esposito and Lionshare were aware, or recklessly disregarded, that these stock sales violated securities laws and regulations.

Esposito's actions involved deliberate deception and manipulation to evade securities regulations and profit from the unauthorized sale of ReBuilder shares.

D. ESPOSITO AND LION GOLD MAKE MATERIAL MISSTATEMENTS AND OMISSIONS IN PUBLIC DOCUMENTS

Esposito continued his deceptive practices by causing Lion Gold to submit false and misleading information statements to OTC Markets for public disclosure. Here's how he carried out this part of the fraudulent scheme:

1. Knowledge of Violations

False Representation of Lion Mineracao Ownership: On November 16, 2012, Esposito caused Lion Gold to submit an information statement to OTC Markets falsely representing that Lion Mineracao was a wholly owned operating subsidiary of Lion Gold. This statement was misleading because Esposito owned 99.99% of Lion Mineracao, meaning Lion Gold had no actual ownership stake in Lion Mineracao.

2. Failure to Disclose Debt Control and Dilution

The information statement also omitted crucial information, such as the amount of Lion Gold convertible debt controlled by Esposito and Lionshare through the ReBuilder Notes, and the potential dilution of shareholder equity resulting from the conversion of this debt into common stock. This omission left investors unaware of Esposito's control over Lion Gold and the potential impact on shareholder ownership if the debt were converted into equity.

3. Submission of Amended Misleading Disclosure

On January 8, 2013, Esposito caused Lion Gold to provide an amended disclosure statement to OTC Markets, which contained the same misrepresentations as the initial submission made on November 16, 2012.

These actions demonstrate Esposito's intent to manipulate public perception and conceal his control over Lion Gold, while withholding crucial information from investors regarding debt control and potential dilution of shareholder equity. By submitting false and misleading disclosure statements, Esposito continued to deceive investors and perpetuate his fraudulent scheme.