The top executive at a Central Florida tech firm is under investigation by the U.S. Securities and Exchange Commissionallegedly for perpetuating a multiyear fraud while CEO of a different company.
The SEC on Oct. 18 filed a complaint with the U.S. District Court for the District of Colorado against Brent David Willis, who now is CEO of Cocoa-based aerospace firm Vaya Space Inc., for actions he allegedly committed when he was the CEO of Midvale, Utah-based NewAge Inc. from 2017-2019.
Willis’ attorney, Michael Diver of Chicago-based Katten Muchin Rosenman LLP, told Orlando Business Journal the allegations against Willis are untrue, and Willis and his legal team will dispute them in court. “The complaint alleges that NewAge never entered into arrangements with certain distributors. That is inaccurate. Likewise, they allege that NewAge never committed to developing CBD-infused beverages — also untrue. We look forward to disproving all of these allegations in court.”
The 62-year-old Willis was appointed CEO and a director of NewAge on March 24, 2016, and Willis and the company’s board of directors reached a resignation agreement on Jan. 10. Vaya Space, where Willis became CEO in April, is not mentioned in the SEC’s complaint and is not part of the agency’s investigation.
Beginning in July 2017, the complaint states, Willis began putting out public statements that allegedly vastly overstated the scope of distribution deals NewAge signed or that spoke of deals that were not consummated at all. Those statements, all of which resulted in immediate boosts to NewAge’s share prices, included, according to the complaint:
- An April 2019 press release stating that NewAge’s three Marley Mate flavors would be available at all Walmart stores that month, when Walmart allegedly never agreed to make all the flavors available at all its locations and sold Marley brand products in less than 7% of its stores
- A January 2018 announcement that the U.S. military had agreed to take 21 NewAge products to be sold in commissaries worldwide, when allegedly the only new distribution during this period was to sell NewAge products at two individual stores in Virginia and Florida for a trial period of four weeks
- A November 2017 press release that NewAge had entered into an agreement with Unified Strategies Group to expand the distribution of its beverage portfolio to USG’s more than 1 million vending machines reaching more than 75,000 workplace locations a day when allegedly the company’s products, at their peak, were sold by only one or two USG members at about 100 vending machines.
- The complaint also alleges that Willis claimed, beginning in September 2018, that NewAge was bringing to market a line of CBD-infused beverages to satisfy the demand for cannabis-related products when the company allegedly took only preliminary steps in developing such products. At the October 2018 NACS trade show in Las Vegas, where many convenience-store leaders gather, Willis reportedly organized an off-site meeting for retailers, distributors and investors in which he offered samples of the “full-spectrum” CBD products while distributing sell sheets, the complaint claims. However, the complaint alleges, the products made with a purported proprietary in-house formula consisted only of samples of existing NewAge products to which drops of CBD purchased from a local shop allegedly had been added on-site just before the event.
NewAge’s share prices peaked at $8.47 just days before that trade show, as the company had sent out news of the new line of products in the month beforehand. Willis later said in several news releases that the full line of CBD-infused products would be ready for shipments to stores by Christmas of 2018, and interest remained high in the company, the complaint claims.
NewAge relied on the $80 million in proceeds from two at-the-market securities offerings in September and November 2018 to buy global beverage company Morinda Holdings, which was projected to grow its annual revenue from about $50 million in 2018 to $300 million in 2019, according to the complaint.
The SEC alleges all these actions took place while Willis was the CEO of NewAge, which was headquartered in Denver until the company relocated its corporate headquarters to Midvale, Utah, on March 1, according to a NewAge filing with the SEC.
The complaint from the SEC alleges Willis's actions violated the Securities Act of 1933 and the Securities Exchange Act of 1934. The SEC’s full complaint can be read here.
In the complaint, the SEC asks a judge to order Willis to “disgorge ill-gotten gains received during the period of violative conduct and pay prejudgment interest on such ill-gotten gains” and to pay unspecified civil monetary penalties under federal law. It also asks that he be prohibited from serving as an officer or director of any public company and that he be prohibited from offering any penny stocks.
In addition to monetary penalties, trading bars and director/officer bars commonly are sought by the SEC in such cases, Jay Kesten, a Florida State University College of Law associate professor focused on corporate governance, told OBJ. The length of those bars, which can be permanent, depend on the case and, ultimately, at a judge's discretion, said Kesten, who declined to comment specifically on the SEC's case against Willis.
If Willis fights the allegations in court, as his attorney promises, that would be fairly uncommon. It's likely between 50-60% of cases brought by the SEC are settled before they come to a resolution through a trial, Kesten added. "The SEC is very successful. When they have finally filed a case, they win in a supermajority of cases."
Meanwhile, NewAge in August filed for Chapter 11 bankruptcy protection, according to NewAge’s filings with the SEC. NewAge in September notified the SEC that the Nasdaq delisted NewAge shares from the Nasdaq stock market as a result of the bankruptcy filing.
Neither NewAge nor its current or other former employees are defendants in the case, as Willis is the only defendant listed in the complaint.NewAge executives could not be reached for comment by press time.
It is unclear who first raised these complaints with the SEC. An SEC spokesperson declined to comment on the case.
Vaya Space executives could not be reached for comment by press time.
Denver Business Journal Senior Reporter Ed Sealover contributed to this report.
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