Taronis Fuels will pay $5.1M to resolve SEC fraud allegations
Manufacturer of water and industrial gas supplies Taronis Fuels has agreed to pay the Securities and Exchange Commission (SEC) $5.1 million to resolve fraud-related allegations.
According to the SEC's complaint, which was filed in U.S. District Court for the Middle District of Florida, Taronis Fuels, its former parent company Taronis Technologies (now known as BBHC), and Taronis Tech Chief Executive Scott Mahoney issued materially false and misleading press releases announcing phony or misleading deals with customers. According to the SEC, fictitious agreements were publicized with the city of San Diego, the Turkish government, a Popeye's Louisiana Kitchen franchise, and Smithfield Foods.
For instance, according to the SEC, Mahoney falsified a contract with the city of San Diego in a press release announcing the business's "first city wide contract," which was later used as an exhibit in a 2019 public filing. Taronis Tech did "not have any formal binding contracts, agreements, or long-term purchase commitments with the city of San Diego," the SEC continued, so Mahoney resent the filing "to correct its prior disclosure" when the city of San Diego later contacted the company to request that the press release be removed.
Despite the city of San Diego insisting it had no business with the company, the updated document still claimed Taronis Tech "'had approval and a written authorization... to move forward with the procurement of gas'," the SEC said.
Tyler Wilson, a former chief financial officer and general counsel for Mahoney and Taronis Fuels, is also accused of fabricating and backdating orders, which caused the business to declare false revenue for the second and third quarters of 2020. An agency litigation announcement stated that Taronis Fuels claimed in SEC filings that its financial statements were produced in compliance with generally accepted accounting standards (GAAP) and received around $30 million from investors in private placements.
The SEC stated that Taronis Fuels disclosed in April 2021 that the previously published financial statements for the fiscal year 2019 and each interim quarterly period for the fiscal year 2020 should not be relied upon.
The Securities Exchange Act of 1934 was allegedly violated by Taronis Tech, Taronis Fuels, Mahoney, and Wilson. Sarbanes-Oxley (SOX) violations were also alleged against Mahoney and Wilson.
Without admitting or denying wrongdoing, Taronis Fuels agreed to be permanently restrained from breaching the alleged federal securities laws and to pay $4.9 million in disgorgement and $232,000 in prejudgment interest.
Mahoney agreed to a split settlement without admitting or denying wrongdoing and will pay a $150,000 civil penalty, be restricted for five years from serving as an officer or director of a public business, and be prohibited from marketing penny stocks. According to the SEC, the court will decide whether Mahoney should be required to pay Taronis Fuels back for disgorgement and prejudgment interest owing to SOX violations.
Taronis Tech and Wilson are the targets of the agency's requests for permanent injunctions and civil penalties, with Mahoney also being the target of similar requests for action against Wilson.
An inquiry for comment was not immediately answered by Taronis Fuels. Taronis Tech separated out the business in December 2019, yet they kept using the same workspace.
By fLEXI tEAM