The U.S. Securities and Exchange Commission has filed a new legal action against a small investment firm based in Humboldt County, California, that has ties to the local cannabis industry and is accused of breaching fiduciary duties to its shareholders.
The suit, which was filed Aug. 1 in U.S. District Court in the Northern District of California against Sisu Capital, a small family investment firm based in Arcata, California, alleges that Timothy Overturf incorporated and led Sisu Capital after turning 18 in 2013, while his father, Hansueli, was serving a suspension as an investment adviser.
Although Timothy Overturf was the functional face and name of the firm, his father was the real leader, the suit alleges, despite the suspensions, first by the state of California in 2011 and then by a federal nonprofit government watchdog that same year, the Financial Industry Regulatory Authority. FINRA also fined Hans Overturf $10,000 for “engaging in undisclosed business activities.”
Hans Overturf was also under suspension from 2017 to 2019 by the state of California as a broker-dealer, but he continued selling investment advice through Sisu Capital anyway.
The suit alleges that the father-son duo netted at least $2 million in fees from their various clients, including $858,000 for Timothy Overturf alone in one two-year span, “while acting contrary to their clients’ interests, including during periods of Hans Overturf’s undisclosed suspension and while making unsuitable and unauthorized trades for client accounts.”
The pair offered high-paying investment advice to 42 “high net worth clients” that had approximately $51.7 million in assets being managed by Sisu Capital, the suit alleges.
Although Sisu Capital’s wrongdoings don’t appear to have a direct impact on the cannabis industry, the firm shared an executive with Sisu Extracts, a licensed California marijuana manufacturer, the Lost Coast Outpost reported. That executive, John Figueiredo, was a registered financial advisor with Sisu Capital from 2015-2016 and is a former CEO of both companies.
“Integrity is everything to me, and we contributed hundreds of millions of dollars into the local economy at SISU,” Figueiredo told the Lost Coast Outpost.
Timothy Overturf declined to comment on the lawsuit to the Lost Coast Outpost, but said it was a “complicated accusation.”
The suit requests that a federal judge issue civil fines against both Overturfs, require them to “disgorge all ill-gotten gains” including “prejudgment interest,” and issue an order preventing the pair from further violating the federal Advisers Act.
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