A U.S. military veteran who is suing a since dissolved cannabis company for wrongful termination and illegally withholding compensation has asked a federal judge to impose sanctions against some of the company’s executives, whom he accuses of violating a court order to freeze assets related to the case.
Francis Racioppi Jr., who initially filed his lawsuit in April, told a U.S. District judge in California on Oct. 8 that some of the defendants in his suit, all of whom are or were associated with the Genius Fund Group, have sold or moved more than $3M in assets that had been ordered frozen by a court.
The Genius Fund Group was based in Los Angeles and consisted of multiple shell companies aimed at capitalizing on California’s legal marijuana market, according to Racioppi’s suit. The company reportedly blew through $164M in less than two years before the venture crumbled.
The suit lists Russian billionaire Dmitry Bosov and Gary Shinder, a former executive, as the principal leaders of the group. Bosov was found dead of an apparent gunshot wound, possibly self-inflicted, in his Moscow apartment on May 7, according to Russian media reports.
In the motion for sanctions, Racioppi accuses Shinder and other surviving defendants of purposefully violating the court order to freeze assets. Their “brazen and shocking” actions, the motion alleges, undermines Racioppi’s suit and represent a “direct affront” to the court’s authority.
The motion calls on the court to find the defendants – several shell companies and their managers are listed – in contempt and to impose a daily fine of $10,000 and/or incarceration against the defendants until they comply with the court’s order. Further, it asks the court to order the defendants to pay for Racioppi’s legal fees and costs, which amount to $107,500.
Attorney Thomas O’Brien, who is representing Racioppi through the Browne George Ross firm, noted the significance of the filing.
“A motion for contempt is an extraordinary legal remedy reserved for the most serious of transgressions, a remedy which we believe is appropriate here based on the blatant violation of a federal court order,” he told WeedWeek on Monday. “We continue to fight to protect our client’s interests in his continuing legal battle with his former employer.”
The case largely centers on a professional relationship that Racioppi alleges failed only after he raised concerns about what he thought were poor business practices from Bosov and Shinder.
Racioppi, a veteran of the U.S. Army Special Forces, says in his suit that Bosov, a Russian oligarch, invested more than $160M into Genius Fund Group through a pair of foreign companies for which Bosov held a controlling interest.
Racioppi was hired by the Genius Fund Group in April 2019 as its chief security officer and quickly realized that the corporation suffered from “gross mismanagement,” the suit alleges. That mismanagement, according to Racioppi’s suit, included millions of dollars spent on investments “with virtually nonexistent oversight or accountability, and the company lacked any coherent business plan to generate either short- or long-term profit.”
Racioppi, in his suit, further accused Bosov of charging “substantial personal expenditures” to the company that had no business purpose.
Plaintiff Racioppi says he was promoted to COO in October 2019 and then CEO on March 5, 2020. Despite this, his suit alleges, Shinder anointed himself the company’s president and board chairman and “immediately began wholly ignoring and circumventing Plaintiff on virtually every management-level decision.”
In the suit, Racioppi says he was ultimately fired on March 26. He says he was told his firing was a result of a lack of business due to the COVID-19 pandemic. Racioppi took issue with this, noting that cannabis companies have been allowed to remain open during the pandemic and he claims the company set records for daily and weekly revenues in March 2020.
Racioppi says he was only fired because he disclosed concerns about “mismanagement and fraud” to his superiors and the defendants were worried that he may later share those same concerns with government or law enforcement agencies.
Because his contract was set to run through Dec. 31, 2021, Racioppi claims he is owed more than $1.3M in withheld salary.
In August, Racioppi argued that the defendants were attempting to liquidate assets, which led to the court granting him a writ of attachment on more than $3.7M of assets. Because of the order, Shinder and other living defendants were prohibited from transferring certain assets.
In his latest motion, Racioppi accuses the defendants of moving some of those assets to a new entity they control named Heli Holdings. The motion alleges the defendants hid those moves from Racioppi and his lawyers.
“There is no question that [the defendants] knowingly, willfully, and brazenly violated an unequivocal Court order barring the transfer of assets,” it read.
Shinder and the Genius Fund Group-associated defendants are represented by David Golubchik and Kurt Ramlo of Levene Neale Bender Yoo & Brill. They did not immediately return messages Monday seeking comment.
Correction: This story previously misstated who the plaintiff accuses of moving assets that had been ordered frozen.
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