Man convicted of insider trading linked to firm holding state cannabis contracts
Michael Shvartsman was convicted of insider trading, while Eric Hannelius settled without admitting or denying guilt. Both men were involved in a company with contracts to track legal marijuana in Florida and other states.
The company contracted by Florida and several other states to track the cultivation and sale of legal marijuana has been linked to a man convicted of insider trading, and another who paid a fine in the same scheme, legal and corporate documents show.
Michael Shvartsman, one of the two men, was sentenced in October to more than two years in prison after he pled guilty to securities fraud. According to the indictment, he had earned millions of dollars from insider trades involving shares in a company that merged with Trump Media & Technology Group Corp, whose majority shareholder is former U.S. President Donald Trump.
The other man, Eric Hannelius, agreed to pay a civil penalty in September to settle a civil suit, which also accused him of insider trading in relation to the same merger. Under the terms of the settlement, Hannelius did not admit or deny guilt.
Trump Media was not accused of wrongdoing in the case. The insider trading scheme was also unrelated to the involvement of the two men in BioTrack, the company with cannabis contracts in Florida and other states, which has not been accused of any wrongdoing.
AP Photo/John Minchillo
Michael Shvartsman leaving Federal Court in New York on July 20, 2023.
The connections between Shvartsman and Hannelius and BioTrack are being revealed by the Miami Herald and OCCRP for the first time as voters in Florida debate whether to legalize marijuana for recreational use. Florida currently only allows people with certain medical conditions to obtain marijuana.
BioTrack signed a 2022 contract with Florida that pays the company up to $768,000 over five years to provide software that tracks the lifecycle of legally grown cannabis from “seed to sale,” to ensure that none of it is diverted for illegal use.
Corporate documents show that the cannabis company Alleaves acquired BioTrack in February 2023. Shvartsman and Hannelius have appeared as officers and CEOs in numerous corporate records for BioTrack and its parent company, Alleaves.
An Alleaves spokesperson said that neither man has any role in Alleaves and that Shvartsman has no stake in the company.
However, Hannelius was listed as one of Alleaves’ directors on corporate records filed in Delaware and Florida earlier this year, and is currently listed as a director of Alleaves in the Florida corporate registry.
When asked to explain this discrepancy, Alleaves spokesperson Emily Vetter said that Hannelius’s inclusion in the public records was a mistake.
“We believe that was an administrative error that needs to be corrected,” she said.
Shvartsman and Hannelius did not respond to multiple requests for comment.
Florida’s Department of Health, which holds the contract, did not respond to requests for comment.
In addition to Florida, BioTrack has contracts with Arkansas, Delaware, Hawaii, New Mexico and New York to operate traceability systems. The company also signed contracts to run portals for medical cannabis patients in New Hampshire and Virginia.
The quick pace of legalization and the urgent need to regulate the cannabis sector have created challenges for authorities, said David Vaillencourt, whose Colorado-based consultancy GMP Collective helps companies enter the complex cannabis market.
“I can say this with confidence that every state has had to figure out how to create an infrastructure and regulate a federally illegal substance and with few resources. This has never been done before,” he said.
Kevin Hall/OCCRP
Recreational cannabis use is now legal in 24 U.S. states and the District of Columbia. Stores like this dispensary in Edgewater, Maryland, sell products ranging from loose-leaf marijuana to balms, ointments and chewable gummies.
Payment Problems
Cannabis is big business in the U.S. Sales revenue is expected to reach nearly $43 billion this year according to Statista Market Insights, and is legal for recreational use in nearly half the states in the country.
But there’s a problem: While some states have legalized marijuana, it is still illegal under federal law, which has made most banks reluctant to work with cannabis companies.
That’s where BioTrack’s parent company, Alleaves Inc, comes in.
Alleaves acts as an intermediary in a system that allows the purchaser to pay a marijuana dispensary using their debit card. To the bank, the payment looks like a cash withdrawal, but it’s actually a cashless debit payment to the dispensary.
Shvartsman and Hannelius were sued earlier this year for fraud and breach of contract by a bank in Oklahoma, which alleged that they lied about whether their businesses were connected to the cannabis industry.
Alleaves wasn’t named in the lawsuit, but BT Assets Group, which the company used to acquire BioTrack, was a party to the suit. The bank’s lawyers stated that Shvartsman, along with Hannelius and his wife, were the beneficial owners of BT Assets Group — meaning they have ultimate control over the company.
The suit is still pending, and Shvartsman and Hannelius deny the allegations.
Along with their ownership of BT Assets Group, corporate registry documents reveal the past roles of Shvartsman and Hannelius in Alleaves.
Shvartsman is listed in one 2022 Delaware corporate filing as the CEO of Alleaves, while Hannelius is listed as the CEO in a 2023 filing. Hannelius is still listed as a director of Alleaves in the company’s most recent filings in both Delaware and Florida. Hannelius is also listed in the latest available Delaware records as the CEO of BT Assets Group.
The purchase of BioTrack for $30 million in February 2023, by Alleaves, came the year after the firm signed its contract with Florida to monitor the flow of legal marijuana.
Vetter, the spokesperson for Alleaves, said Alleaves divested BT Assets Group in December 2023.
She added that, despite corporate records showing both Shvartsman and Hannelius as officers of the company in the past, to “our knowledge” neither man has a role at the company. She didn’t say when their relationship with the company ended.
The company’s currently listed CEO, Michael Beedles, did not respond to multiple phone calls and emails seeking clarification on the relationship.
Alleaves touts the integration of BioTrack into its payment systems as a selling point for cannabis companies that already use the firm to keep tabs on the marijuana they produce or sell.
‘Sheer Greed’
Alleaves’ acquisition of BioTrack came four months before the U.S. Attorney for the Southern District of New York unveiled charges against Shvartsman.
Ahead of Shvartsman’s sentencing, prosecutors accused him and his circle of investors of “netting nearly $40 million in illegal profits” from well-timed investments in the company that merged with Trump Media.
“The defendant’s criminal conduct was flagrant, manipulative and motivated by sheer greed,” prosecutors wrote.
Shvartsman — who owns a condo in Sunny Isles Beach, a wealthy area in greater Miami — pleaded guilty earlier this year and agreed to forfeit the $18.2 million in profits he made. At his sentencing he was also fined an additional $1 million.
Shvartsman could be deported after serving his prison sentence because he is not a U.S. citizen. Born in Ukraine when it was part of the Soviet Union, Shvartsman immigrated to Canada as a child and later became a citizen.
Hannelius settled a civil suit brought by the U.S. Securities Exchange Commission by agreeing to give up his proceeds from the trades, which totaled $168,000, plus interest. He also agreed to pay a “civil money penalty” of the same amount. The agreement allowed Hannelius to settle the case without admitting or denying the charges.
The Herald previously reported on another member of the insider trading circle, a Russian American businessman named Anton Postolnikov.
He hasn’t been charged, but federal prosecutors allege that he made $14.5 million from illegal insider trades in the company that merged with Trump Media.
A company controlled by Postolnikov later loaned millions of dollars to Trump Media.
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