stock king 1
1 week ago
Crooked JK can’t hide from this …DEPARTMENT OF FINANCIAL INSTITUTIONS SECURITIES DIVISION
On July 20, 2024, the Securities Administrator of the state of Washington issued a Stop Order Denying Effectiveness to the Application for Registration (“Stop Order”) and Statement of Charges and Notice of Intent to Enter Order to Cease and Desist, To Revoke Exemptions, To Impose Fines, and to Charge Costs, Order No. Order # S-23-3528-24-SO01 (“Statement of Charges”). The Stop Order and Statement of Charges, together with a Notice of Opportunity for Hearing (“Notice”) and an Application for Adjudicative Hearing (“Application”), were served on Respondents James Katzaroff, VirExit Technologies, Inc., and Globestar Therapeutics Corporation (collectively “Respondents”) on July 20, 2024.
The Notice advised Respondents James Katzaroff, VirExit Technologies, Inc., and Globestar Therapeutics Corporation that the Application must be received within twenty days from the date of service. Respondents James Katzaroff, VirExit Technologies, Inc., and Globestar Therapeutics Corporation failed to request an administrative hearing on the Statement of Charges within twenty days of service. Respondent VirExit Technologies, Inc failed to request an administrative hearing on the Stop Order within twenty days of receipt of the Stop Order and Notice.
FINAL ORDER
DEPARTMENT OF FINANCIAL INSTITUTIONS Securities Division PO Box 41200 Olympia, WA 98504-1200 360-902-8760
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The Securities Administrator therefore adopts as final the following Findings of Fact and Conclusions of Law as set forth in the Statement of Charges, enters a final order against Respondents James Katzaroff, VirExit Technologies, Inc., and Globestar Therapeutics Corporation to cease and desist from violations of the Securities Act, to revoke exemptions, and to impose the fines and costs sought in the Statement of Charges and enters a final order against VirExit Technologies denying the effectives of its application for registration.
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FINDINGS OF FACT Respondents
1. James Katzaroff (“Katzaroff”), CRD #1032123, is a resident of Richland, Washington. Katzaroff was registered as an agent for a broker-dealer with the Securities Division from December 2017 to June 2018. Katzaroff is the CEO and President of both VirExit Technologies, Inc. and Globstar Therapeutics Corporation.
2. VirExit Technologies, Inc. (“VirExit”) is a Wyoming Corporation with a principal place of business in Richland, Washington. VirExit was originally incorporated as Poverty Dignified, Inc. (“PVDG”) in September of 2013, before changing its name to VirExit Technologies, Inc. on March 23, 2021. In or about June 2020, Katzaroff was transferred control of and became the CEO and Chairman of PVDG. VirExit trades on the OTC market under the ticker VXIT. VirExit purports to be in the business of selling PPE.1
3. Globestar Therapeutics Corporation (“GSTC”) is a Wyoming Corporation with a principal place of business in Richland, Washington.2 GSTC was originally incorporated as AngioSoma, Inc. (“AngioSoma”) on December 8, 2014, before changing its name to Globestar Therapeutics Corporation on April 14, 2021. In or about March 2021, Katzaroff purchased AngioSoma from Alexandria Blankenship, who transferred control to Katzaroff. GSTC trades on the OTC market under the ticker GSTC. GSTC is
1 PVDG and VirExit are hereinafter collectively referred to as VirExit.
2 AngioSoma and GSTC are hereinafter collectively referred to as GSTC.
FINAL ORDER
DEPARTMENT OF FINANCIAL INSTITUTIONS Securities Division PO Box 41200 Olympia, WA 98504-1200 360-902-8760
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purportedly a clinical stage pharmaceutical company with a patented drug formulation to treat multiple sclerosis.
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Related Parties
4. Robert “Bob” Sonfield (“Sonfield”) was a Texas resident and securities attorney who represented VirExit, GSTC, and Katzaroff. In 2008, he was named as a defendant in an SEC complaint for violations of federal securities laws in regard to an unregistered, nonexempt distribution of common stock. Without admitting or denying fault Sonfield paid a civil penalty. Sonfield passed away on October 2, 2023.
5. Alexandria Blankenship (“Blankenship”) is a Texas resident and the former secretary and romantic partner of Robert Sonfield. She was the president and CEO of AngioSoma before Katzaroff purchased it from her. In 2008, she was named as a relief defendant in an SEC complaint for violations of federal securities laws in regard to an unregistered, nonexempt distribution of common stock, though no action was taken against her in the final judgement.
Nature of the Conduct
Overview
6. In February of 2021, James Katzaroff offered and sold stock in two Washington companies, VirExit Technologies and GSTC, through unregistered private placements. Katzaroff raised approximately $500,000 for each company. Katzaroff solicited the investments through general solicitation and offered the investments as a package deal, telling investors, “I really don't want your money if you're not going to hedge your bets on both of these.” Katzaroff made multiple material misrepresentations and omissions to investors including how investor funds would be used, the risks associated with investing in each company, and the lock up periods on selling shares.
FINAL ORDER
DEPARTMENT OF FINANCIAL INSTITUTIONS Securities Division PO Box 41200 Olympia, WA 98504-1200 360-902-8760
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7. In February of 2023, Katzaroff and VirExit filed an application for registration by coordinated review with the Securities Division under Regulation A Tier 1. The offering circular fails to disclose material facts to investors.
2021 Offer and Sale of VirExit Securities
8. VirExit raised $497,500 in investments from seventeen investors in February of 2021, which improperly relied on an exemption from registration under Rule 506(b). Katzaroff solicited these investments through general solicitation to investors by offering the investment to individuals he did not have a substantive, pre-existing relationship with. Katzaroff primarily offered and sold investments in VirExit to his and other officers in the company’s acquaintances. Katzaroff offered and sold some investments in VirExit to people who were referred to him by other investors. Katzaroff primarily offered the investments by email and phone, though he did meet some investors in person.
9. Katzaroff provided investors with a one-page subscription agreement and wiring instructions prior to them investing. Katzaroff told investors that VirExit planned to bring products to market, focusing on PPE like masks and sanitizers. Katzaroff told at least one investor that because Katzaroff knew what he was doing, the risk associated with the investment was “inconsequential.” Some investors only invested in VirExit because they felt it was a package deal with investing in GSTC. Katzaroff gave investors the impression that they would be able to trade their VirExit stock. To date, at least three investors have been unable to house or sell their shares of VirExit.
10. Between February 10, 2021 and March 17, 2021, Katzaroff raised $497,500 in investments from seventeen investors that was deposited in VirExit’s Bank of America account. From February 10, 2021 to July 28, 2021, nearly all investor funds were withdrawn from the account. During the period where Katzaroff spent the investor funds, there are no discernable payments for product development or product
FINAL ORDER
DEPARTMENT OF FINANCIAL INSTITUTIONS Securities Division PO Box 41200 Olympia, WA 98504-1200 360-902-8760
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procurement, nor has Katzaroff or VirExit provided the Division with any contracts or communications from manufacturers or other documents indicating business activity.
11. Katzaroff misrepresented to at least three investors how investor funds would be used. While investors were told that investor funds would be used to purchase and sell PPE, at least 70% of the raised funds were spent on other purposes, such as marketing, payments to Sonfield, and payments to Katzaroff and other company executives.
12. Katzaroff failed to disclose to at least three investors the risk of investing in VirExit. The subscription agreement for VirExit only says that the subscriber is capable of evaluating the merits and risks of an investment in VirExit, “including the risk of losing the entire investment.” Katzaroff did not discuss any risks associated with competition or the market. Katzaroff did not discuss the possibility of cheaper masks being produced in China. Katzaroff did not discuss risks associated with supply chains. Katzaroff did not discuss market risks.
13. Katzaroff misrepresented to at least three investors how investments on the over-the-counter (“OTC”) market work. OTC securities are securities that are not listed on a major exchange in the United States and are instead traded via a broker-dealer network, usually because they do not meet the requirements to be listed on a national exchange. Full-service brokerages generally require certain minimum stock values to hold stocks traded on the OTC market. OTC markets are generally less transparent and less regulated than conventional stock exchanges, which makes them riskier to invest in.
14. Katzaroff failed to disclose information material to trading VirExit stock purchased in a private offering. Katzaroff failed to disclose to investors how full-service brokerages would require certain minimum stock values to hold stocks traded on the OTC market, and how this would impact investors abilities to sell their shares. Multiple investors stated that this information would have been helpful prior to investing.
FINAL ORDER
DEPARTMENT OF FINANCIAL INSTITUTIONS Securities Division PO Box 41200 Olympia, WA 98504-1200 360-902-8760
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Katzaroff also failed to disclose to at least three investors that VirExit stock had a one year lock up period. The VirExit subscription agreement that investors signed did not reference a lock up period.
2021 Offer and Sale of GSTC Securities
15. GSTC raised $499,500 from sixteen investors in February of 2021. Katzaroff solicited these investments through general solicitation to investors, by offering the investment to individuals he did not have a substantive, pre-existing relationship with. Katzaroff primarily offered and sold investments in GSTC to his and other officers in the company’s acquaintances. Katzaroff offered and sold some investments in GSTC to people referred to him by other investors. Katzaroff did not have a prior existing relationship with the referred investors. Katzaroff primarily offered the investments by email and phone, though he did meet some investors in person.
16. Katzaroff provided investors with a slide deck on GSTC and its drug cocktail, a one-page subscription agreement, and a copy of the patent prior to them investing. Katzaroff told investors that GSTC had a patent for a drug cocktail to treat multiple sclerosis. Katzaroff told the investors that the drug cocktail’s component drugs had already been approved by the FDA, so the cocktail would be on an accelerated approval basis. Katzaroff gave investors the impression there was minimal risk because the component drugs were already FDA approved, so the approval process for the combination should have been “perfunctory.” Katzaroff told investors that he had friends in hospital systems that would do the clinical trials for FDA approval. Katzaroff told investors that they would be able to trade their GSTC stock. To date, at least three investors have been unable to house or sell their shares of GSTC.
17. Katzaroff failed to disclose to at least three investors that he had recently purchased GSTC and still owed funds for the purchase. Katzaroff misrepresented to at least three investors how investor funds would be used. Katzaroff failed to disclose that at least 85% of the raised funds were spent on payments to Blankenship for the purchase of GSTC, marketing, and payments to Katzaroff himself.
FINAL ORDER
DEPARTMENT OF FINANCIAL INSTITUTIONS Securities Division PO Box 41200 Olympia, WA 98504-1200 360-902-8760
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18. Katzaroff misrepresented the difficulty of the FDA approval process to at least three investors. While Katzaroff did discuss the FDA approval process to investors, he failed to disclose the difficulties in getting an FDA drug trial. To date, neither Katzaroff nor GSTC has provided investors or the Securities Division with evidence that GSTC has conducted clinical trials for the drug cocktail. When questioned, Katzaroff could not tell the Division what steps GSTC would need to take to get FDA approval for its drug cocktail. Katzaroff testified that GSTC eventually pivoted to doing drug trials in India in November of 2022, however, at that point all investor funds from the initial February 2021 offering had been spent. Katzaroff did not provide the division with records indicating that legitimate steps had been taken towards securing a clinical trial for its drug cocktail before investor funds had been spent.
19. Katzaroff misrepresented to at least three investors the risk of investing in GSTC. The subscription agreement for GSTC only says that the subscriber is capable of evaluating the merits and risks of an investment in GSTC, “including the risk of losing the entire investment.” Katzaroff did not discuss the risk associated with GSTC not raising enough funds to get through the FDA approval process or with failing to raise enough funds in subsequent rounds of fundraising. Katzaroff did not discuss any risks associated with the drug cocktail’s clinical trials not showing the expected results, and instead Katzaroff gave at least one investor the impression that the trials had minimal risk of failure.
20. Katzaroff misrepresented to at least three investors how investments on the OTC market work. Katzaroff failed to disclose to at least three investors that GSTC stock had a six month and one day lock up period. Katzaroff did not discuss how full-service brokerages would require certain minimum stock values to hold stocks traded on the OTC market with investors, or how this would impact investors abilities to sell their shares.
FINAL ORDER
DEPARTMENT OF FINANCIAL INSTITUTIONS Securities Division PO Box 41200 Olympia, WA 98504-1200 360-902-8760
VirExit 2023 Coordinated Review Filing
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21. On February 1, 2023, an application for registration by coordinated review was filed with the Securities Division under Regulation A Tier 1 for an offering of $5,000,000 worth of Common Stock in VirExit Technologies, Inc. The offering circular of the application states that VirExit’s mission is to “create safety products and protocols for the individual and commercial marketplace.”
22. The offering circular, intended for delivery to prospective investors, does not disclose the February 2021 offering conducted by VirExit or the results of that offering.
23. The offering circular, intended for delivery to prospective investors, does not disclose that VirExit spent all investor funds from the February 2021 offering by July 28, 2021 without VirExit producing or procuring a product to bring to market. Approximately 70% of investor funds went towards marketing, legal expenses, and payments to executives and board members, which VirExit Technologies, Inc. did not disclose to investors.
24. The offering circular, intended for delivery to prospective investors, does not disclose VirExit’s past offering that improperly relied on an exemption from registration under Rule 506(b).
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Registration Status
25. Respondent GSTC is not currently registered to sell its securities in the state of Washington and has not previously been so registered, nor has it filed a claim of exemption from registration.
26. Respondent James Katzaroff is not currently registered as a securities salesperson or broker- dealer in the state of Washington and has not previously been so registered.
27. Respondent VirExit is not currently registered to sell its securities in the state of Washington and has not previously been so registered, nor has it filed a valid claim of exemption from registration.
Failure to Comply with Regulation D Rule 506
28. VirExit Technologies, Inc. claimed an exemption from registration of the VirExit Technologies, Inc. offering under Regulation D Rule 506. VirExit Technologies, Inc., through Katzaroff,
FINAL ORDER
DEPARTMENT OF FINANCIAL INSTITUTIONS Securities Division PO Box 41200 Olympia, WA 98504-1200 360-902-8760
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filed a Notice of Exempt Offering of Securities with the Securities and Exchange Commission (“SEC”) on February 11, 2021. Neither VirExit Technologies, Inc. nor Katzaroff submitted a notice filing for the exemption to the state of Washington.
29. Regulation D Rule 506 prohibits the issuer or any person acting on behalf of the issuer from offering or selling securities by any form of general solicitation. VirExit Technologies, Inc. and Katzaroff offered securities to the acquaintances of existing investors with whom they did not have substantive pre- existing relationship.
2023 Coordinated Review
30. On May 31, 2022, the SEC qualified a VirExit stock offering in reliance of Tier 1 of Regulation A.
31. On February 23, 2023, VirExit filed for Regulation A coordinated review with Washington. On March 8, 2023 VirExit’s counsel emailed the Securities Division stating that it was withdrawing its registration in Washington and wished to proceed only in Texas, North Carolina, and South Carolina. Washington continues to administer the coordinated review process.
32. VirExit’s coordinated review application has remained pending as VirExit has failed to pay the required filing fee.
Based upon the above Tentative Findings of Fact, the following Conclusions of Law are made:
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CONCLUSIONS OF LAW
1. The offer and/or sale of the stock as described above constitutes the offer and/or sale of a security as defined in RCW 21.20.005(14) and (17).
2. Respondents VirExit Technologies, Inc., GlobeStar Therapeutics Corporation, and James Katzaroff violated RCW 21.20.140, the securities registration section of the Securities Act of Washington, by offering and/or selling securities for which no registration is on file with the Securities Administrator.
FINAL ORDER
DEPARTMENT OF FINANCIAL INSTITUTIONS Securities Division PO Box 41200 Olympia, WA 98504-1200 360-902-8760
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3. Respondent James Katzaroff violated RCW 21.20.040, the licensee registration section of the Securities Act of Washington, by offering and/or selling said securities while not being registered as a securities salesperson or broker-dealer in the state of Washington.
4. Respondents James Katzaroff, VirExit Technologies, Inc. and GlobeStar Therapeutics Corporation violated RCW 21.20.010, the anti-fraud section of the Securities Act of Washington, by making untrue statements of material fact and/or omitting to state material facts necessary to make the statements made, in light of the circumstances in which they were made, not misleading. These misrepresentations justify the entry of an order to revoke exemptions pursuant to RCW 21.20.325.
The registration statement filed on behalf of VirExit Technologies, Inc. is incomplete in a material respect or contains statements which are, in the light of the circumstances under which they are made, false or misleading with respect to any material fact as set forth above. This justifies the entry of a stop order pursuant to RCW 21.20.280(1).
Based upon the foregoing and finding it in the public interest:
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FINAL ORDER
IT IS HEREBY ORDERED that Respondents James Katzaroff, VirExit Technologies, Inc., and Globestar Therapeutics Corporation, and their agents and employees, shall each cease and desist from violating RCW 21.20.140, the securities registration section of the Securities Act of Washington.
IT IS FURTHER ORDERED that Respondents James Katzaroff, VirExit Technologies, Inc., and Globestar Therapeutics Corporation, and their agents and employees, shall each cease and desist from violating RCW 21.20.010, the anti-fraud section of the Securities Act of Washington.
IT IS FURTHER ORDERED that Respondent James Katzaroff, and his agents and employees, shall each cease and desist from violating RCW 21.20.040, the registration section of the Securities Act of Washington.
FINAL ORDER
DEPARTMENT OF FINANCIAL INSTITUTIONS Securities Division PO Box 41200 Olympia, WA 98504-1200 360-902-8760
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IT IS FURTHER ORDERED that Respondent VirExit Technologies, Inc.’s ability to rely on exemptions from registration with respect to stock offered or sold by VirExit Technologies Inc. under RCW 21.20.320(1), (3), (9), (12), and (17) has been revoked.
IT IS FURTHER ORDERED that Respondent Globestar Therapeutics Corporation’s ability to rely on exemptions from registration with respect to stock offered or sold by Globestar Therapeutics Corporation under RCW 21.20.320(1), (3), (9), (12), and (17) has been revoked.
IT IS FURTHER ORDERED that Respondent James Katzaroff shall be liable for and pay a fine in the amount of $60,000.
IT IS FURTHER ORDERED that Respondent VirExit Technologies, Inc. shall be liable for and pay a fine in the amount of $30,000.
IT IS FURTHER ORDERED that Respondent Globestar Therapeutics Corporation shall be liable for and pay a fine in the amount of $30,000.
IT IS FURTHER ORDERED that Respondents James Katzaroff, VirExit Technologies, Inc., and Globestar Therapeutics Corporation shall be liable for and pay costs in the amount of $25,000.
IT IS FURTHER ORDERED that the application for registration filed on February 1, 2023, by VirExit Technologies, Inc. is denied.
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AUTHORITY AND PROCEDURE
This FINAL ORDER is entered pursuant to the provisions of RCW 21.20 and is subject to Chapter 34.05 RCW. Respondents have the right to petition the superior court for judicial review of this agency action under Part V of Chapter 34.05 RCW. Pursuant to RCW 21.20.395(4), a certified copy of this Final Order may be filed in superior court. If so filed, the clerk shall treat the Final Order in the same manner as a superior court judgment as to the fine, and the fine may be recorded, enforced, or satisfied in like manner.
FINAL ORDER
DEPARTMENT OF FINANCIAL INSTITUTIONS Securities Division PO Box 41200 Olympia, WA 98504-1200 360-902-8760
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WILLFUL VIOLATION OF THIS ORDER IS A CRIMINAL OFFENSE.
SIGNED and ENTERED this 23rd day of August, 2024.
Approved by:
/s/ ________________________________ Brian J. Guerard
Chief of Enforcement
Reviewed by:
/s/ __________________________________ Holly Mack-Kretzler
Financial Legal Examiner Supervisor
/s/
__________________________________ William M. Beatty
Securities Administrator
Presented by:
/s/ ________________________________ Keenan Osborne
Financial Legal Examiner
FINAL ORDER
DEPARTMENT OF FINANCIAL INSTITUTIONS Securities Division PO Box 41200 Olympia, WA 98504-1200 360-902-8760
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