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`KATHRYN C. WANNER (Cal. Bar No. 269310)
`Email: wannerk@sec.gov
`M. LANCE JASPER (Cal. Bar No. 244516)
`Email: jasperml@sec.gov
`
`Attorneys for Plaintiff
`Securities and Exchange Commission
`Michele Wein Layne, Regional Director
`Alka N. Patel, Associate Regional Director
`Jennifer Barry, Regional Trial Counsel
`444 S. Flower Street, Suite 900
`Los Angeles, California 90071
`Telephone: (323) 965-3998
`Facsimile: (213) 443-1904
`
`UNITED STATES DISTRICT COURT
`CENTRAL DISTRICT OF CALIFORNIA
`
`
`SECURITIES AND EXCHANGE
`COMMISSION,
`Plaintiff,
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`
`vs.
`DAVID J. BUNEVACZ, MARY
`HAYCA BUNEVACZ,
`CAESARBRUTUS LLC, CB
`HOLDING GROUP CORP., AND
`BRUTUS CALIFORNIA VENTURES
`CORP.,
`
` Case No.
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`COMPLAINT
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`Defendants,
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`Case 2:22-cv-02284 Document 1 Filed 04/05/22 Page 2 of 22 Page ID #:2
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`Plaintiff Securities and Exchange Commission (“SEC”) alleges:
`JURISDICTION AND VENUE
`The Court has jurisdiction over this action pursuant to Sections 20(b),
`1.
`20(d)(1), and 22(a) of the Securities Act of 1933 (“Securities Act”), 15 U.S.C. §§
`77t(b), 77t(d)(1), and 77v(a); and Sections 21(d)(1), 21(d)(3)(A), 21(e), and 27(a) of
`the Securities Exchange Act of 1934 (“Exchange Act”), 15 U.S.C. §§ 78u(d)(1),
`78u(d)(3)(A), 78u(e), and 78aa.
`Defendants have, directly or indirectly, made use of the means or
`2.
`instrumentalities of interstate commerce, of the mails, or of the facilities of a national
`securities exchange in connection with the transactions, acts, practices and courses of
`business alleged in this complaint.
`Venue is proper in this district pursuant to Section 22(a) of the Securities
`3.
`Act, 15 U.S.C. § 77v(a), and Section 27(a) of the Exchange Act, 15 U.S.C. § 78aa(a),
`because certain of the transactions, acts, practices and courses of conduct constituting
`violations of the federal securities laws occurred within this district. In addition,
`venue is proper in this district because all of the individual Defendants reside in this
`district, and all of the corporate Defendants have their principal places of business in
`this district.
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`SUMMARY
`This is an enforcement action brought against defendant David J.
`4.
`Bunevacz (“Bunevacz”), a securities fraud recidivist, and two entities under his control:
`defendants Caesarbrutus LLC (“Caesarbrutus”) and CB Holding Group Corp. (“CB
`Holding”). Bunevacz, Caesarbrutus, and CB Holding violated the federal securities
`laws by conducting an offering fraud and Ponzi scheme, and by engaging in the
`unregistered offer and sale of securities. Bunevacz’s step-daughter, defendant Mary
`Hayca Bunevacz (“Mary Hayca”), also violated the federal securities laws by
`participating in the unregistered offer and sale of securities issued by Caesarbrutus, CB
`Holding and Brutus California Ventures Corp. Defendant Brutus California Ventures
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`Case 2:22-cv-02284 Document 1 Filed 04/05/22 Page 3 of 22 Page ID #:3
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`Corp. (“Brutus California”) was a co-issuer of promissory notes issued by CB Holding
`and violated the federal securities laws by participating in the unregistered offer and
`sale of those notes.
`From at least April 2017 until at least September 2019, Bunevacz,
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`Caesarbrutus and CB Holding raised over $32 million from at least 40 investors.
`Bunevacz told investors he was engaged in the production and sale of cannabis
`products, particularly “vape” pens containing oils infused with Cannabidiol (CBD), and
`promised to use their funds to generate profits from these activities. In some instances,
`he claimed to have binding purchase orders for large quantities of vape pens and
`provided investors with fake purchase orders and other fabricated documents to support
`these claims.
`In reality, Caesarbrutus and CB Holding were sham businesses, and the
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`purported transactions did not exist. Instead of using investor funds for business
`purposes, Bunevacz misappropriated the vast majority of those funds for personal
`expenses, including millions of dollars spent gambling and on credit card payments,
`leaving investors with substantial losses.
`Bunevacz also lied to investors about his professional experience and
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`connections in the cannabis industry and, in most instances, failed to disclose his March
`2017 conviction of two felony securities violations under California law. In at least one
`instance, he falsely told an investor he had no criminal history.
`Brutus California was a co-issuer of securities issued by CB Holding,
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`and Mary Hayca participated in the offer and sale of securities issued by
`Caesarbrutus, CB Holding and Brutus California, none of which registered any
`offering of securities with the SEC.
`As a result of the conduct alleged in this Complaint, defendants
`9.
`Bunevacz, Caesarbrutus and CB Holding violated Sections 17(a), 5(a), and 5(c) of the
`Securities Act of 1933, 15 U.S.C. § 77q(a), (“Securities Act”), Section 10(b) of the
`Securities Exchange Act of 1934, 15 U.S.C. § 17j(b), (“Exchange Act”), and
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`Case 2:22-cv-02284 Document 1 Filed 04/05/22 Page 4 of 22 Page ID #:4
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`Exchange Act Rule 10b-5, 17 C.F.R. § 240.10b-5, and defendants Mary Hayca and
`Brutus California violated Sections 5(a) and (c) of the Securities Act.
`DEFENDANTS
`10. David J. Bunevacz (“Bunevacz”), age 53, is a resident of Calabasas,
`California. Bunevacz was the president of CB Holding and the manager of
`Caesarbrutus. He controlled those entities and their bank accounts and was the
`person in charge of those entities and responsible for their day-to-day operations at all
`relevant times. In August 2016, the State of California charged Bunevacz with grand
`theft, selling securities without qualification, and using false statements in the sale of
`a security. On March 22, 2017, Bunevacz pleaded guilty to two felony counts of
`selling securities without qualification. The court entered a suspended sentence
`contingent on Bunevacz paying a total of $273,000 in restitution to two victims,
`which Bunevacz paid, at least in part, using investor funds.
`11. Caesarbrutus LLC (“Caesarbrutus”) is a Wyoming limited liability
`company formed on January 11, 2017 with its principal place of business in Valencia,
`California. Caesarbrutus and its securities offerings are not registered with the SEC.
`12. CB Holding Group Corp. (“CB Holding”) is a Nevada corporation
`registered on June 29, 2018 with its principal place of business in Calabasas,
`California. CB Holding and its securities offerings are not registered with the SEC.
`13. Mary H. Bunevacz (“Mary Hayca”), age 33, is Bunevacz’s step-
`daughter and a resident of Calabasas, California, where she lives with her parents.
`Mary Hayca has a bachelor’s degree in Global Studies. She is currently unemployed
`and has previously worked in the vaporizer pen and e-cigarette industries. Mary
`Hayca held executive-level titles with Caesarbrutus and CB Holding, although
`Bunevacz was the person in charge of those entities. She administered bank accounts
`and participated in meetings and communications for Caesarbrutus and CB Holding
`at Bunevacz’s direction.
`14. Brutus California Ventures Corp. (“Brutus California”) is a California
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`Case 2:22-cv-02284 Document 1 Filed 04/05/22 Page 5 of 22 Page ID #:5
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`Corporation registered by Mary Hayca on July 13, 2018 with its principal place of
`business in Valencia, California. Mary Hayca opened and controlled Brutus
`California’s bank account. Brutus California and the offerings for which it was a co-
`issuer with CB Holding were not registered with the SEC.
`FACTS
`A. The Promissory Notes, Stock Certificates, and Profit Sharing
`Agreements Were Securities
`Promissory Notes
`1.
`15. Bunevacz primarily raised investor funds through promissory notes
`issued by Caesarbrutus and CB Holding (collectively, the “Promissory Notes”).
`16. Brutus California was listed as a co-issuer of the notes issued by CB
`Holding.
`17. Bunevacz represented to investors that the proceeds of the Promissory
`Notes would be used for business purposes, and often represented that investor funds
`would be used to complete profitable sales of vape pens.
`18. The Promissory Notes were similar, except that notes issued by CB
`Holding came with warrants that permitted lenders to convert them to shares of CB
`Holding common stock at the lender’s option.
`19. The Promissory Notes typically matured in six or twelve months and
`provided for repayment of principal with interest at maturity. Principal amounts for
`the Promissory Notes ranged from $10,000 to $3.5 million, with many notes falling in
`the $50,000 to $300,000 range, and with interest ranging from 10% to 15% per year.
`20. Caesarbrutus raised at least $19 million from the sale of Promissory
`Notes between April 2017 and June 2019, and CB Holding raised at least $8 million
`from the sale of Promissory Notes between July 2018 and September 2019.
`21. The Promissory Notes constitute investment contracts subject to the
`federal securities laws.
`22. Purchasers of the Promissory Notes invested money in exchange for the
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`Case 2:22-cv-02284 Document 1 Filed 04/05/22 Page 6 of 22 Page ID #:6
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`notes.
`23. As Bunevacz described the Promissory Notes to investors, both the
`investors’ profits and the issuer’s profits would come from the issuer’s successful use
`of investor funds in the operation of its cannabis business, and often through the
`profitable sale of vape pens.
`In at least some instances, investors expected their funds to be pooled
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`with other investor funds.
`25. Bunevacz pooled investor funds and used some of those funds to make
`payments to investors for previously issued securities, also known as Ponzi payments.
`Investors in the Promissory Notes expected the profits from their
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`investments to be derived solely from the issuer’s efforts to make money through its
`cannabis-related business. In many instances, investors in the Promissory Notes
`expected their profits to derive from Bunevacz’s efforts to buy and sell vape pens.
`27. The Promissory Notes also constitute notes subject to the federal
`securities laws.
`Investors purchased the Promissory Notes for investment purposes and
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`not for commercial or consumer purposes.
`29. The Promissory Notes were sold to a broad segment of the public,
`including to at least 30 investors located in multiple states.
`2.
`Stock Certificates
`30. Bunevacz also raised investor funds through the sale of stock certificates
`issued by CB Holding (the “Stock Certificates”).
`31. Bunevacz represented to investors that CB Holding was engaged in the
`business of selling cannabis-related products and planned to use investor funds to
`grow that business.
`32. Bunevacz raised at least $1.2 million through the sale of at least 13
`million shares of CB Holding stock.
`In at least some instances, Bunevacz sold the stock to investors at less
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`than $0.10 per share.
`Investors acquired the Stock Certificates for investment purposes.
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`35. Both investors and CB Holding described the Stock Certificates as
`shares of common stock in CB Holding.
`3.
`Profit Sharing Agreements
`In some instances, Bunevacz raised funds through profit sharing
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`agreements issued by Caesarbrutus (the “Profit Sharing Agreements”) which entitled
`investors to various percentages of Caesarbrutus’s profits from certain of Bunevacz’s
`business activities. For example, one of those agreements entitled the investor to
`80% of the profits generated from Bunevacz’s sales of vaporizer pens in exchange for
`a $4 million investment.
`37. Caesarbrutus raised at least $4.4 million through Profit Sharing
`Agreements.
`38. The Profit Sharing Agreements constitute profit-sharing agreements
`subject to the federal securities laws.
`Identification and Solicitation of Investors
`B.
`39. Bunevacz typically solicited investors through in-person meetings,
`telephone calls, text messages, and emails.
`40. Bunevacz raised investor funds from people he knew personally, such as
`his dentist, and people he met through his teenage daughter’s participation in
`equestrian events.
`In some instances, investors who knew Bunevacz introduced him to
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`potential investors with whom he had no pre-existing relationship, some of whom
`later invested with Caesarbrutus or CB Holding.
`42. Caesarbrutus and CB Holding raised funds from investors in multiple
`states and from investors outside the United States.
`43. Mary Hayca joined Bunevacz in some meetings with prospective
`investors. During those meetings, Bunevacz and Mary Hayca discussed Mary
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`Case 2:22-cv-02284 Document 1 Filed 04/05/22 Page 8 of 22 Page ID #:8
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`Hayca’s background in the vaporizer pen industry.
`C. Mary Hayca’s Role with CB Holding and Caesarbrutus
`44. Mary Hayca signed Stock Certificates for CB Holding and Promissory
`Notes issued by Caesarbrutus and CB Holding.
` Mary Hayca granted her father, Bunevacz, general authority to sign
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`business documents for CB Holding and Caesarbrutus in her name, which Bunevacz
`used to sign at least some of the securities issued by those entities.
`46. Mary Hayca had signatory authority on CB Holding bank accounts that
`received investor funds and transferred those funds at Bunevacz’s direction to entities
`that Bunevacz claimed were legitimate third-party suppliers.
`47. Mary Hayca received at least $39,000 from CB Holding that originated
`with investors. She received other benefits from investor funds, including car
`payments made for her benefit.
`D. The Fraud
`1.
`Bunevacz’s Misrepresentations and Omissions to Investors
`about the Business
`48. Bunevacz raised money from investors by lying to them about
`Caesarbrutus’s and CB Holding’s business activities, and promising to use their funds
`for those entities’ profitable business ventures – in particular, the sale of vape pens.
`49. Bunevacz told investors he had valuable relationships with reputable
`companies that Caesarbrutus and CB Holding could leverage to buy and sell products
`for profit, including a China-based manufacturer called Blue Ox Industrial Co. Ltd.
`(“Blue Ox”), an oil producer called Greenfield Organix (“Greenfield Organix”), a
`Cannabis products supplier called Claremont Capital Partners (“Claremont Capital”),
`and a Cannabis products distributor called Saveur Vape LLC (“Saveur Vape”).
`In reality, Bunevacz did not have the claimed business relationships, and
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`instead created bank accounts under like-sounding names to those actual companies
`in order to mislead investors into believing the legitimacy of the investments.
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`51. Similarly, Bunevacz told some investors he had binding purchase orders
`for large numbers of vape pens – including from Saveur Vape – and agreements from
`suppliers – including Blue Ox, Greenfield Organix, and Claremont Capital – to
`provide the pens and oils needed to fulfill those orders on profitable terms.
`52. For example, in late 2018 and early 2019, Bunevacz represented to a
`Canada-based investor in telephone conversations and in person that Bunevacz was
`seeking to raise funds to complete vape pen transactions with business partners on
`profitable terms. He provided that investor with purported purchase orders from
`Saveur Vape and purported invoices from Blue Ox, Greenfield Organix and
`Claremont Capital concerning the claimed business transactions. The investor
`subsequently made substantial investments with CB Holding.
`53. These representations were false and misleading, and the purchase
`orders and invoices were fabricated. Bunevacz and his companies did not have the
`claimed relationships with suppliers and customers in the cannabis industry, and the
`purported vape pen transactions did not exist.
`54. Bunevacz relied on other misrepresentations, omissions, and misleading
`documents to induce investments in Caesarbrutus and CB Holding.
`In approximately October 2018, for example, Bunevacz met with two
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`prospective investors for an extended meeting, in person, in Lexington, Kentucky.
`During that meeting, Bunevacz represented to the investors that Caesarbrutus had
`over $17 million in revenue from product sales in 2017. At the same meeting, he
`showed the investors what he represented were audited financial statements for
`Caesarbrutus that reflected over $17 million in revenue from product sales. These
`representations – and the purported audited financials – were false and misleading
`because Caesarbrutus did not have any significant revenue or product sales in 2017.
`In the same meeting, Bunevacz represented to the investors that he was a
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`founder of Grenco Science, a vaporizer pen company associated with celebrity rapper
`Snoop Dogg that sells a well-known product called the G Pen. This representation
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`Case 2:22-cv-02284 Document 1 Filed 04/05/22 Page 10 of 22 Page ID #:10
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`was false and misleading because Bunevacz was not a founder of Grenco Science.
`Instead, he controlled an unrelated entity called Grenco Science Inc. that he used to
`misappropriate investor funds. Those investors and a related entity subsequently
`invested over $4 million with CB Holding.
`57. Bunevacz falsely and misleadingly represented to other investors that he
`was a founder of Grenco Science, including an Anaheim, California-based individual
`who invested a total of approximately $2 million with Caesarbrutus in December
`2017 and January 2018 for the purpose of funding vape pen transactions to be
`completed by Bunevacz and Caesarbrutus.
`In approximately August 2019, Bunevacz provided another prospective
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`investor, whom Bunevacz knew from his teenage daughter’s participation in
`equestrian activities, with CB Holding investor materials that described Bunevacz as
`a founder of Grenco Science. Bunevacz provided the materials to the prospective
`investor via email. That investor subsequently invested $10,000 with CB Holding.
`59. Bunevacz also told investors he was a significant investor in a cannabis
`wellness company called Papa & Barkley. This representation was false because
`Bunevacz never invested in Papa & Barkley. In approximately January 2019, for
`instance, Bunevacz gave a prospective investor Papa & Barkley products to aid the
`investor’s ailing father and falsely represented that his business connections in the
`cannabis industry included being a significant shareholder in Papa & Barkley. That
`individual subsequently invested $400,000 with CB Holding, and a friend and
`business associate of that investor, whom Bunevacz also personally solicited,
`invested a total of $1.1 million with CB Holding.
`60. Bunevacz also misled some current and prospective investors by
`providing them with bank statements that appeared to reflect CB Holding’s use of
`investor funds for legitimate business activities, including payments to suppliers and
`from customers.
`In early 2019, for example, Bunevacz provided a prospective investor
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`with bank statements that purported to reflect CB Holding’s use of investor funds for
`payments to suppliers, including a payment to “Blue Ox Industrial” of $820,000 on
`December 20, 2018, and its subsequent receipt of payments from customers.
`Bunevacz represented to the investor that the transactions reflected in the bank
`statements concerned arm’s-length business dealings with third party customers and
`suppliers. The investor had previously recommended a substantial investment by an
`affiliated entity, which the entity made, and subsequently made a substantial personal
`investment with CB Holding, including because of the information contained in the
`bank statements.
`62. The bank statements were false and misleading because they did not
`reflect transactions with third-party suppliers and customers. Instead, they reflected
`transfers of funds to and from accounts controlled by Bunevacz through entities that
`had similar names to those third-party companies, but that were instead used by
`Bunevacz to misappropriate investor funds and create the false appearance of
`legitimate business activity. Payments in the bank statements to “Blue Ox Industrial”
`for example, did not go to the China-based Blue Ox Industrial Co. Ltd. that Bunevacz
`claimed to do business with; they went to an account held by an unrelated Wyoming
`entity named Blue Ox Industrial Inc. that Bunevacz controlled and used to
`misappropriate investor funds.
`63. Bunevacz’s representations and the documents he provided investors
`were important to investors who subsequently purchased the Promissory Notes and
`Stock Certificates, and who entered into the Profit Sharing Agreements. Investors
`believed Bunevacz, Caesarbrutus, and CB Holding had the business connections they
`claimed to have and could complete the promised business transactions with the
`investors’ funds. Bunevacz’s claims to be a founder of Grenco Science and an
`investor in Papa & Barkley, for example, were important to investors because they
`led investors to believe that Bunevacz was a successful and connected business
`person in the cannabis industry.
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`2.
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`Bunevacz’s Misrepresentations and Omissions to Investors
`about the Use of Funds
`64. Bunevacz promised to use investor funds to complete profitable vape
`pen transactions and for other business purposes. For example:
`In November 2017, Bunevacz represented to a group of investors
`(a)
`led by an individual in Florida that he would use their funds to acquire vape pens to
`sell to a retailer called Boston Smoke Shop at a significant profit. He represented that
`Boston Smoke Shop had agreed to purchase millions of dollars in pens from
`Caesarbrutus. The investment group subsequently invested $4 million with
`Caesarbrutus through a Profit Sharing Agreement that entitled them to a portion of
`the profits generated from those sales.
`In late 2017 and early 2018, Bunevacz represented to an
`(b)
`individual investor located in Anaheim, California that he would use the investor’s
`funds to purchase vape pens from China and sell them at a significant profit to a
`retailer in New York. Bunevacz’s representations about his planned use of the
`investor’s fund induced a total of approximately $2 million in investments by the
`individual with Caesarbrutus in late 2017 and early 2018.
`In approximately September and October 2018, Bunevacz told the
`(c)
`representative of a prospective entity investor based in Canada that he would use the
`investor’s funds to acquire supplies needed to complete pre-existing purchase orders
`for vape pens, including an order for 525,000 pens infused with CBD oil. On or
`about November 20, 2018, CB Holding entered into a loan agreement with the same
`prospective investor, which provided that CB Holding would use funds borrowed
`from the investor to process orders for vaporizer pens, including for payments to
`suppliers. The prospective investor subsequently loaned CB Holding at least
`$3 million pursuant to that loan agreement and a promissory note issued by CB
`Holding and Brutus California.
`In approximately June 2019, Bunevacz represented to a
`(d)
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`Case 2:22-cv-02284 Document 1 Filed 04/05/22 Page 13 of 22 Page ID #:13
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`prospective investor that CB Holding needed funds to fulfill an order for 1.2 million
`vape pens that would generate significant profits for CB Holding and the investor.
`He discussed the proposed investment with the prospective investor via telephone.
`The investor and his wife subsequently invested $500,000 with CB Holding.
`65. Bunevacz’s promises to use investor funds for business purposes,
`including to complete vape pen transactions, were important to these and other
`investors.
`66. Bunevacz, Caesarbrutus and CB Holding did not use the funds provided
`by these and other investors as promised, and never intended to use those funds as
`promised. Instead, Bunevacz pooled investor funds and misappropriated the vast
`majority of those funds for personal expenses, including:
`(a) Over $8 million transferred to casinos;
`(b) Over $10 million in credit card expenses;
`(c) Over $300,000 spent on a horse in November 2018;
`(d) Over $200,000 spent on a birthday party with circus-style
`entertainment in June 2019;
`(e) Over $200,000 spent on rent for a five-bedroom mansion in
`Calabasas, California; and
`(f) Hundreds of thousands of dollars spent on jewelry.
`67. Bunevacz also used investor funds to pay criminal restitution that he was
`ordered by a California court to pay in connection with his March 2017 conviction for
`felony securities violations.
`68. Bunevacz also used investor funds to pay purported returns on
`previously issued securities, inducing some investors to purchase additional
`securities.
`Investors would not have provided funds to Caesarbrutus or CB Holding
`69.
`for Bunevacz’s personal use or payments to earlier investors.
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`Case 2:22-cv-02284 Document 1 Filed 04/05/22 Page 14 of 22 Page ID #:14
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`3.
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`Bunevacz’s Misrepresentations and Omissions about His
`Criminal History and Lawsuits Filed Against Him
`70. When soliciting investors for Caesarbrutus and CB Holding, Bunevacz
`consistently held himself out as a successful businessperson and investor, and
`consistently failed to disclose his March 2017 conviction for two felony securities
`violations under California law. When soliciting an Anaheim, California-based
`investor who invested a total of approximately $2 million with Caesarbrutus in late
`2017 and early 2018, for example, Bunevacz held himself out as successful and
`experienced, but did not disclose either his felony securities conviction or the fact that
`California had charged him with felony securities violations.
`In late 2018, a Canada-based investor specifically asked Bunevacz if he
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`had any criminal history, and Bunevacz falsely replied that he did not.
`Investors would not have invested with Caesarbrutus or CB Holding had
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`they known either that California had charged Bunevacz with securities violations or
`that Bunevacz had been convicted of felony securities violations. This includes the
`Canada-based investor and the Anaheim-based investor, each of whom learned about
`Bunevacz’s criminal history only after investing with his companies.
`73. When soliciting investors for Caesarbrutus and CB Holding, and
`describing himself as a successful businesspersons and investor, Bunevacz also failed
`to disclose a number of lawsuits filed against him by past investors and business
`partners alleging that Bunevacz had taken their money and failed to deliver on
`promises made in business deals similar to the transactions he proposed with CB
`Holding and Caesarbrutus. This included a 2010 lawsuit accusing Bunevacz of
`fraudulently promising to provide nearly $3 million in event tickets for the
`Vancouver Olympics; a 2017 lawsuit accusing Bunevacz of failing to repay funds
`owed based on promises to buy vape pens and electronic vaporizers from a
`manufacturer in China; and a December 2018 lawsuit accusing Bunevacz of failing to
`return funds provided for the purchase of vape pens.
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`Case 2:22-cv-02284 Document 1 Filed 04/05/22 Page 15 of 22 Page ID #:15
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`Investors would not have invested with either Caesarbrutus or CB
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`Holding had they known that Bunevacz’s previous investors and business
`counterparts had accused him of taking their money in similar deals.
`In late 2018, a Canada-based investor learned about the lawsuit against
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`Bunevacz concerning the Vancouver Olympics and asked Bunevacz to explain what
`happened. Bunevacz falsely explained to the investor that the lawsuit was resolved in
`his favor and provided the investor with a settlement agreement that purported to
`require Bunevacz’s former counterparty to pay Bunevacz $325,000. In reality, the
`opposite was true – Bunevacz had agreed to pay his former counterparty $325,000 to
`resolve the lawsuit – and the settlement agreement Bunevacz provided to the investor
`was fabricated. Bunevacz’s explanation and the purported settlement agreement
`contributed to the investor’s decision to invest with CB Holding.
`4.
`Ponzi Payments and Lulling Conduct
`76. Bunevacz also used at least some investor funds to pay purported returns
`on previously issued securities. For example, in February 2019, Bunevacz used
`investor funds to make two payments totaling $150,000 to an earlier investor.
`77. When Bunevacz failed to make payments to investors as promised, he
`generally provided excuses such as that the proposed business transaction or
`transactions had been delayed, but would soon be completed.
`In at least one instance, he persuaded an investor to contribute additional
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`funds to complete the alleged business transactions.
`79. Bunevacz repeatedly promised some investors that he would return their
`funds, but never made the payments.
`80. Bunevacz’s lulling statements were false and misleading because
`defendants never had any contractual or other business relationship with the alleged
`third-party business contacts which would have justified repayment of investor funds,
`and because Bunevacz and his companies’ true business activity was
`misappropriating investor funds through false and misleading claims about their
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`Case 2:22-cv-02284 Document 1 Filed 04/05/22 Page 16 of 22 Page ID #:16
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`business activities, connections, experience, and intended use of funds.
`E. Defendants Acted with a High Level of Scienter, or in the
`Alternative, Were Negligent
`81. Bunevacz acted with a high degree of scienter.
`82. As the principal of Caesarbrutus and CB Holding, the person controlling
`their bank accounts, and the person who claimed to have the operative relationships
`in the cannabis industry, Bunevacz knew, or acted recklessly in not knowing that:
`(1) he and his companies did not have the claimed business relationships; (2) the
`vaporizer pen transactions were not real; (3) the invoices and purchase orders were
`fabricated; (4) the bank statements were misleading; (5) he did not have the business
`experience he claimed to have; and (6) he was routinely misappropriating investor
`funds instead of using them to buy and sell vape pens and other cannabis products for
`profit.
`83. Bunevacz also knew about his felony securities convictions and the
`lawsuits against him when he described his purported business experience, and knew
`that his af