U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 23835 / May 18, 2017
U. S. Securities and Exchange Commission v. Hadsell Chemical Processing, LLC and Robert Walton, Jr., No. 2:17-cv-432 (S.D. Ohio filed May 17, 2017)
SEC Charges Former President and Chemical Processing Company with Defrauding Investors and Failing to Register a $12 Million Promissory Note Offering
The Securities and Exchange Commission today announced charges against Hadsell Chemical Processing, LLC and its former president for conducting an unregistered promissory note offering fraud.
The SEC's complaint, filed in federal court in southern Ohio, alleges that Robert Walton, Jr. of Loveland, Ohio, and Hadsell Chemical Processing, LLC, a chemical processing company located in Waverly, Ohio, made material misrepresentations to 65 investors in connection with the offer and sale of approximately $12 million of promissory notes and also failed to register the notes with the SEC. According to the complaint, from approximately April 2012 through October 2015, Hadsell Chemical and Walton told investors that their investments were guaranteed, that Hadsell Chemical had received multi-million dollar contracts from customers, and that Hadsell Chemical was profitable. The complaint alleges that none of these statements were true. The SEC also alleges that Walton created fake purchase orders and falsified financial statements from Hadsell Chemical, which he gave to investors. And, the SEC alleges that, from January through at least August 2015, Walton told investors that $1.2 million of their money would be used to buy part of a business selling topical ointments containing cannabis. Walton allegedly provided only approximately $300,000 to that business and did not receive any ownership of the business. He allegedly used the rest of the money - $900,000 - for other business expenses.
According to the complaint, Hadsell Chemical still owes approximately $8.1 million in principal to investors under the promissory notes.
The SEC's complaint charges Hadsell Chemical and Walton with violating Sections 5(a), 5(c), and 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The SEC seeks injunctions against future violations and disgorgement of ill-gotten gains from both, and a civil money penalty against Walton.
Without admitting or denying the SEC's allegations, Walton has consented to the entry of a permanent injunction. Walton also agreed that the amounts of his disgorgement, prejudgment interest and civil penalties will be determined by the court at a later date.
The SEC's investigation was conducted by Jamie Davidson and was supervised by Anne C. McKinley in the Chicago Regional Office. The litigation will be led by Jamie Davidson, Anne C. McKinley, and John Birkenheier.