Tennessee resident Darren Singleton is interested in investing in startups and saw an opportunity in Massachusetts’ nascent legal marijuana industry.
He got an email alert about a Holyoke company that had a property lease in a city that was friendly to marijuana businesses. He and his wife flew to Massachusetts, met Positronic Farms founder David Caputo and toured the space in a former paper mill.
“It looked like it was going to be a solid play,” Singleton said.
Singleton withdrew money from his 401(k) and sent Caputo a cashier’s check for $25,000. He convinced two friends in Tennessee to invest $25,000 each.
Last week, the “solid” deal imploded when Secretary of the Commonwealth William Galvin charged Caputo and Positronic Farms with violating state securities laws.
According to Galvin’s Securities Division, Caputo sold $1.3 million in securities that were not registered with the Secretary of State, without verifying that the investors were accredited. Caputo solicited investors through newspaper ads, press releases, online videos and email messages. He failed to keep money in escrow, did not tell investors their money would be transferred to another business and spent money before raising a required minimum amount, according to the complaint.
“I felt like he just defrauded all of us, and he didn’t do his due diligence and didn’t take due care of our money,” Singleton said.
Caputo denies any wrongdoing.
Reached by phone this week, Caputo said he thinks investors will still see a payoff. He believes every shareholder will get between $5,000 and $7,000 annually if Holyoke Gardens is able to continue to pursue its license and grow marijuana. “I don’t know why they’d be upset, they should be getting a reward from that” investment, Caputo said.
Caputo, Positronic Farms attorney David Noonan, and Positronic Farms President Morriss Partee all said Holyoke Gardens has been talking to another cannabis company about a potential relationship. Officials from Holyoke Gardens and the other company declined to comment.
According to the Securities Division, about 40 investors from nine states put $1.3 million into the project. Several who spoke to The Republican / MassLive said they were not surprised to hear of the charge — and said they were unhappy.
“I regret making the investment because that $10,000 is lost,” said Alex Teitsch of Easthampton.
Teitsch, a retired investor and graphic artist, invested in Positronic Farms because he had previously worked as a contractor for Caputo’s web design company. “It sounded good at the time,” Teitsch said.
Teitsch said he does not know the full circumstances around the charge, but he does not judge Caputo harshly. He knows many start-ups fail. “It was a gamble,” he said.
Others feel less charitable toward Caputo. Bryan Schira, who lives in Illinois, heard about the company through his brother-in-law, Caputo’s former college roommate. Schira said he felt good when Caputo was charged because he thinks the investors were “screwed and burned” by Caputo.
“I blindly put my faith and trust in him based on his relationship with my brother-in-law,” Schira said, adding that his brother-in-law “feels terrible about this situation.”
Schira said it was clear to him from early investor calls that “things were off to a rocky start,” and he was worried about mismanagement. He said shareholders would ask Caputo if the company obtained multiple quotes for a job; Caputo questioned why that was needed once he found someone to do the work.
“There was just not a lot of transparency, not a lot of forthcoming information about what was going on, it didn’t seem very collaborative,” Schira said. “In retrospect, it all makes a lot of sense when I learned what was actually happening a time zone away.”
State marijuana regulators investigating Holyoke marijuana companies Holyoke Gardens and Positronic Farms
Positronic Farms, which was charged with violating state securities law, has a close relationship with marijuana cultivator Holyoke Gardens.
After Caputo resigned from Positronic Farms in September 2018, Morriss Partee became president. Partee said he soon learned that fundraising had not been performed in accordance with state regulations. David Noonan, an attorney for Positronic Farms, said he advised the board that the security sales could be voided by the secretary of state’s office.
In a letter to shareholders dated Oct. 11, 2018, Partee told the investors that the company was facing a potential fine from Galvin’s office due to violations of state laws related to Caputo’s fundraising. In another letter to shareholders, dated March 13, 2019, Partee provided more in-depth information about the apparent violations, including Caputo allegedly ignoring state laws requiring that investors be accredited.
One Massachusetts investor, who asked that his name not be used, put his inheritance into the company and hoped to get a return on his investment to boost his retirement savings. He described Caputo as a friend of a friend.
The investor said he has been anxious and sleepless for months knowing about the problems, and waiting for the other shoe to drop. “It’s eased up now because the other shoe did drop,” the investor said. “It sucks what these people did.”
Recent Comments