Drake’s Organic Spirits Sued by US Government, Which Alleges the Company Faked $2.6M in Sales
(Photo: Drake’s Organic Spirits/Instagram)
The U.S. Securities and Exchange Commission announced this week that it has filed fraud charges against Mark D. Anderson, the founder and CEO of Drake’s Organic Spirits, alleging he orchestrated sham transactions to inflate revenue and mislead investors.
In a complaint filed Tuesday, the SEC alleges Anderson directed employees to record about $2.6 million in fake sales during the final weeks of 2021. According to the filing, the transactions were carried out through entities he controlled, including BBFY USA and Captain Drake.
The agency claims Anderson used a series of “round-trip” transactions, moving funds into Drake’s Organic Spirits and then transferring roughly the same amount out, creating the appearance of legitimate revenue.
The complaint further alleges that the inflated financials were used to raise capital. Between February and December 2022, the company and Anderson allegedly raised about $1.5 million through a convertible debt offering that included the misstated 2021 sales.
Regulators say the pattern continued into the following year. In 2022, Anderson allegedly directed staff to record an additional $391,000 in sham sales. Those figures were then included in offering materials used to raise more than $900,000 from investors in early 2023 through a preferred stock rights offering.
The SEC has charged Anderson with violating antifraud provisions under both the Securities Act of 1933 and the Securities Exchange Act of 1934, including Rule 10b-5. The two affiliated entities were also charged with antifraud violations tied to their role in the alleged scheme.
The agency is seeking permanent injunctions, civil penalties and a conduct-based ban that would prohibit Anderson from participating in future securities offerings, outside of his personal investment accounts.
The investigation was conducted by staff in the SEC’s Denver Regional Office. The case will proceed in federal court.
Anderson co-founded Drake’s Organic Spirits in 2017. The company sells vodka, rum and ready-to-drink products.
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