Florida cannabis tracking company linked to men in Trump Media insider trading scheme (original) (raw)
Cloned plants at the Trulieve medical marijuana facility in Quincy on Wednesday, Feb. 1, 2017.Joe Rondone/Tallahassee Democrat
A company contracted by Florida and several other states to track the cultivation and sale of legal marijuana has been linked to two men who have been penalized for insider trading, records show.
Michael Shvartsman was sentenced in October to more than two years in prison following his guilty plea to securities fraud. Shvartsman made millions of dollars in “illegal profits” from insider trades in a company that merged with Trump Media & Technology Group Corp.
The other man, Eric Hannelius, agreed to pay a “civil penalty” in September to settle a civil suit, which also accused him of insider trading in relation to the merger with the media company owned by former President Donald Trump.
Shvartsman and Hannelius have been named in numerous corporate records connected to Alleaves, which is the parent company for BioTrack, which holds the contract to track legal cannabis in Florida.
The two men, along with Hannelius’s wife, were listed as beneficial owners of an Alleaves subsidiary that bought BioTrack last year, giving them ultimate control of the subsidiary, according to court records filed this year.
Their connections to BioTrack are being revealed for the first time by the Miami Herald and Organized Crime and Corruption Reporting Project as voters in Florida debate whether to legalize marijuana for recreational use. Florida currently only allows people with certain medical conditions to obtain marijuana.
Alleaves said that neither man currently has a role with the company.
If Shvartsman does, it could potentially pose a problem because the 2022 contract between BioTrack and the state of Florida stipulates that no one convicted of “[f]raudulent practices, false pretenses and frauds,” can work on the project, or have access to data it generates.
That contract pays the company up to $768,000 over five years to provide software that tracks the lifecycle of legally grown cannabis from “seed-to-sale,” to ensure that none of it is diverted for illegal use.
The company said that neither man has any role with Alleaves now and that Shvartsman has no stake in the company. However, Hannelius was listed as one of the Alleavesdirectors on corporate records filed in Delaware and Florida earlier this year and is currently listed as a director of Alleaves in the Florida corporate registry.
Michael Shvartsman, hides from photojournalists using an umbrella after exiting Federal Court, Thursday, July 20, 2023, in New York. (AP Photo/John Minchillo) John Minchillo AP
When asked to explain this discrepancy, company spokesperson Emily Vetter said Hannelius’s inclusion in the public records was a mistake.
“We believe that was an administrative error that needs to be corrected,” she said.
Shvartsman and Hannelius did not respond to multiple requests for comment.
Florida’s Department of Health, which holds the contract, didn’t respond to numerous requests for comment.
In addition to Florida, BioTrack has contracts with Arkansas, Delaware, Hawaii, Illinois, New Mexico, New York and North Dakota to operate traceability systems. The company also signed contracts to run portals for medical cannabis patients in New Hampshire and Virginia.
While states have taken numerous measures to keep criminal elements out of the burgeoning legal marijuana market, BioTrack’s connection to two men penalized for a financial crime suggests there is an uphill challenge for regulators to keep pace with a rapidly evolving industry.
“I can say this with confidence that every state has had to figure out how to create an infrastructure and regulate a federally illegal substance and with few resources, this has never been done before,” said David Vaillencourt, whose Colorado-based consultancy GMP Collective helps companies enter the complex cannabis market.
Payment Problems
Cannabis is big business in the U.S. Sales revenue is expected to reach nearly $43 billion this year, according to Statista Market Insights, and it is legal for recreational use in nearly half the states in the country.
But there’s a problem: While some states have legalized marijuana, it is still illegal under federal law, which has made most banks reluctant to work with cannabis companies.
That’s where BioTrack’s parent company, Alleaves Inc, comes in.
Alleaves acts as an intermediary in a system that allows the purchaser to pay a marijuana dispensary using their debit card. To the bank, the payment looks like a cash withdrawal, but it’s actually a cashless debit payment to the dispensary.
The money still has to go somewhere, though.
Shvartsman and Hannelius were sued earlier this year for fraud and breach of contract by a bank in Oklahoma, which alleged that they lied about whether their businesses were connected to the cannabis industry.
Alleaves wasn’t named in the lawsuit, but BT Assets Group, which the company used to acquire BioTrack, was a party to the suit. Shvartsman, along with Hannelius and his wife, are the beneficial owners of BT Assets Group — meaning they have ultimate control over the company — according to court files. The suit is still pending.
Along with their ownership of BT Assets Group, corporate registry documents reveal the role of Shvartsman and Hannelius in Alleaves. Shvartsman and Hannelius have each been listed as CEO of the company in state corporate filings in recent years and Hannelius is listed as a director on the company’s most recent filings in Florida and Delaware.
The purchase of BioTrack for $30 million in February 2023, by BT Assets Group, then controlled by Shvartsman and Hannelius, came the year after the firm signed its contract with Florida to monitor the flow of legal marijuana.
Vetter, the spokesperson for Alleaves, said that Alleaves divested BT Assets Group in December 2023, 10 months after SEC filings show that the sale was completed. And she said that despite corporate records showing both Shvartsman and Hannelius as officers of the company in the past, to “our knowledge” neither man has a role at the company. She didn’t say when their relationship with the company ended.
The company’s current listed CEO, Michael Beedles, did not respond to multiple phone calls and emails seeking clarification on the relationship.
Alleaves touts the integration of BioTrack into its payment systems as a selling point for cannabis companies that already use the firm to keep tabs on the marijuana they produce or sell.
Alleaves’ acquisition of BioTrack came four months before the U.S. Attorney for the Southern District of New York unveiled charges against Shvartsman. Ahead of Shvartsman’s sentencing, prosecutors accused him and his circle of investors of “netting nearly $40 million in illegal profits” from well-timed investments in the company that merged with Trump Media.
“The defendant’s criminal conduct was flagrant, manipulative and motivated by sheer greed,” prosecutors wrote.
Shvartsman, who owns a 4,000 square-foot condo in the Porsche Design Tower on posh Sunny Isles Beach, pleaded guilty earlier this year and agreed to forfeit the 18.2millioninprofitshemadeaspartofhispleadeal.Athissentencinghewasalsofinedanadditional18.2 million in profits he made as part of his plea deal. At his sentencing he was also fined an additional 18.2millioninprofitshemadeaspartofhispleadeal.Athissentencinghewasalsofinedanadditional1 million.
Porsche Design Tower Miami. Porsche Design Tower Miami.
Shvartsman could be deported after serving his prison sentence because he is not American. Born in Ukraine when it was part of the Soviet Union, Shvartsman immigrated to Canada as a child and later became a citizen.
Hannelius settled a civil suit brought by the U.S. Securities Exchange Commission by agreeing to give up his proceeds from the trades, which totaled $168,000, plus interest. He also agreed to pay a penalty of the same amount. The agreement allowed Hannelius to end the case without admitting or denying the charges.
The Herald previously reported on another member of the insider trading circle, a Russian American businessman named Anton Postolnikov.
He hasn’t been charged, but federal prosecutors allege that he made $14.5 million off of illegal insider trades in the company that merged with Trump Media.
A company controlled by Postolnikov later loaned millions of dollars to Trump Media.
This story was produced in coordination with Organized Crime and Corruption Reporting Project, OCCRP, an investigative nonprofit newsroom with staff on six continents.
Jay Weaver writes about federal crime at the crossroads of South Florida and Latin America. Since joining the Miami Herald in 1999, he’s covered the federal courts nonstop, from Elian Gonzalez’s custody battle to Alex Rodriguez’s steroid abuse. He was part of the Herald teams that won the 2001 and 2022 Pulitzer Prizes for breaking news on Elian’s seizure by federal agents and the collapse of a Surfside condo building killing 98 people. He and three Herald colleagues were 2019 Pulitzer Prize finalists for explanatory reporting on gold smuggling between South America and Miami.
Ben Wieder is an investigative reporter in McClatchy’s Washington bureau and for the Miami Herald. He worked previously at the Center for Public Integrity and Stateline. His work has been honored by the Society of American Business Editors and Writers, National Press Foundation, Online News Association and Association of Health Care Journalists.