As of Wednesday, July 9, 2014
A key backer of James Martin’s Copa di Vino enterprise and Sunshine Mountain Vineyard has settled a federal lawsuit that accused the investor of securities fraud.
Canadian investor John Babikian has agreed to pay $3.73 million to the Securities and Exchange Commission, without admitting or denying the allegations in the federal complaint.
As part of the lawsuit, filed in March 2014, a federal judge put an asset freeze on the vineyard property east of The Dalles, which was purchased for $2 million in 2012 by a company owned by Babikian.
With the settlement, the asset freeze is lifted, according to federal documents.
Martin, who could not be reached for comment for this story, told The Chronicle earlier that Babikian bought the vineyard land and then pumped another $5 million into the property, which now has 110 acres planted in the vineyard.
Babikian’s company sold the vineyard in January 2014 to a Hong Kong company, which was itself created in December 2013.
Babikian was a wine aficionado — with a $1 million wine collection, one Canadian report stated — who quickly contacted Martin after Martin appeared in 2011 on the TV reality show “Shark Tank,” seeking investors in his Copa di Vino, or wine in a glass, enterprise.
Babikian backed Copa and also financed the vineyard. But last fall, Martin said earlier, the money stopped coming in and Babikian stopped returning phone calls.
Martin earlier said he’d carefully vetted Babikian, checking on his investments in 12 other US companies, before accepting him as an investor.
He was unaware of Babikian’s fraudulent activities, which began unraveling last fall. Canadian authorities were pursuing him for $4.2 million in back taxes, his now ex-wife filed for divorce, and federal securities officials were preparing a lawsuit against him.
The suit accused Babikian of a “pump and dump” scheme in which he widely promoted a penny stock via two websites to 700,000 email subscribers, without disclosing his own significant ownership of the stock. In 90 minutes after the emails went out, the stock price rose sharply, and Babikian sold his entire holdings, making more than $1.9 million in ill-gotten gains.
Babikian paid $1.9 million for the ill-gotten gains, interest of $128,073, and a civil penalty of $1.7 million.
He is also barred from recommending the purchase of any stock without simultaneously disclosing any plans or intentions to sell such stocks within 14 days of the recommendation.
The Dalles City Attorney Gene Parker released a statement on the SEC settlement distinguishing the vineyard property from the Sunshine Mill property, which the city has helped finance with revenues from the Columbia Gateway Urban Renewal Agency.
“The complaint filed by the SEC did not include any provision seeking to seize any interest in the Sunshine Mill property,” Parker wrote, adding that the resolution of the SEC proceed confirmed the mill was not involved in any of the securities violations that were part of the SEC proceeding.