By Dean Seal


The U.S. Securities and Exchange Commission has filed a civil enforcement action against Martin A. Sumichrast, the chief executive of cbdMD Inc., over an alleged fraud at a private fund that he managed.

The SEC claims Mr. Sumichrast impermissibly doubled his own salary at Stone Street Partners LLC after the fund's co-manager died and engaged in self-dealing transactions with entities in which he had a personal interest, including cbdMD.

In a statement posted on Twitter, Mr. Sumichrast said he would "vigorously defend these allegations and is confident that he will prevail." He claims Stone Street was ravaged by a $60 million Ponzi scheme enacted by his former partner that he did not take part in, and that after his partner's death by suicide, he remained at Stone Street and worked to make the fund's investors whole.

Sumichrast said the SEC is now seeking to make him a scapegoat with its enforcement action, "perhaps to deflect from its own inaction on the Ponzi scheme."

CbdMD said in a statement that the civil suit does not allege any wrongdoing against the company, and that a special committee of independent directors is reviewing the case. Mr. Sumichrast is fully cooperating with the committee, cbdMD said.

Amid two trading halts, CbdMD shares fell 7.2% to 64 cents by midday Wednesday.


Write to Dean Seal at dean.seal@wsj.com


(END) Dow Jones Newswires

06-01-22 1238ET