Cannabis Investment Fund and Founder Charged in Fraudulent Scheme
On September 5, 2018, the Securities and Exchange Commission announced that it charged a Texas-based investment fund and its founder with defrauding investors with false promises of massive returns in cannabis-related businesses. The SEC also issued an alert to warn retail investors about marijuana-related securities offerings.
The SEC’s complaint alleged that Greenview Investment Partners L.P. and its founder Michael E. Cone (“Cone”) used misleading marketing materials in raising more than $3.3 million from investors. Allegedly, Cone employed boiler room sales staff who made cold calls to investors and promised them up to 24 percent annual returns from investments in Greenview. According to the SEC’s complaint, Cone used an alias to conceal his prior criminal convictions, lied about having a former agent from the U.S. Drug Enforcement Administration on staff, as well as falsely claimed to have a long record of profitably investing millions in cannabis-related businesses.
The SEC’s complaint alleged that, in reality, Greenview had no track record and its sole investment of $400,000 was in a cannabis company that had yet to harvest a crop. According to the SEC’s complaint, Cone spent investors’ money on designer clothes and luxury cars, and on payments to earlier investors to prolong the alleged scheme. In a parallel criminal proceeding, the U.S. Attorney’s Office for the Central District of California charged Cone and seized approximately $1.4 million in cash and assets.
The SEC’s complaint, filed in United States District Court for the Northern District of Texas, charged Greenview and Cone with securities fraud and violations of the registration provisions of the federal securities laws. Cone agreed to an officer-and-director bar and a permanent injunction. The court will eventually determine disgorgement and prejudgment interest.
As part of their ongoing collaboration to protect retail investors, the SEC’s Office of Investor Education and Advocacy and Retail Strategy Task Force issued the aforementioned Investor Alert about marijuana-related investments, urging investors to consider the risks of investment fraud and market manipulation before investing in a marijuana-related company.
Source: SEC.gov
Kehoe Law Firm, P.C.
