The directors of three companies have been charged by the Securities and Exchange Commission (SEC) for fraudulently selling fake interests in a cannabis company.
Guy Griffithe and Robert Russell misled investors into thinking they were buying interests in a recreational cannabis company, called SMRB, which was supposedly licensed in Washington state.
The sales happened through two firms controlled by Griffithe, Renewable Technologies Solution and Green Acres Pharms, between August 2015 and December 2017.
The duo managed to defraud $4.85m (£3.72m, €4.37m) from at least 25 investors, the SEC said.
The regulator said the pair led clients to believe the money that went to Renewable would be used to operate SMRB.
But the complaint alleges that $1.8m was spent by Griffith for personal expenses, including several luxury cars and a yacht for Russell.
He is also accused of transferring $1.7m into Russell’s personal accounts.
Ponzi fashion
In order to make people believe this was a proper investment, however, the two directors took a Ponzi approach and started paying out “profits” to some clients, using other investors’ funds, the SEC said.
“As alleged in our complaint, Griffithe and Russell exploited popular interest in the cannabis industry to obtain millions of dollars from investors who thought they were buying into a profitable business,” said SEC associate director Melissa Hodgman.
“Instead, Griffithe and Russell deceived investors and used the money to enrich themselves.”
The US watchdog is now seeking permanent injunctions, as well as trying to recover investors’ money and bringing forward civil penalties against the two fraudsters.
