The U.S. Securities and Exchange Commission charged a marijuana-focused investment fund with bilking investors out of more than $3 million and simultaneously warned the public about “scam artists” exploiting “hot” industries such as cannabis.
In a lawsuit, the SEC accuses Texas-based Greenview Investment Partners and its founder, Michael Cone, of using misleading marketing materials and bogus promises of high returns to defraud investors out of $3.3 million.
According to an SEC news release, Cone allegedly:
- Employed a “boiler room sales staff” that made cold calls to investors and promised them up to 24% annual returns from investments in Greenview.
- Used an alias to hide prior criminal convictions.
- Lied about having a former agent from the U.S. Drug Enforcement Administration on staff.
- Falsely claimed to have a long record of profitably investing millions in cannabis-related businesses.
In reality, the SEC said, Greenview had no track record and its sole investment of $400,000 was in a cannabis company that had yet to harvest a crop.
The SEC complaint also alleges that Cone spent investors’ money on designer clothes and luxury cars as well as on payments to earlier investors to prolong the alleged scheme.
A Greenview spokesperson could not be immediately reached for comment.
In its warning, the SEC urged marijuana investors to be on the lookout for signs of fraud and market manipulation.
Signs of fraud, the SEC said, include:
- Unlicensed, unregistered sellers.
- Guaranteed returns.
- Unsolicited offers.
Signs of market manipulation, the agency noted, include:
- The SEC having suspended a company’s stock.
- Abrupt or multiple changes to company name or type of business.
- News releases that seem implausible, suggesting the company’s stock is being hyped solely to drive up its stock price.