14 March 2016
Above the Law write..
The nascent legalized marijuana industry has never been easy for regulators, forcing difficult decisions over how to enforce federal laws in states that have cleared cannabis for medical and—in some cases—recreational use.
But the U.S. Securities and Exchange Commission has a decidedly simpler calculation: If a marijuana company misleads investors, it’s as ripe an enforcement target as another firm.
Nearly three years after issuing a warning about weed-related investments, the SEC recently went after Medbox, a California-based marijuana vending machine startup, over accusations it falsely touted “record” revenue based on illegal stock sales
The company’s founder, Vincent Mehdizadeh, agreed to pay $12 million in disgorgement and penalties under the settlement, which is subject to court approval. He also agreed to be barred from serving as an officer or director of a public company.
In a prepared statement, Michele Wein Layne, director of the SEC’s Los Angeles office, said investors “were misled into believing that Medbox was a leader in the burgeoning marijuana industry when the company was just round-tripping money from illegal stock sales to boost revenue.”
According to the SEC, Mehdizadeh created a shell company named New-Age Investment Consulting to make illegal stock sales, the proceeds of which he used to increase Medbox’s revenue. In press releases, the company advertised “record” revenues when, in fact, much of that money came from the stock sales, regulators alleged.