SEC Charges Founder of Medical Marijuana Company in Sale of Unregistered Securities
Litigation Release No. 24246 / August 28, 2018
Securities and Exchange Commission v. Richard J. Greenlaw et al., No. 2:18-cv-00321 (D. Maine filed August 17, 2018)
The Securities and Exchange Commission today announced settled charges against the founder of a Maine-based medical marijuana company that solicited investors on Craigslist.
The SEC's complaint alleges that, beginning in 2014, Richard J. Greenlaw, of Kittery, Maine, raised approximately $500,000 from at least 59 investors by offering securities in 20 cannabis-related entities that he formed, which purportedly sold medical marijuana products that did not contain THC, the chemical compound responsible for most of marijuana's psychological effects. According to the complaint, Greenlaw sold ownership interests in the companies by posting advertisements on Craigslist. When prospective investors responded to his online ads, Greenlaw followed up with securities offering documents and sales materials describing the purported marijuana products. No registration statement was on file or in effect with the SEC with respect to this offering of securities.
The SEC's complaint charges Greenlaw and the 20 cannabis-related entities, including: NECS LLC, MaineCS LLC, VTCS LLC, MassCS LLC, NHCS LLC, RICS LLC, CTCS LLC, FLCS LLC, ILCS LLC, IACS LLC, LOUCS LLC, MICS LLC, MNCS LLC, NDCS LLC, NJCS LLC, NYCS LLC, OHCS LLC, PennCS LLC, UPCS LLC, and WICS LLC, with violating the registration provisions of Sections 5(a) and 5(c) of the Securities Act of 1933. Greenlaw and the cannabis-related entities consented to the entry of a final judgment imposing permanent injunctions from further violations of Sections 5(a) and 5(c) of the Securities Act. In addition, Greenlaw consented to a conduct-based injunction. The settlement also requires Greenlaw to pay disgorgement and prejudgment interest of $340,142 and a civil penalty of $50,000. The settlement is subject to approval of the court.