SEC Obtains Final Judgment Against Founder of Medical Marijuana Company
Litigation Release No. 24318 / October 18, 2018
Securities and Exchange Commission v. Richard J. Greenlaw et al., No. 2:18-cv-00321 (D. Maine)
On October 12, 2018, a federal district court in Maine entered a final judgment against the founder of a Maine-based medical marijuana company and twenty affiliated entities related to his solicitation of investors on Craigslist.
On August 17, 2018, the SEC filed a complaint in the U.S. District Court for the District of Maine, alleging that, beginning in 2014, Richard J. Greenlaw, of Kittery, Maine, raised approximately $500,000 from at least 59 investors by offering securities in twenty 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. The complaint alleged that 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.
On October 12, 2018, the Honorable Nancy Torresen granted the SEC's motion for final judgment as to all defendants, including Greenlaw and the twenty cannabis-related entities, 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, and entered a final judgment finding defendants violated the registration provisions of Sections 5(a) and 5(c) of the Securities Act of 1933. The final judgment also ordered permanent injunctions against Greenlaw and the cannabis-related entities from further violations of Sections 5(a) and 5(c) of the Securities Act, as well as ordering an additional conduct based injunction against Greenlaw. It also ordered Greenlaw to pay disgorgement and prejudgment interest of $340,142 and a civil penalty of $50,000.
The SEC's litigation was led by Senior Counsel William J. Donahue, Assistant Director Robert B. Baker, and Supervisory Trial Counsel Martin F. Healey.