SEC Charges Cannabis Investment Fund and Founder in Fraudulent Scheme

The Securities and Exchange Commission today charged a Texas-based investment fund and its founder with defrauding investors with false promises of massive returns in cannabis-related businesses.  The SEC also issued an alert to warn retail investors about marijuana-related securities offerings.

The SEC’s complaint alleges that Greenview Investment Partners L.P. and its founder Michael E. Cone used misleading marketing materials in raising more than $3.3 million from investors.   Cone allegedly employed boiler room sales staff who made cold calls to investors and promised them up to 24 percent annual returns from investments in Greenview.  According to the complaint, Cone used an alias to conceal his prior criminal convictions, lied about having a former agent from the U.S. Drug Enforcement Administration on staff, and falsely claimed to have a long record of profitably investing millions in cannabis-related businesses.  The complaint alleges that, in reality, Greenview had no track record and its sole investment of $400,000 was in a cannabis company that had yet to harvest a crop.  According to the complaint, Cone spent investors’ money on designer clothes and luxury cars, and on payments to earlier investors to prolong the alleged scheme.  In a parallel criminal proceeding, the U.S. Attorney’s Office for the Central District of California charged Cone and seized approximately $1.4 million in cash and assets.

“Greenview allegedly exploited investor interest in the marijuana industry and lied about high returns and the backgrounds of its key executives,” said Shamoil T. Shipchandler, Director of the SEC’s Fort Worth Regional Office. “Investors must remain vigilant and not let the fear of missing out dupe them into making bad investment decisions.”

The SEC’s complaint filed in U.S. District Court for the Northern District of Texas, charges Greenview and Cone with securities fraud and violations of the registration provisions of the federal securities laws. Cone agreed to an officer-and-director bar and a permanent injunction. The court will determine disgorgement and prejudgment interest at a later time.

As part of their ongoing collaboration to protect retail investors, the SEC’s Office of Investor Education and Advocacy (OIEA) and Retail Strategy Task Force (RSTF) issued the Investor Alert about marijuana-related investments.  In the alert, OIEA and RSTF urge investors to consider the risks of investment fraud and market manipulation before investing in a marijuana-related company.  The alert points out that a guaranteed high rate of return on your investment is a red flag of fraud.

The SEC’s investigation was conducted by Robert Hannan and Jody Z. Moore and supervised by Scott F. Mascianica and Eric Werner. The SEC’s litigation will be led by Janie Frank.