Cannabis Investment Fund and Founder Charged by SEC

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Marijuana-Related Investment Fund

A Texas-based investment fund and its founder were charged by the Securities and Exchange Commission for defrauding investors. The alleged fraud scheme involved empty promises of enormous returns in the cannabis business.

The SEC recently issued an alert to caution retail investors regarding marijuana-related securities offerings.

The SEC complaint alleges Greenview Investment Partners L.P. and its founder Michael Cone utilized misleading marketing materials to raise more than $3.3 million from investors. Allegedly, Cone hired a “boiler room” sales staff to make cold calls to investors, promising up to 24 percent annual returns from investments in Greenview.

Additionally, the SEC says Cone used an alias to conceal his prior criminal convictions. Not only that, he falsely told investors that he had a former agent from the U.S. Drug Enforcement Administration on staff.

Moreover, he claimed to have a long record of profitably investing millions of dollars in cannabis-related startups. However, the SEC alleges Greenview had virtually no track record at all. In fact, Greenview Investment Partners’ sole investment of $400,000 was in a cannabis company that had not yet harvested a crop.

The SEC complaint states that Cone spent investors’ money on designer clothes and luxury cars. Not only that, Cone used investor funds to make payments to earlier investors in order 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 complaint filed in the U.S. District Court for the Northern District of Texas, charged 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.