Warning from SEC: Beware of Increase in Fraud in Cannabis Industry

Startups in the cannabis industry are not unlike those in other industries. Most of them need cash to get going. But, as reported by the National Law Review, the SEC has issued a warning that they have seen an uptick in fraud among cannabis industry investment opportunities. The levels of abuse among cannabis companies raising funds range from lack of required disclosures to outright fraud and theft.

The article highlights one cannabis startup that raised $5.5 million, through a promoter. The perpetrator told investors the money they were putting in would be used to acquire a marijuana dispensary. Instead, the SEC’s investigation found that he used the money for himself, to purchase luxury cars and other expenses not related to the business. The SEC has brought charges against that individual and is warning of other investment scams in the industry. They remind investors to perform serious due diligence before putting up any money for investment.