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Cannabis Con Artists Fined $25 Million For Offering Fraud

On July 29, 2020, the Securities and Exchange Commission (SEC), charged six individuals and their companies for their roles in a $25 million cannabis investment fraud. The SEC filed its federal Complaint in the Central District of California, charging these defendants with violations of the antifraud provisions of Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, violations the registration provisions of Section 5 of the Securities Act, and violations of the broker-dealer registration requirements of Section 15(a) of the Exchange Act.  According to the SEC, Arizona residents Charles Lloyd, Mark W. Heckele together with California residents Anthony Todd Johnson (a/k/a Todd Johnson), Jeremy T. Johnson, Richard A. Portillo, and Michael R. Gregory defrauded over 400 investors in a scheme involving  investments in a cannabidiol (CBD) extraction company and a marijuana farm.On July 29, 2020, the Securities and Exchange Commission (SEC), charged six individuals and their companies for their roles in a $25 million cannabis investment fraud. The SEC filed its federal Complaint in the Central District of California, charging these defendants with violations of the antifraud provisions of Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, violations the registration provisions of Section 5 of the Securities Act, and violations of the broker-dealer registration requirements of Section 15(a) of the Exchange Act.

According to the SEC, Arizona residents Charles Lloyd, Mark W. Heckele together with California residents Anthony Todd Johnson (a/k/a Todd Johnson), Jeremy T. Johnson, Richard A. Portillo, and Michael R. Gregory defrauded over 400 investors in a scheme involving  investments in a cannabidiol (CBD) extraction company and a marijuana farm.

As alleged in the complaint, the six individual defendants allegedly conducted the scheme through nine issuers and three marketing companies, Smart Initiatives, LLC, Valley View Enterprises LLC, Target Equity LLC, Zabala Farms Group, LLC, GPA Enterprises LLC, C-Quadrant LLC, Green Bud Initiatives LLC, RJ Holdings Group, LLC, CIS Marketing, LLC, Green Growth Ventures, LLC, Extraction Capital Tier 1, LLC, and Lloyd Marketing, LLC.

The Johnsons brothers, Portillo, Lloyd, Heckele, and the defendant marketing entities – Green Bud Initiatives LLC, CIS Marketing, LLC, and Lloyd Marketing, LLC – operated as unregistered broker-dealers in connection with these investments, none of which were registered with the Commission.

Moreover, in furtherance of their fraudulent scheme, the defendants “. . . used general solicitation to attract prospective investors, including via cold calls, Craigslist, Facebook, and other websites and social media.”

The Johnson brothers, Portillo, Heckele and Lloyd are accused of misleading investors with a guaranteed 100+% annual return on their investments. The Johnson brothers also were charged with misappropriating over $2.7 million and, with the help of Gregory, deceiving investors about a suspect “business loan.” This purported loan was secured by the property where the CBD extraction company was to be built. Instead, this “business loan” was in fact used to pay off other investors involved with an unrelated entity.

Making matters worse, these defendants misrepresented the principals’ capital contributions to the investments – claiming that they had made large contributions when in fact they had not. The defendants misrepresented their backgrounds to investors and even their relationships with their community – the defendants made false claims to investors, stating that their company had a research/business relationship with a renowned California university.

To stop this fraudulent scheme, the SEC is seeking disgorgement of all ill-gotten gains, prejudgment interest, civil penalties, and permanent injunctions against these defendants.

Did You Lose Money Investing In Private Cannabis Securities Offerings?

The SEC has reported  a rise in the number of investor complaints regarding cannabis and marijuana-related investments. The SEC recently issued temporary trading suspensions for the common stock of five different companies that claim their operations relate to the marijuana industry.

These companies stock trading was suspended because of unreliable information regarding the accuracy of publicly-available information about these marijuana companies or based on potential illegal activity (unlawful sales of securities and market manipulation).

Fraudsters often take advantage of popular trends or products in a growth industry. Currently, cannabis companies attract investors with the promise of high returns. Also, for marijuana-related companies that are not required to report with the SEC, investors may have limited information about the company’s management, products, services, and finances. When publicly-available information is scarce, fraudsters can more easily spread false information about a company, making profits for themselves while creating losses for unsuspecting investors.

If you or someone you know invested money in connection with private securities offerings through any of these individuals or entities, there may be recovery available. At Silver Law Group, our nationally-recognized securities and investment fraud attorneys assist investors throughout the U.S. We are ready to help you investigate the details of your situation and determine a course of action that is tailored to your needs and goals. If you or someone you know invested any of these individuals or entities, please contact the Silver Law Group toll free at (800)-975-4799 or e-mail ssilver@silverlaw.com for a confidential consultation.

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