Forget about the DEA or the ATF or the FDA cracking down on the cannabis industry. It’s the SEC that is doing the investigating — and it has found one marijuana vending machine company engaging in stock shenanigans.
Last week the U.S. Securities and Exchange Commission filed a 55-page complaint charging cannabis vending machine company Medbox and its founder with deceiving investors by forming a secret shell company to create “bogus” sales.
“As alleged in our complaint, investors were misled into believing that Medbox was a leader in the burgeoning marijuana industry when the company was just round-tripping money from illegal stock sales to boost revenue,” according to Michele Wein Layne, director of the SEC’s Los Angeles Regional Office.
Medbox touted record profits and its position as a leader in the marijuana industry. But the SEC found that these claims and other statements made by the company and its founder Vincent Mehdizadeh to be fraudulent.
According to the SEC, Mehdizadeh created a shell company called New-Age Investment Consulting to carry out illegal stock sales and used the proceeds from those sales to boost the firm’s revenue. According to the SEC, Mehdizadeh’s fiancée, Yocelin Legaspi, was allegedly the CEO of the shell company.
Medbox allegedly issued press releases headlining the phony revenues as record earnings to legitimize itself as a viable commercial operation when in fact nearly 90 percent of the company’s revenue in the first quarter of 2014 stemmed from sham transactions with New-Age.
The SEC complaint alleges that Mehdizadeh used $640,000 of the stock revenue to buy a luxury home in the Pacific Palisades.
According to the filing, Mehdizadeh allegedly acknowledged in a text message that “the only thing we are really good at is public company publicity and stock awareness. We get an A+ for creating revenue off sheer will but that won’t continue.”
Mehdizadeh and Medbox, which has since changed its name to Notis Global, have agreed to settle with the government. Mehdizadeh agreed to pay more than $12 million and agreed to be barred from serving as an officer or director of a public company or participating in any penny stock offerings. The settlements are subject to court approval.
[gravityform id=”13″ title=”false” description=”true”]
