The Securities and Exchange Commission is investigating complaints that a group of individuals raised $25 million from 400 investors under the promise of a cannabis farm and extraction facility.
Between September 2017 and February 2019, six individuals raised money across the country for their next big project. However, now they stand accused in a complaint filed in California federal court of raising that money under false pretenses.
All six of the people involved were from California or Arizona and the companies in question were all located in California. One group raised $12.3 million from 226 investors for a cannabis farm in Salinas, California. The other group raised $13.2 million from 211 investors for a CBD extraction facility in Salinas.
The defendants misled and deceived investors, selling them unrealistic returns on their investments. Some claims were as high as 100% return or more.
After raising the money, the SEC alleges that $2.7 million was diverted away from the project without cause and the accused lied about getting a business loan to finance the future extraction facility. The money instead went to pay off investors in a completely different entity.
The SEC right now is looking to serve the six defendants with permanent injunctions, blocking any of them from investment activity as well as hefty fines.