The United States Securities and Exchange Commission (SEC) has filed charges in federal court in California over an alleged fraudulent multi-million-dollar cannabis company investment scheme.
The SEC on Tuesday announced charges against Guy S. Griffithe, Robert W. Russell, and the three companies that they controlled, alleging that they defrauded investors who thought they were purchasing interests in a licensed cannabis business in the state of Washington out of $4.85 million.
According to the SEC complaint, between August of 2015 and December of 2017, Griffithe, of California, used Renewable Technologies Solution, Inc. (RTSI) to allegedly sell ownership interests in SMRB LLC, a Washington company owned by Russell with a grower’s license for the state’s adult-use cannabis market.
The complaint claims that Russell and Griffithe told investors that their investments in RTSI would be used to operate SMRB, though the securities did not, in reality, convey a legitimate stake in the company.
Griffithe allegedly spent approximately $1.8 million of investor funds on unrelated personal and business purchases, including payments on several of his luxury cars, a yacht for Russell, and $1.7 million worth of deposits into Russell’s personal bank accounts.
“As alleged in our complaint, Griffthe and Russell exploited popular interest in the cannabis industry to obtain millions of dollars from investors who thought they were buying into a profitable business,” said Associate Director Melissa Hodgman. “Instead, Griffithe and Russel deceived investors and used the money to enrich themselves.”
To make it look like the cannabis business was profitable and paying the promised dividends, the SEC complaint alleges that Griffithe allegedly paid purported profit distributions to some investors, partially funded through a Ponzi-like scheme with funds from other investors.
The SEC’s complaint charges Griffithe, Russell, Renewable SMRB, and Green Acres Pharms LLC with violating antifraud provisions of federal securities laws.
The complaint also charges Griffithe, Renewable SMRB, and Green Acres Pharms with violating registration provisions of federal securities laws.
Robert Russell’s wife Sonja is also named as a relief defendant in the complaint, which seeks permanent injunctions, civil penalties, and the return of allegedly ill-gotten gains with prejudgement interest.
