In its opening salvo in a federal lawsuit filed Sept. 5, the Securities and Exchange Commission asserts that Greenview Investment Partners defrauded more than 60 investors across 26 states. By using “false and misleading marketing and offering material and deceptive sales pitches,” Greenview drew more than $3.3 million from investors interested in the cannabis industry, according to the lawsuit.
“Greenview allegedly exploited investor interest in the marijuana industry and lied about high returns and the backgrounds of its key executives,” said Shamoil T. Shipchandler, director of the SEC’s Fort Worth Regional Office, in a public statement. “Investors must remain vigilant and not let the fear of missing out dupe them into making bad investment decisions.”
As the cannabis industry matures at a rapid clip, venture capital has poured money into organizations in the U.S. and, even more so, internationally. Many of those investments have led to initial public offerings and massive mergers, but some lead to the seedier side of the nascent cannabis business.
The SEC paints a picture of ringleader Michael Cone as a man with a criminal past; he pleaded guilty to felony delivery of marijuana and other charges in 2017. Shortly thereafter, Cone, a Texas resident, started Greenview. In his role at the so-called investment firm, Cone used the alias Brian Gwinn.
The lawsuit was filed in the Northern District Court of Texas. (See the full complaint below.)
The two primary pitches that Cone offered investors were laid out simply in the lawsuit: “Greenview had a management team with a ten-year track record of profitably investing more than $100 million in cannabis-related businesses, Greenview had provided outsized returns to more than 200 investors, and investors could expect a 24-percent annual return,” according to the SEC. “These were lies.”
From each investor, Cone sought a minimum of $50,000. Through a hired sales staff that was trained to “parrot” Cone’s talking points, prospective investors were picked off of purchased lead lists; they had no association with one another, according to the lawsuit, and they were to have nothing more than a passive role in Greenview. Cone was solely interested in their money.
The talking points included a range of claims, according to the SEC:
- Greenview was a successful investment company and had been in business since 2006, with three offices across the country;
- Greenview served businesses in all 30 states where recreational and/or medical marijuana is legal and had raised between $112 million and $152 million in debt financing for cannabis companies throughout the United States and in other markets, such as Canada;
- Greenview’s cannabis investment clients included one of the first cannabis firms publicly listed on the New York Stock Exchange;
- Greenview had 271 investors, who had received 24 percent annual returns, which investors could expect in the future;
- Greenview employed a retired agent from the U.S. Drug Enforcement Administration (DEA) to assist with compliance issues; and
- Greenview’s management team, led by Cone’s alter ego “Brian Gwinn,” had extensive private equity and investment experience and a ten-year track record of profitably investing more than $100 million in cannabis-related businesses.
All told, Greenview made one investment in a cannabis company—although the SEC asserts that the company did not harvest a single cannabis crop, nor did it provide any returns to Greenview. Cone did make one withdrawal from the funds raised by investors, however; he took out about $450,000 “and spent hundreds of thousands of dollars of investor funds on meals, watches, designer clothes, accessories and luxury automobiles.”
Earlier this year, the FBI seized $1.4 million in cash and various assets from Cone’s offices in Dallas. The SEC is now requesting that the federal court prevent him and Greenview from continuing any fundraising efforts.
Top photo courtesy of Adobe Stock