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Marijuana Consulting Firm's Bogus Scheme Goes Up In Smoke – SEC
A California-based company and its founder agreed to pay $12.3 million in disgorgement, prejudgment interest and penalties to settle SEC charges that it falsely touted "record" revenue numbers to investors and claimed to be a leader in the marijuana industry, while some of its earnings came from sham transactions with a secret affiliate.
ACCORDING TO THE SEC'S COMPLAINT, … Medbox (now known as Notis Global) provided marijuana consulting services and claimed to sell vending machines known as "Medbox" devices capable of dispensing marijuana based on biometric identification. The SEC alleges that Vincent 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 Medbox's revenue.
Medbox then issued press releases headlining the phony revenues as record earnings to legitimize itself as a viable commercial operation when in fact nearly 90% of the company's revenue in 2014 stemmed from sham transactions with New-Age.
Mehdizadeh used the money raised in New-Age's illicit stock sales, in part, to purchase a luxury home in the Pacific Palisades. [for a heady price, I'm sure.]
The SEC also charged Medbox's then-CEO Bruce Bedrick, New-Age and Yocelin Legaspi, Mehdizadeh's then-fiancée. The SEC's litigation continues against all three.
