Investors thought they were investing $4.85 million in a cannabis company, but were instead lining the pockets of two people and financing their taste for luxury cars, yachts and dreams of Hollywood movie making, according to charges filed by the Securities and Exchange Commission on Tuesday.
The SEC accused Guy S. Griffithe and Robert W. Russell, and three companies they controlled, of defrauding investors who thought they were purchasing interests in a Washington-licensed recreational cannabis company. Some investors were paid with other investor money in the model a classic Ponzi-scheme, according to the charges.
Between August 2015 and December 2017, Griffithe of California, used Renewable Technologies Solution, Inc., an entity he controlled, to sell investors “ownership interests” in SMRB LLC, a Washington company owned by Russell that held a license to grow marijuana under the state’s recreational cannabis laws, according to the SEC.
Griffithe and Russell are accused of leading investors to believe their investments in Renewable would be used to operate SMRB, but in reality the securities did not convey any legitimate stake in SMRB. Instead, Griffithe allegedly spent approximately $1.8 million of investor funds on personal and unrelated business expenses, including payments toward several luxury cars for himself and a yacht for Russell, according to the complaint.
“As alleged in our complaint, Griffithe 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 R. Hodgman. “Instead, Griffithe and Russell deceived investors and used the money to enrich themselves.”
Of the approximately $4.85 million raised from Investors, Griffithe spent more than $1.8 million for personal uses and other inappropriate expenditures for himself, Russell, and others, during the Relevant Time Period, including payments toward:
- 2008 Bentley Continental
- 2012 Mercedes Benz C Class
- 2013 Ford Mustang
- 2015 Porsche Panamera
- $250,000 toward a 65-foot Pacific Mariner yacht bought by Russell and Sonja Russell
- $25,000 toward a 42-foot Hydrasport custom power boat
- Expenditures for Griffithe’s unrelated business ventures, including Bridgegate Pictures Corp. and other of Griffithe’s undertakings in the movie industry.
Griffithe is also accused of depositing approximately $1.7 million into Russell’s personal bank accounts. To create the illusion that the marijuana business was profitable and paying dividends as promised, Griffithe allegedly paid out purported profit distributions to some investors, which were partially funded in a “Ponzi-like fashion” using funds from other investors, according to the complaint.
The complaint, filed in federal court in California, charges Griffithe, Russell, Renewable, SMRB, and Green Acres Pharms LLC with violating the antifraud provisions of the federal securities laws. The complaint also charges Griffithe, Renewable, and Green Acres Pharms with violating the registration provisions of the federal securities laws. The complaint, which also names Russell’s wife, Sonja Russell, as a relief defendant, seeks “permanent injunctions, return of allegedly ill-gotten gains with prejudgment interest, and civil penalties.”
Steven A. Morelli is editor-in-chief for AdvisorNews. He has more than 25 years of experience as a reporter and editor for newspapers and magazines. He was also vice president of communications for an insurance agents’ association. Steve can be reached at email@example.com.
© Entire contents copyright 2020 by AdvisorNews. All rights reserved. No part of this article may be reprinted without the expressed written consent from AdvisorNews.