SEC Charges Six in $25M Cannabis Business-Related Fraud

The SEC has filed charges against six people for allegedly defrauding more than 400 investors out of $25 million; the scheme supposedly took place between September 2017 and February 2019.

Full story after the jump.

The Securities and Exchange Commission has filed charges against six individuals from California and Arizona for defrauding investors out of $25 million. The scheme included nine issuers and three marketing companies.

The SEC complaint alleges that from September 2017 to February 2019, California residents Anthony Todd Johnson, Jeremy T. Johnson, Richard A. Portillo, and Michael R. Gregory, and Arizona residents Charles Lloyd and Mark W. Heckele, raised funds from more than 400 individuals to invest in a California cannabis farm and a separate CBD extraction facility.

The SEC said the fraud was conducted through the following companies:

  • Smart Initiatives, LLC
  • Valley View Enterprises LLC
  • Target Equity LLC
  • Zabala Farms Group, LLC
  • GPA Enterprises LLC
  • C-Quadrant LLC
  • Green Bud Initiatives LLC
  • RJ Holdings Group, LLC
  • CIS Marketing, LLC
  • Green Growth Ventures, LLC
  • Extraction Capital Tier 1, LLC
  • Lloyd Marketing, LLC

The Johnson brothers, Portillo, Lloyd, and Heckle allegedly led investors to believe that they would receive a guaranteed annual return on their investments of 100 percent or more. Further, the complaint alleges that the Johnsons misappropriated more than $2.7 million of investor funds and, with Gregory, deceived investors about a purported “business loan” secured by real property to develop the CBD extraction facility that was actually used to pay back investors in an unrelated entity.

The complaint also claims that certain defendants misrepresented the principals’ backgrounds, their capital contributions, and a purported relationship with a California university.

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