Call it marijuana, cannabis, or weed. You don’t have to smoke it or consume it to enjoy some reward. This pseudo-pharma industry is on the rise, and with it, a quickly emerging buyer beware investors’ market.
States aren’t the only ones cashing in on revenue from marijuana sales. For those seeking an alternative to potentially high yielding oil and gas investments or even risky cryptocurrency investments, the cannabis investment trade is developing a following.
One recent cannabis investment opportunity arose from Steven L. Brickner of Florida. Brickner raised $5.5 million from 60 investors in several states over three and a half years through various companies purporting to invest in marijuana-related companies. The cannabis investments were made in a handful of LLCs named FirstCanna Pharmaceuticals, FirstCanna Financial, FirstCanna Insurance, and High Country Healing Co.
Brickner raised money to purchase assets of a Colorado-licensed marijuana dispensary network, High Country Healing. On the way to the weed shop, he misappropriated $3 million, representing over half of investors’ funds.
Reverse Merger
Prior to the marijuana investment venture, Brickner claimed he ran a “series of venture capital, finance, and other commercial companies in the Tampa, Florida area.” SEC Complaint. Brickner tried to make the investment sound better by complicating the message. He told investors that the companies they were investing in would enter into a reverse merger with an over-the-counter publicly traded company. In a nutshell, a reverse merger is a way for private companies to go public.
SAFE Agreements
Investors often signed SAFE agreements, Simple Agreement for Future Equity, which gave them preferred shares of capital stock for their investment.
Misrepresentations To Investors Included:
- Reverse merger. Their money was to be used to purchase assets and pay costs for the reverse merger in the marijuana dispensary network.
- Mergers and acquisitions and IPO. The Company was on track to be the largest cannabis operation. An IPO placement was forthcoming with a $2.6 billion offering. That valuation represented a 2500 to 1 conversion rate for investors.
- Stock split. The impending merger would create a large stock split that would yield investors millions of dollars. However, Brickner did not own assets for the merger, nor did he file regulatory documents for a merger.
Investor’s Money
Brickner, like so many investment con artists before him, misappropriated funds for his personal use and lavish lifestyle, including:
- $1.2 million in cars. Brickner purchased a number of classic and luxury cars. He developed quite a collection—a Bentley, a new Corvette and Camaro, three classic Camaros, and three classic Corvettes, just to name a few.
- Brickner used $580,000 of investor funds to pay off a house mortgage.
- Adult entertainment. $335,000 was released into Tampa’s economy through the adult entertainment market.
- $465,000 was converted into cryptocurrency coins.
- Spending money. Apparently, Brickner liked having a little change in his pockets, as he withdrew $286,000 in cash.
Brickner’s Undisclosed Background
Brickner claimed to have 20 years of owning and operating companies in different markets. However, he failed to disclose a recent bankruptcy where his last three years of stated income were zero, $44,541, and $89,082.
Justice Being Served
At the time of this writing, Brickner has negotiated with the SEC. He does not admit to the allegations, but would be permanently enjoined from violating federal securities laws, and would pay investors’ fees, along with prejudgment interest and penalties. The details are not disclosed, but the deal is subject to court approval. SEC Litigation News Release.
Marijuana And Investments Don’t Always Mix
If you are considering riskier investments in digital currency, oil and gas, or even marijuana, stay focused and diligently investigate before handing over your money. Investment fraud is ripe wherever there is a potential to make a higher-than-average yield. Fraudulent deals are everywhere. Do your research. Take time to determine if your salesperson and the securities offering are registered with the state or SEC. Check the history of the people in the deal, as well as any past or pending lawsuits.
Investors with Steven Brinker could have discovered his personal bankruptcy had they done a little research before investing.
We hope all your crypto-currency, cannabis, and oil and gas investments are safe and profitable. But if you find yourself searching for an experienced oil and gas litigation lawyer or a commercial litigation lawyer, we are here to help.