Cryptocurrency fraud is alive and well, but there’s still plenty of oil and gas financial fraud and real estate investment scams stealing investors’ money. If digital currency isn’t your style, check out the new kid on the fraudster block. The pot industry is proving that it too can grow Ponzi schemes. Recently the SEC won a temporary injunction against Integrated National Resources, a/k/a Weedgenics, for a pot Ponzi scheme.
Pot Ponzi Scheme
Rolf Max Hirschmann, a/k/a Max Bergmann, and Patrick Earl Williams raised more than $60 million in under four years from 350 investors across the United States. Hirschmann and Williams converted $16.2 million of investor money into personal wealth and Ponzi scheme payments before the SEC obtained an emergency order to stop the fraud. The Weedgenics’ sales team raised $22.4 million in just six months.
The Promises
Investor funds in INR (Integrated Natural Resources a/k/a Weedgenics) were raised to “develop and expand a cannabis cultivation facility in Adelanto, California, the expansion would generate regular interest payments for investors, INR’s facilities in both California and Nevada were profitable and making millions in revenue each year, and the investments were stable and guaranteed. Defendants also represented that they had the requisite licenses and permits necessary to operate such facilities. In truth, however, all of this was a sham.” SEC Complaint
The Investment Deal
“INR . . . guaranteed investors fixed annual interest rates between 19.5% and 36%, and sometimes offered additional equity and revenue sharing interests. After 60 consecutive monthly disbursements, investors had the choice to renew their investment for another five-year term or have their full initial investment capital returned.” SEC Complaint
A Few Lies to Investors and Prospects
“…INR’s facilities are non-existent. Defendants never owned or operated a cultivation facility. While Defendants offered up financials, locations, and even photographs of purported facilities, none of them ever belonged to or was associated with Defendants. Thus, Defendants’ claims that these facilities generated tens of millions of dollars came from thin air.” SEC Complaint
As an example of financial misrepresentations Defendants made to support this investment fraud included the following. The non-existent Las Vegas facility was said to generate over one million dollars in revenue monthly. In 18 months, the California facility was projected to reach $2.5 million in gross monthly revenue. For 2021 the Defendants claimed the fake California production generated $16 million. SEC Complaint
“The complaint further alleges that in an attempt to avoid detection, Hirschmann, acting as the face of the company, used the fake name Max Bergmann the entire time he communicated with investors, while Williams, as Vice President of the company, worked behind the scenes while spending investor funds on his more public career as a rap musician known as ‘BigRigBaby.’” SEC Press Release
What Happened to the Money?
Every investment fraud requires the lawyers to trace the money. In this case, the SEC followed the money of five individuals through 49 accounts. “. . .[O]nce investor money was received by accounts controlled by Defendants, those funds were deliberately transferred to multiple other accounts, dizzyingly back and forth from Defendants’ to RDs’ [Relief Defendants] and vice versa. This circuitous movement of money was intended to obfuscate the truth: investor funds were being used to pay personal expenses and to pay off other investors. From purchasing luxury cars to financing residential upgrades to paying for jewelry and adult entertainment, Defendants and RDs spent tens of millions of dollars in investor money on items having nothing to do with a grow/cultivation facility.” SEC Complaint
Some of the more interesting expenditures included Hirschmann’s $5.4 million in residential real estate and renovations, $3.8 million in luxury automobiles, $1.0 million paid to women and $4.4 million paid to credit cards.
How Could Investors Avoid This Pot Ponzi Scheme?
Investment scams come in many sizes and are developed from a variety of industries. Doing your homework and seeking financial and legal advice are essential, especially when dealing with lucrative rates of return. In the case of Weedgenics, a little due diligence could have saved people a pile of cash.
Call The City and State Authorities
- The cannabis industry is subject to local and state regulations. “. . .[T]he City of Adelanto, State of California, and state of Nevada all require entities and individuals to obtain specific permits or licenses before operating a cannabis/marijuana cultivation facility. INR never obtained any such permits or licenses.” SEC Complaint
Check Out Social Media
- Patrick Earl Williams of St Petersburg Florida publicly claimed to be the vice president of INR. INR’s corporate filings listed him as president and chairman of the board. Don’t just research the person you’re dealing with or one or two others. Look into all the corporate leaders. Williams had a public career as a rap musician. While music is a respectable profession, how did someone who was listed as president have the time to cultivate a rap profession?
Research Real Estate
- A few clicks on the computer will show you who owns commercial real estate. While Weedgenics may have been a renter, an investor could call the owner or leasing agent and ask about a leasing agreement. Admittedly, this is more due diligence than what traditionally perform. But these days, you can’t be too careful.
Dallas Investment Fraud Attorney | Ponzi Scheme Lawyer
This Pot Ponzi scheme case is in its infancy, but we are already learning some financial investment tips. We hope all your investments are safe and profitable. But if you find yourself searching for an experienced investment fraud lawyer or a ponzi scheme attorney. Mark A. Alexander. P.C. is here to help. Call us today at (972) 544-6968.
