Securities Fraud Lawyer Blog
The Law Office of David Liebrader is pleased to report $5.3 million in recent judgments and settlements against cannabis industry companies.
With the growth of the legal cannabis industry, unscrupulous operators and scam artists have been plying their trade, luring in unsuspecting investors with promises of outsized returns.
One case involves a $1.8 million judgment obtained in the Monterey County Superior Court against Zabala Farms of Salinas; a mid-size grow operation. The Plaintiff had invested in a Zabala affiliate that sold unregistered securities. The State of California issued a cease and desist order against the subsidiary, which was followed by an administrative action filed by the SEC. The investor was able to use the findings to obtain two judgments, one against the affiliate, and later, a judgment against Zabala Farms of Salinas in the Monterey Superior Court.
Another recent success story is the settlement of $3.5 million in claims against a cannabis conglomerate that promised 30% returns. Investors received distributions for about 6 months before payments ceased. After The Law Office of David Liebrader filed claims, the investors were offered settlements totaling nearly 100% of their invested capital. The Las Vegas Review Journal recently profiled the case after the entity was shut down by the SEC
The legal cannabis industry operates on slim margins, and promises of large returns must be viewed as a red flag. There is no substitute for doing due diligence into cannabis businesses and their principals. Business licenses should be checked, and basic background searches should be run before investing. Websites such as brokercheck, operated by FINRA, and the SEC’s website will reveal whether the salesmen are licensed and whether they and the business entities have disciplinary histories.
As the industry consolidates due to competition, there are operators looking to stay afloat or make a quick buck promising double digit returns based on pie in the sky accounting. Investors should be mindful that the industry attracts more than its fair share of scammers and con men. Caveat Emptor applies, lest your hard earned savings go up in smoke.
The Law Office of David Liebrader has been representing burned investors for 30 years. Recoveries to date top $75 million.