SEC charges marijuana start-up company and its operatives with fraud

The SEC's complaint alleges that, from at least September 2016 through February 2020, Swaffer and Williams, through POHIH and other now-defunct related entities, raised approximately $14 million from approximately 75 investors in at least 14 states for a start-up marijuana business with operations in Europe, through a series of unregistered securities offerings. According to the complaint, while some funds raised from investors went to fund operations, Swaffer and Williams misappropriated a substantial amount of the investor funds for personal use while also misrepresenting the risks associated with investment.

The complaint further alleges that Swaffer misappropriated at least $2.4 million for his personal use between September 2016 and March 2020. The complaint also alleges that Williams, in addition to being aware of Swaffer's misappropriation, misappropriated investor funds for personal use between April 2017 and January 2020.

The SEC's complaint, filed in federal court in the Northern District of Ohio, charges all defendants with violating the registration provisions of Sections 5(a) and (c) of the Securities Act of 1933, and additionally charges Swaffer and Williams with violating the anti-fraud provisions of Section 17(a) of the Securities Act, and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder.

The SEC is seeking a permanent injunction, disgorgement with prejudgment interest, and a civil penalty against all defendants, and also seeks an officer and director bar against Swaffer and Williams. Additionally, the complaint names Rosalyn K. Swaffer as a relief defendant and seeks an order imposing disgorgement plus prejudgment interest against her.

The SEC's investigation was conducted by Meredith J. Laval, Matthew T. Wissa, and Jean M. Javorski and supervised by Amy S. Cotter in the Chicago Regional Office. Michael Foster will lead the litigation.

The SEC's Office of Investor Education and Advocacy has issued investor alerts on marijuana investments and frauds targeting retail investors. Additional information is available on www.investor.gov.

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Original text here: https://www.sec.gov/litigation/litreleases/2022/lr25496.htm