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There are a lot of good things that have come from legalizing marijuana in our state. Tax money collected from the marijuana industry has been used for programs around the state. Police have been able to focus their efforts on more serious offenses. Colorado has even developed a new tourism industry based largely on the legalization of marijuana.
Unfortunately, while marijuana legalization is still doing great things for our state, the industry is showing signs of getting spoiled by white collar crimes and devious business practices.
Toward the end of 2016, a business called FusionPharm made headlines for committing securities fraud. FusionPharm created and sold shipping containers that grew cannabis (and other indoor plants) with hydroponics.
FusionPharm had been under the eye of federal agencies for several years at that point. In 2014, they temporarily could not trade shares because the US Securities and Exchange Commission suspended trading for them as well as for four other businesses.
This raised critiques from marijuana investors like the self-titled “Wolf of Weed Street.” The Wolf of Weed Street assured investors and the SEC that FusionPharm was a legitimate business, and that they had investments in FusionPharm.
When FusionPharm was charged with securities fraud, the Wolf of Weed Street did not comment too heavily on the incident, but did share a post on their Facebook page from Vice News about how FusionPharm had put a spotlight on white collar crime in the marijuana industry.
FusionPharm’s scheme is too intricate and tricky to break down here, but it involved what was essentially a shell company – Microcap – and deliberately not disclosing the relationship between Microcap, FusionPharm, and the men that owned the company in order to shore up the business’s finances.
Initially, the business was able to convince many investors that it was solid. FusionPharm sold shares over-the-counter through pink sheets. When they were at their peak, they were considered a top trader of penny stocks in the marijuana industry.
Eventually, though, the investors who had shares in FusionPharm learned the truth about FusionPharm’s poor financial health and schemes, and many who put their trust in the business ended up losing big.
One investor, who was confident in FusionPharm and invested $10,000 in the business, said he ultimately lost up to 75 percent of his investment. He said that, once he finally dug into FusionPharm’s financials and met with the CEOs of the company, he knew that the business was not legitimate.
After several years of running this scheme, the men behind FusionPharm – William Sears and Scott Dittman – were caught and now face criminal penalties. They were charged in a federal court for Conspiracy to Defraud the U.S.
One count of this charge can result in up to five years in federal prison and up to $250,000 in fines. In addition to the charge of Conspiracy to Defraud, Sears also faces a count of filing a false income tax return. This charge can add an additional three years in prison and up to $250,000 in fines if he is convicted.
As you can see, white collar crimes, whether committed at the state or federal level, come with serious consequences.
FusionPharm is only one example of how white collar crimes have invaded the marijuana industry. Many smart business owners have decided to cash in on the state’s recent legalization. Unfortunately, some fraudsters are among their ranks.
The marijuana industry is just starting to make it as a legitimate industry in our country, with trading possible on public markets. Unfortunately, now that it is on par with other “legal” industries, it is just as vulnerable as they are to fraud and other criminal schemes.
With FusionPharm’s crimes making headlines, there is no doubt that federal agencies will be on the lookout for similar crimes throughout the industry. The current administration already has a negative bias against legalized marijuana at the state level and will no doubt use these crimes as an argument to enforce federal marijuana laws.
These crimes can put offenders behind bars for years and cost them tens of thousands of dollars. If you have been arrested or charged with white collar crimes, or are afraid you may be arrested in the future, contact a Colorado defense lawyer today.
About the Author:
Denver-based criminal defense and DUI attorney Jacob E. Martinez is a knowledgeable and experienced litigator with a record of success providing innovative solutions to clients facing criminal charges of any severity. Mr. Martinez has been designated a Top 100 Trial Lawyer by the National Trial Lawyers and has been awarded both the Avvo Client’s Choice Award and Avvo Top Attorney designation, evidencing his reputation for his exemplary criminal and DUI defense work and high moral standards.