A Kittery man has agreed to pay nearly $400,000 in fines and interest for illegally soliciting investors for a medical cannabis operation on Craigslist, the U.S. Securities and Exchange Commission said.
Richard J. Greenlaw raised roughly $500,000 from at least 59 investors by offering securities in 20 cannabis-related businesses on the popular classified advertising website despite not being registered with the SEC, the commission said in a statement Tuesday.
Greenlaw has agreed to turn over proceeds from his illegal solicitations in the amount of $340,142, plus pay a civil penalty of $50,000, the SEC said. The settlement is subject to court approval.
Names of the businesses that Greenlaw purported to represent included NECS LLC (doing business as New England Cannabis Solutions LLC), MaineCS LLC, MassCS LLC, VTCS LLC, NHCS LLC and several others, the SEC said.
Greenlaw sold ownership interests in the companies to investors in at least 21 states by posting advertisements on Craigslist, the SEC said.
When prospective investors responded to his online ads, Greenlaw followed up with securities offering documents and sales materials describing the purported marijuana products, which Greenlaw characterized as medical products that do not contain THC, the chemical compound responsible for most of marijuana’s psychological effects.
No registration statement was on file or in effect with the SEC with respect to Greenlaw’s offering of securities, the commission said.
According to Judith Shaw, securities administrator at the Maine Office of Securities, Greenlaw is the first cannabis-related business owner in Maine to be charged with a securities law violation.
HISTORY OF VIOLATIONS
In addition to the financial settlement, Greenlaw also is barred from any further illegal solicitation of investments, the commission said.
According to the Maine Secretary of State’s Office website, NECS and MaineCS are businesses that were both incorporated in April 2014. The website lists the companies’ status as being in good standing with regard to filing the necessary formation documents and annual reports.
Greenlaw also registered similar limited liability companies in 18 other states, including Massachusetts, Vermont, New Hampshire, Rhode Island, Florida and Illinois, the SEC said. NECS is listed as the majority shareholder in all 18 companies.
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Greenlaw has a history of securities law violations that stretches back decades, the SEC complaint says.
The commission filed a prior enforcement action against him in 1983, alleging he violated provisions of the U.S. Securities and Exchange Act “for his role in an investment scheme involving certain risky stocks and options trading.”
In that case, Greenlaw also was slapped with an injunction against any related violations in the future.
Greenlaw could not be reached for comment Wednesday. An online search for New England Cannabis Solutions and related names did not produce a company website, Facebook page or other social media presence.
There is a website for Vermont Cannabis Solutions, based in Burlington, Vermont, but company principal Andrew Subin said the business is a law firm, and that it is unrelated to Greenlaw’s companies and has no affiliation. Subin said he had never heard of the Maine-based company.
CHALLENGES FOR CANNABIS BUSINESSES
Legal cannabis industry financial consultant Tom Mourmouras, managing partner of Fiscal Therapy Financial in Old Orchard Beach, also said he had never heard of NECS before reading about the SEC complaint.
Mourmouras said legitimate cannabis businesses in Maine face a challenge overcoming negative public perception because of the drug’s long history of illegality. When a legal cannabis business runs afoul of regulators, it can be viewed as a setback for the entire industry, he said.
“I think it affects smaller businesses a little bit more than bigger businesses,” he said. “Locally, with these smaller businesses especially here in Maine, it’s definitely hard jumping over this hurdle of the stigma that’s attached to this industry. Hopefully we’ll see this change soon.”
Mourmouras said it is possible that NECS was attempting to raise capital for costs such as buying or leasing real estate and purchasing equipment. He said most legal cannabis businesses in Maine cannot access traditional means of financing such as small-business loans.
“For the smaller and midsize businesses, that’s extremely tough,” he said. “There’s really no institutional money that’s available in Maine. … Right now, a lot of my clients are just even lucky enough to have a bank account.”
Federal court documents list Greenlaw’s address as Norton Road in Kittery. The Maine Sex Offender Registry lists a Richard J. Greenlaw located at the same address who was convicted in 2003 of “certain use of computer services prohibited.”
J. Craig Anderson can be contacted at 791-6390 or at:
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