William Galvin, Secretary of Commonwealth, has issued an advisory asking potential investors to be wary of cannabis scams. The advisory comes after fraud charges were filed against two businessmen in the state.
Since the cannabis industry isn’t monitored by federal regulators or state-chartered banks, the odds of people falling prey to such scams are really high.
“A single regulator can’t police this marketplace; my Securities Division intends to scrutinize these offerings to proactively prevent investor harm,” Galvin was quoted as saying by High Times.
The two entrepreneurs in question are:
David Caputo (Positronic Farms, Inc.)
The report by Galvin’s office states that David Caputo allegedly raised $1.3 million from as many 40 investors for a recreational marijuana cultivation facility. Besides this, he also tried to solicit investments from more than 730 prospect investors via videos, press releases and an unspecified news website.
However, the state Cannabis Control Commission confirmed that the company hadn’t even submitted a complete application.
Notably, in his LinkedIn profile, Caputo has described himself as an SEO expert and the founder of a marijuana company.
Frederick V. McDonald, Jr. (US Advisory Group Inc.)
In April of this year, Galvin’s office filed fraud Charges against the CEO of a Beverly-based investment adviser, US Advisory Group Inc.
Frederick V. McDonald, Jr. allegedly raised $8 million from more than 100 investors to fund medical marijuana dispensaries that never saw the light of day. Reportedly, McDonald had failed to disclose not only key risks to his investors but also critical information including his own conflict of interest in the deals.
Galvin’s office is looking to censure McDonald and his firm from registering as an investment advisor or broker in the state, while also asking for restitution and an administrative fine.
If you are also looking to invest in the enticing cannabis industry, make sure that your hard-earned money is going in the right, safe hands.