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Legal marijuana in Colorado created new opportunities for fraud

On Behalf of | Jul 9, 2018 | Criminal Defense

Anytime there is money for someone to make, there is potential for abuse, theft and fraud. When Colorado became the first state in the country to legalize marijuana for adult recreational use, most people felt excited.

After all, this change in law would reduce crime across the state by eliminating most petty marijuana dealers and creating a regulated market. This would divert money away from actual cartels and empower people in Colorado to become marijuana entrepreneurs. In practice, legalized marijuana has had quite a few benefits for the state.

Of course, there always have to be a few bad apples who manipulate a system to their own advantage and profit. A recent case in Colorado highlights the risk for securities fraud in the still developing world of legal marijuana and the potential consequences for those who fail to make proper disclosures in the securities trade.

Man who organized marijuana investments broke the law

The Colorado Securities act places certain responsibilities on people and companies that work in securities or investments. One savvy businessman decided that he would do his best to skirt the law and pad his own pockets.

He did not disclose his equity in a company he had started when he sold the business to a previous employer. He also allowed his license as a registered representative to expire and did not renew it. While without his license, he continued to seek out new investors in companies and received commission payments. He also failed to provide the Colorado Division of Securities with transparency documents and filings for sales and other business transactions.

All told, the amount of money he successfully manipulated from investors was over half a million dollars. As a result of his behavior, he has been classified as a “bad actor” and cannot engage in private placement offerings for the next 10 years.

Securities fraud is a very serious offense

White collar crimes in Colorado are no joke. The state often penalizes people convicted of these offenses with jail time and steep fines. Worse, as in the case above, individuals can find themselves banned from the only industry in which they have relevant experience and expertise.

Many times, simple oversights and mistakes can lead to claims of securities fraud. You may not have intended to mislead investors or fail to provide critical information. It’s important to understand that intent is usually at least part of what drives a fraud case. Mistakes can and do happen, but you may need to prove that there wasn’t an intention to commit an act of fraud.

If you are facing allegations of fraud in Colorado related to securities or other financial practices, you need to educate yourself about the potential consequences and take steps immediately to mitigate the potential fallout.

Photo of Attorney Phillip A. Geigle