The U.S. Securities and Exchange Commission has charged Nevada-based cannabis company American Patriot Brands (APB) with fraud in a “long-running scheme” in which the company raised more than $30 million from investors.
The Securities and Exchange Commission (SEC) filed the civil complaint Thursday in the U.S. District Court for the District of Puerto Rico.
The complaint names as defendants American Patriot CEO Robert Lee, current and former executives Brian Pallas and J. Bernard Rice as well as the company and several related businesses.
The SEC alleged in a news release that the executives “made a series of false and misleading statements to investors about various aspects of the company, including its financial condition, the scope of its operations, the value of its Oregon cannabis farm, and the safety and security of investing in APB.”
“The complaint alleges that APB funneled millions in investor proceeds to the APB executives’ personal accounts and spent tens of thousands on the executives’ personal expenses,” the SEC claimed.
Specifically, the complaint asserts that Lee, Pallas and Rice “have solicited investments and raised over $30 million from more than 100 investors in the United States … through a variety of material misrepresentations and omissions.”
The complaint alleges APB “promoted itself as one of the largest cannabis farms in the country and provided wildly inflated financial information to support extremely high revenue projections.”
Further, the SEC said company officers “siphoned off millions in investor funds” to companies based in Puerto Rico.
The SEC also alleges many other misrepresentations and omissions to investors by the executives, including:
- Exaggerating past revenues and making “wholly unfounded” revenue projections.
- Falsely claiming amounts raised from investors.
- Misrepresenting the value of a farm in Oregon.
- Falsely claiming business operations in Colorado.
APB “fabricated business profits and prospects to entice investors with falsehoods that in the end left investors with essentially worthless securities,” Carolyn Welshhans, associate director of the SEC enforcement division, said in a statement.
The SEC is seeking a trial by jury.
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