SEC Says Medbox Made Up Bogus Revenue & Mehdizadeh to Pay SEC $12 Million

On March 9, 2017, the U.S. Securities & Exchange Commission issued the following press release:

Securities and Exchange Commission v. Notis Global, Inc. (f/k/a Medbox, Inc.), et al., Civil Action No. 2:17-cv-01905 (C.D. Cal. filed March 9, 2017)

SEC Charges Marijuana-Related Company and Executives With Touting Bogus Revenues

The Securities and Exchange Commission charged a California-based company and its founder with falsely touting “record” revenue numbers to investors and claiming to be a leader in the marijuana industry while some of its earnings came from sham transactions with a secret affiliate.

According to the SEC’s complaint, Medbox provided marijuana consulting services and claimed to sell vending machines known as “Medbox” devices capable of dispensing marijuana on the basis of biometric identification. The SEC alleges that Vincent Mehdizadeh created a shell company called New-Age Investment Consulting to carry out illegal stock sales and used the proceeds from those sales to boost Medbox’s revenue. Medbox allegedly issued press releases headlining the phony revenues as record earnings to legitimize itself as a viable commercial operation when in fact nearly 90 percent of the company’s revenue in the first quarter of 2014 stemmed from sham transactions with New-Age. Mehdizadeh allegedly acknowledged in a text message that “the only thing we are really good at is public company publicity and stock awareness. We get an A+ for creating revenue off sheer will but that won’t continue.”

Meanwhile, according to the SEC’s complaint, Mehdizadeh funded the purchase of a luxury home in the Pacific Palisades with proceeds from New-Age’s illicit stock sales.

The SEC’s complaint additionally charges Medbox’s then-CEO Bruce Bedrick with being complicit in the scheme and personally profiting. The SEC also charged New-Age and Mehdizadeh’s then-fiancée Yocelin Legaspi with unlawfully selling unregistered securities. Mehdizadeh installed Legaspi as the supposed CEO of New-Age when he created the company.

Without admitting or denying the SEC’s allegations, Mehdizadeh and Medbox, which has since changed its name to Notis Global, have agreed to settle the SEC’s charges. The settlements are pending final approval by the court. Medbox consented to the entry of a final judgment permanently enjoining it from violations of Sections 5(a), 5(c), and 17(a) of the Securities Act of 1933 (Securities Act) and Sections 10(b), 13(a), 13(b)(2)(A), and 13(b)(2)(B) of the Securities Exchange Act of 1934 (Exchange Act) and Rules 10b-5, 12b-20, 13a-11, and 13a-13 thereunder. Mehdizadeh consented to the entry of a final judgment permanently enjoining him from future violations of Sections 10(b) and 15(a) of the Exchange Act and Rules 10b-5 and 13b2-2 thereunder, aiding and abetting Medbox’s violations of Sections 13(a), 13(b)(2)(A), and 13(b)(2)(B) of the Exchange Act and Rules 12b-20, 13a-11, and 13a-13 thereunder, and Sections 5(a), 5(c), and 17(a) of the Securities Act; requiring him to pay disgorgement of $6,014,048 plus prejudgment interest of $270,299.35 and a civil penalty of $6,014,048; and prohibiting him from serving as an officer and director of a public company or participating in any penny stock offerings.

The Commission’s complaint also alleges that Bedrick violated Section 10(b) of the Exchange Act and Rules 10b-5, 13b2-2, and 13a-14 thereunder, Section 17(a) of the Securities Act, and aided and abetted Medbox’s violations of Section 13(a) of the Exchange Act and Rules 12b-20, 13a-11, and 13a-13 thereunder. In addition, the complaint alleges that Bedrick failed to comply with Section 304 of the Sarbanes-Oxley Act of 2002 (SOX) and seeks a permanent injunction, disgorgement plus prejudgment interest, a civil penalty, a penny stock bar, an officer and director bar, and reimbursement pursuant to Section 304 of SOX. Finally, the complaint alleges that Yocelin Legaspi and New-Age Investment Consulting violated Sections 5(a) and 5(c) of the Securities Act and seeks permanent injunctions, disgorgement plus prejudgment interest, and civil penalties. The SEC’s litigation continues against Bedrick, Legaspi, and New-Age.

See “A Convicted Thief and a Chiropractor Claim Their Pot Company Isn’t a One-Hit Wonder.”

By |2017-03-11T07:27:24-07:00March 11th, 2017|Medbox, Stories & Articles|Comments Off on SEC Says Medbox Made Up Bogus Revenue & Mehdizadeh to Pay SEC $12 Million

Republican Congressman Introduces Bill to Legalize Marijuana

Republican Congressman Justin Amash, three other Republicans and three Democrats introduced House bill H.R.1227, Ending Federal Marijuana Prohibition Act of 2017.  The bill states:

Prohibition On Certain Shipping Or Transportation.—This Act shall not apply to marihuana . . . .

Removed from schedule of controlled substances.—Subsection (c) of Schedule I of section 202(c) of the Controlled Substances Act (21 U.S.C. 812(c)) is amended—

(1) by striking “marihuana”; and

(2) by striking “tetrahydrocannabinols”

See “It’s 2016, yet the DEA still refers to cannabis as ‘marihuana.’ Why is that?

By |2017-03-11T07:10:17-07:00March 11th, 2017|Federal Dispensary Attacks, Stories & Articles|Comments Off on Republican Congressman Introduces Bill to Legalize Marijuana

Israel Decriminalizes Marijuana

Reuters:  “The Israeli government voted on Sunday in favor of decriminalizing recreational marijuana use, joining some U.S. states and European countries who have adopted a similar approach.  “On the one hand we are opening ourselves up to the future. On the other hand, we understand the dangers and will try to balance the two,” Prime Minister Benjamin Netanyahu told his cabinet in broadcast remarks.”

By |2017-03-05T10:50:38-07:00March 5th, 2017|Stories & Articles|Comments Off on Israel Decriminalizes Marijuana

Feds Warn Duke Rodriguez Not to Have Pot at Nevada Pot Festival

NM Political Report:  “A letter from the U.S. Department of Justice to organizers of a cannabis festival in Nevada could signal how the Trump administration plans to enforce marijuana laws.  Nevada’s U.S. District Attorney sent a letter last week to Duke Rodriguez, CEO of the New Mexico and Arizona based Ultra Health, with concerns that cannabis will be present at the High Times Cannabis Cup. . . . Bogden also addresses Obama-era guidance from the Department of Justice to U.S. district attorneys. In 2013 Deputy Attorney General James Cole issued a memo stating the Department of Justice would not prioritize arrests for possession of small amounts or use of cannabis. . . . ‘The memoranda are not laws or regulations, and they do not create any rights that may be relied upon by any person,’ Bogden wrote. ‘Marijuana remains illegal under federal law’.”

By |2017-03-03T04:44:51-07:00March 3rd, 2017|Federal Dispensary Attacks, Stories & Articles, Zoned Properties & Duke Rodriguez|Comments Off on Feds Warn Duke Rodriguez Not to Have Pot at Nevada Pot Festival