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SEC files lawsuit against cannabis managers, college theft of investor money

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The US Securities and Exchange Commission late last week File a civil suit against three marijuana entrepreneurs, alleging that they and their company misled investors and stole millions of dollars.

The lawsuit, filed in US District Court for the Northern District of Ohio, alleges that two of the three individuals “intentionally or recklessly committed securities fraud” by collecting money from investors and then using most of it for their own ends.

SEC complaint against Kris Swaffer

The Securities and Exchange Commission has filed the lawsuit against Chris Swaffer and Shawn Williams, with Swaffer’s wife, Rosalyn, listed on the Relief Defendant. It is reported that Chris Soavier and Williams led the mission to raise money from investors for Texas-based POHIH and several related entities.

Swaffer and Williams told financial backers that the project would be an international marijuana company called “Pure Organic Offerings.”

Between 2016 and 2020, the pair raised more than $14 million for the business from 75 investors in 14 states, according to the SEC Suit.

But several million of the money was diverted for Swaffer’s and Williams’ personal use, the lawsuit alleges, and despite the investments being sold as securities, none of the companies under the “Pure Organic” umbrella were registered with the Securities and Exchange Commission.

“Swaffer misled investors about his background, portraying himself to potential investors as a wealthy and successful businessman, while concealing the fact that he was deeply in debt and at risk of losing his home,” the lawsuit says.

He claimed that he would benefit from the business by receiving dividends along with other investors. In fact, he embezzled investor money for the entire time period of Pure Organic’s offerings, including using the investor’s money to pay off debts owed by him and his wife, Rosalyn K. Swaffer… and to fund their personal expenses.”

The lawsuit alleges that Swaffer, a former Michigan auto dealer, began redirecting investor money to cover his debts as early as 2016, taking $2.4 million for his own use.

The lawsuit alleges that Williams earned at least $220,000, along with “hundreds of thousands of dollars off payroll,” while also taking “compensation for business expenses.”

Although Swaffer apparently attempted to obtain legitimate commercial licenses for marijuana in both Michigan and Texas, it was unsuccessful. He has already obtained the permit to grow hemp in North Macedonia and started growing there in 2016.

The duo also did not disclose to investors that the cannabis industry remains federally illegal in the United States, and that the entire operation could be shut down at any moment, the SEC lawsuit alleges.

Finally, the Pure Organic entities “never generated revenue from operations or distributed profits to investors,” the lawsuit states, and the venture collapsed.

Swaffer stopped informing investors of Pure Organic in 2021, “at which time several investors filed lawsuits,” according to the SEC’s lawsuit. Swaffer also hid behind the Fifth Amendment during the SEC investigation.

The lawsuit seeks a permanent injunction, overturning of the pretrial, and civil penalties against the three defendants, as well as an officer and union manager against Chris Soavier and Williams, according to a press release.

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