Nine people in multiple countries have been arrested in an alleged major cannabis crowdsourcing investment fraud case.
More than 400 law enforcement officers in 11 countries executed 9 arrest warrants and 38 house searches last week after a joint investigation. Along with seizures of vehicles, electronic devices and luxury items, EUR 4,700,000 (approximately AUD $7.735 million at current exchange rates) in bank accounts, EUR 1,515,000 (~ AUD $2.493 million) in cryptocurrencies, EUR 106,000 (~ AUD $174,455) in cash and EUR 2,600,000 (~ AUD $4.279 million) in real estate assets have been either seized or frozen.
Europol says those charged were involved in crowdsourcing investment opportunities in the cultivation, harvesting and distribution of medicinal cannabis plants; luring investors with the potential for big returns. Europol said the operation was a classic Ponzi scheme.
“As an example, the average – even cautious – investor would make an initial investment of EUR 50 and receive a pay-out doubling their money soon after,” states Europol. “Motivated by these financial gains, many investors would raise the stakes and pay in hundreds, thousands, or in many cases even tens of thousands of euros.”
But in July 2022, company profiles were scrubbed from social media networks and investors were no longer able to log into their accounts.
Around 186,000 participants from around the world transferred funds from early 2020 to July 2022 and investor losses are estimated at a staggering EUR 645 million – just over AUD $1 billion . But the true total could be much higher.
“While the company pledged annual returns of 100 percent or more, they did not reveal exactly how they would accomplish this, let alone be able to guarantee it.”
Europol’s role in the operation provided coordination and analytical support. Law enforcement agencies from numerous member states carried out the swoop on April 11, and those arrested were Russian, Dutch, German, Italian, Latvian, Maltese, Polish, Jordanian, US and Venezuelan nationals.
The use of crowdsourcing in scam cannabis investment schemes isn’t new. In 2021, the USA’s Securities and Exchange Commission (SEC) charged multiple parties over an allegedly fraudulent scheme involving $2 million of unregistered securities through two crowdfunding campaigns.
While crowdfunding has been used by legitimate cannabusinesses to raise capital given the challenges of sourcing investment via conventional sources, the old wisdom of “if it looks too good to be true, it probably is” applies – and would-be investors need to exercise great caution.
