Seizing on the latest enforcement action involving the booming marijuana industry, federal securities regulators sent a broad warning Wednesday about the dangers of investing in an industry that faces an ever-present risk of criminal prosecution under Trump administration policies.

The U.S. Securities and Exchange Commission, announcing charges against a Texas-based investment fund and its founder, issued an alert that cited the Trump administration’s revocation of Obama-era guidance that largely said enforcers would keep their hands off cannabis companies operating legally under state law.

The withdrawal of the so-called “Cole memo”—named after former Deputy Attorney General James Cole, now a partner at Sidley Austin—sent shock waves through the state-legal cannabis industry. The move, initiated by U.S. Attorney General Jeff Sessions, added some new level of regulatory uncertainty just as more states were taking steps to legalize marijuana for medical or recreational use.

“If you are considering investing in a company with operations relating to the marijuana business industry, understand that the company may be criminally prosecuted and this may impact the value of your investment,” the SEC said in the alert. The advisory highlighted a portion of a Sessions memorandum that cited “Congress’s determination that marijuana is a dangerous drug and that marijuana activity is a serious crime.”

The new alert came as the SEC and federal prosecutors charged Greenview Investment Partners and its founder, Michael E. Cone, with allegedly defrauding investors through false promises of windfalls from investments in marijuana businesses. According to the SEC’s complaint, filed in the U.S. District Court for the Northern District of Texas, Cone and the fund raised $3.3 million through a scheme that involved cold calls to retail investors and false claims about having a long record of profitable investing in cannabis-related businesses.

In reality, the SEC alleged, Greenview had no such experience—its sole investment a $400,000 wager on a cannabis company that had yet to harvest a crop. Cone spent investors’ money on designer clothes and luxury cars, along with payments to earlier investors meant to prolong his Ponzi-like scheme, the SEC said.

Cone, represented by Bird Marella principal Gary Lincenberg, agreed to be barred from serving as an officer or director at a company, according to the terms of a consent order.

Lincenberg declined to comment Wednesday.

A judge in the U.S. District Court for the Northern District of Texas will determine disgorgement and prejudgment interest “at a later time,” the SEC said.

“Greenview allegedly exploited investor interest in the marijuana industry and lied about high returns and the backgrounds of its key executives,” said Shamoil Shipchandler, director of the SEC’s regional office in Fort Worth, Texas. “Investors must remain vigilant and not let the fear of missing out dupe them into making bad investment decisions.”

In a parallel criminal case, brought by the U.S. attorney for the Central District of California, prosecutors charged Cone with fraud and seized about $1.4 million in cash and assets.



The complaint is posted below:


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