A California startup that raised $60 million to develop a marijuna-growing operation was actually a Ponzi scheme with the money used to buy luxury cars, houses and adult entertainment and to sustain the rap career of one of the company’s founders, federal regulators said.
The Securities and Exchange Commission alleged in a civil complaint filed in California federal court that WeedGenics and its owners, Rolf Max Hirschmann and Patrick Earl Williams, promised investors that their money would be used to expand existing operations in California and Nevada.
But investigators say the company, which was legally registered as Integrated National Resources Inc., was a sham and never operated any marijuana-related businesses at all.
“Rolf Hirschmann and Patrick Williams allegedly had no real company, no product, and no business, yet despite this, they promised investors everything and then delivered nothing,” said Michele Wein Layne of the SEC.
Instead, the agency said the money was mostly funneled into the pockets of Hirschmann, 52, of Eagle, Idaho, and Williams, 34, of St. Petersburg, Fla., with $16.7 million being used to pay back earlier investors.
The SEC says that between 2019 and April of this year, the pair managed to raise $60 million from 350 investors.
It wasn’t immediately clear if the men had retained attorneys. A message left for Williams wasn’t immediately returned, and numbers listed for Hirschmann appeared to no longer be in service.
On Tuesday, the SEC said it had received an emergency court order to shut the company down and seize its assets.
According to court filings, Hirschmann and Williams had promised investors returns of up to 36%, claiming the business was well under way and that their money would be used to expand existing operations. When fully operational, they claimed the company would generate tens of millions of dollars annually.
When investor money was received, the men would transfer it through a multitude of accounts to obscure its origins, and then use it to buy jewelry, cars and real estate.
Investigators say Hirschmann took pains to obscure his identity from investors, using a fake name, Max Bergmann, in any communications he had with them. Williams operated behind the scenes but used investor money to prop up his career as a rapper known as BigRigBaby, according to court papers.
In its filings, the SEC named a number of companies controlled by Williams and Hirschmann, with names like Oceans 19 Inc., Autobahn Performance LLC and Bagpipe Holdings LLC, they say have bank accounts holding millions in misappropriated money.
This story originally appeared on Marketwatch
