Commission Seeks to Halt Ongoing Offering Fraud

Offering frauds have long been a focus of the Commission’s enforcement program. They come in all shapes and sizes and are based on a large variety of claims. Frequently the scheme is based on a currently popular product such as crypto coins or assets.

Recently at least some of these cases seem to be reverting to a prior favorite of those seeking to peddle these schemes – cannabis related investments. Regardless of the claims however, the results are always the same: The investors lose their funds despite the apparent safety the promoters of the scheme typically describe; those involved disappear with the investor cash. The investors lose their money. That is the case with the most recently action filed by the agency in this area, SEC v. Integrated National Resouces, Inc., Civil Action No. 8:23-cv-00855 (C.D. Cal. Filed May 16, 2023).

Named as defendants in the case are: the company, also known as “Weedgenics;” Rolf Max Hirschmann, known as “Max Bergmann;” and Patrick Earl Williams Bergmann. Over a period of four years, beginning in June 2019, Messrs. Hirschmann and Williams controlled Weedgenics. During that period Defendants raised over $61 million from about 350 investors.

Investor funds were raised, according to the scheme promoters, to develop and expand a cannabis cultivation facility of the company in Adelamto, California. Investors were told that the company also had a facility in Nevada. Each facility was licensed by the appropriate state authorities. Each facility was profitable, according to Defendants. Those profits would be used to make regular interest payments to investors. Investors were furnished with photos of each facility along with financial statements evidencing the claimed profits.

Each representation made to the investors was false. The documents were false. The funds were not transferred to the company as promised. To the contrary, those funds were cycled through multiple accounts in an obvious attempt to conceal their actual location and further deceive the investors. Eventually the funds went to the individual Defendants who enriched their personal life styles. Portions of the money went to make Ponzi-like payments. In the end the company essentially rekindled the fraud and raised additional funds in this scheme.

The complaint alleges violations of Securities Act Section 17(a) and Exchange Act Section 10(b). The case is in litigation. See Lit. Rel. No. 25733 (May 16, 2023).