Saying you run a business is easier than actually running one

You, too, could run a $61.7m cannabis startup — if you don’t mind lying and federal prisons.

Wanna invest in cannabis? Here’s startup WeedGenics’ pitch:

Saying you run a business is easier than actually running one
  • “100% vertical integration” — cultivation, manufacturing, and distribution all in-house
  • “Massive expansion” with a new 150k-sq.-ft. facility on the way
  • “Spending as low as possible” with “exceptionally high profit margins”

Except there’s just one other thing…

… The California-based startup was actually a Ponzi scheme, feds say.

There was “no real company, no product, and no business,” according to the SEC, which shuttered the company last week and will pursue penalties against owners Rolf Max Hirschmann and Patrick Earl Williams.

The marijuana-growing front accumulated $61.7m in funding, allegedly spent on houses, dining, jewelry, and adult entertainment. Also:

  • Hirschmann, under the alias “Max Bergmann,” pocketed ~$15.7m, spending $2.4m of it on luxury cars.
  • Williams used $7.9m of investor money to fund BigRigBaby, his rapper alter ego.

Your takeaways?

You know better than to run a Ponzi scheme — Right? Right? — but there are still valuable business insights found in moments like this:

  • The ol’ “transfer money endlessly” method? Don’t do that. When money came in, the defendants transferred it “dizzyingly back and forth,” per the SEC, until it wound up in personal accounts. Cute — but it doesn’t work like that.
  • Homework’s always worth it: Knowing when you’re being defrauded isn’t easy by nature, but there are licensing and permitting requirements aplenty (especially for cannabis businesses) one can check on; none were met here.
  • When someone shows you what they’re doing with your money, believe them: There’s a particularly telling moment in the music video for BigRigBaby’s song called — wait for it — “Play Fair”; it shows Williams wiping sweat off his brow with a fat stack of Benjamins.
Topics: Fraud And Scams

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