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February 2, 2023

The SEC Has Warned Against Investors Putting all Their Money into Marijuana

Thank goodness we have the SEC to protect us from ourselves.

The SEC sent out a warning today cautioning investors to be on the lookout for shady "microcap companies that claim their operations relate to the marijuana industry after the agency suspended trading in the fifth such company within the past two months."

The SEC issued an investor alert warning about possible scams involving marijuana-related investments, noting that fraudsters often exploit the latest growth industry to lure investors with the promise of high returns.  “For marijuana-related companies that are not required to report with the SEC, investors may have limited information about the company’s management, products, services, and finances,” the SEC’s alert says.  “When publicly available information is scarce, fraudsters can more easily spread false information about a company, making profits for themselves while creating losses for unsuspecting investors.”

What's hilarious about this investor alert is that no sooner did I get it from the SEC than another press release came in, this time from an over the counter group inviting international partners to open medical marijuana dispensaries worldwide. BEWARE!

Getting back to the SEC, they've been busy already this morning, suspending trading in Denver-based FusionPharm Inc. (LOL, stoners huh), "which claims to make a professional cultivation system for use by cannabis cultivators among others." It appears the SEC is concerned FusionPharm's assets, revenues, and financial condition may not be accurately represented to investors.

“Recent changes in state laws concerning medical and recreational marijuana have created new opportunities for penny stock fraud,” said Elisha Frank, co-chair of the SEC Enforcement Division’s Microcap Fraud Task Force.  “Wherever we see incomplete or misleading disclosures, we act quickly to protect investors.”

In other words, the SEC doesn't want investors buying a sack purported to be Kush but really just stems and seeds.

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