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In the SEC’s Latest Ponzi Scheme Dustup, What Were Investors Smokin?

The Securities and Exchange Commission turned its firehose to douse another alleged Ponzi scheme this week saying its masterminds blew smoke up the noses of investors to the tune of $60 million bucks.

According to the complaint linked here by the feds, Rolf Max Hirschmann of Eagle, Idaho, and Patrick Earl Williams, a Floridian, duped 350 investors from across the country into sinking funds into a cannabis operation, known as WeedGenics. The industrious pair allegedly told investors they were going to expand marijuana grow facilities in Adelanto, California, and Las Vegas (why is it always Vegas?) and that this would generate returns of up to 36%. Really?

“In truth, however,” the SEC says, “this was all a sham.” There were no warehouses, there was no grow operation, there wasn’t any semblance of a legitimate business. Once the money rolled in, the complaint alleges, it was “dizzyingly” transferred to multiple accounts intended to hide the facts about how investors’ money was being used, and it follows a familiar Ponzi scheme pattern: to fund an over-the-top lifestyle for the operators.

Image: SEC. 'Dizzy Pattern' of Moving Funds

Living large in the Gem State

The SEC says Hirshmann’s cut was almost $23 million, and that he spent more than $5.4 million on residential real estate and renovations (his home in Boise looks pretty sweet), nearly $4 million on luxury cars, $4.5 million on credit card payments, a cool quarter-million on entertainment, and over a million in “payments to women.”

A Rapper, not a Rap Sheet

Williams, according to the SEC, transferred $5.6 million of the operation’s funds into his personal accounts, and spent $625,000 on “dining, jewelry, adult entertainment, etc.” Williams is also a rap musician known as “BigRigBaby,” and you can see him handling some cool cash in this online video.

What’s Next

As Ponzi schemes are exposed, people often wonder why there are not always immediate indictments and arrests. The answer is because the victims are the most immediate priority. While the Department of Justice may well proceed with criminal charges, the SEC’s focus is on recovering as much money as possible for the investors. In this case, the assets of those involved in this operation have already been frozen, and a hearing is scheduled for June 2. The SEC will ask that a permanent receiver be appointed by the court, and the receiver’s job will be to sell off the lavish homes, expensive jewelry, luxury vehicles, and other material goods, to put as much money as possible back into the hands of the duped investors. Let’s hope it works out for them.

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