Cease and desist order issued to local marijuana business owner
DENVER (July 16, 2015) – The Securities Commissioner for the Colorado Division of Securities, part of the Department of Regulatory Agencies (DORA), today issued a cease and desist order to Ryan M. Quinn, stipulating that he can no longer illegally solicit investments for a marijuana business in Colorado.
Quinn, who during the months of April and May 2015 posted Craigslist advertisements seeking “high net worth investors to strategically partner with one of the largest MMJ chains in Colorado,” was found by the Division to be conducting these solicitations improperly.
“We know that fraudsters often capitalize on headline grabbing opportunities,” stated Colorado Securities Commissioner Gerald Rome. “Because of this, marijuana investments can be speculative and risky. In addition, they can cause investors to run afoul of the federal Controlled Substances Act, which still considers marijuana an illegal substance. At worst, many of the unregistered solicitations for investments in marijuana are so-called ‘pump-and-dump’ scams that exploit the headline-making nature of the business to artificially pump up the price of their shares, and then when the stock is at its height the insiders sell, or dump their shares, for a profit and leave others with worthless investments.”
Many marijuana businesses want to solicit investors to get their operations up and running, but need to understand that there are strict regulations in place for raising investment monies from investors. The Commissioner also offered cautionary advice for any prospective issuers of marijuana-related securities. “Familiarizing oneself with the regulatory components required to solicit investments for a small business is key—particularly those that outline the necessary notification of risk to investors,” he said. “The newly enacted Colorado Crowdfunding Act will open some doors for local startups, and may eventually be a tool for the marijuana industry. However, those in the industry would also do well to remember that not only their investors, but they themselves may be at risk of violating federal law.”
The terms of the order, which Quinn agreed to, requires him to immediately cease and desist in the offering of unregistered securities, to cease offering securities as an unlicensed issuer, and to cease engaging in any further violation of any provision of the Colorado Securities Act. Failure to adhere to these conditions will result in civil or criminal actions taken by the Division.
Rome concluded, “I would caution anyone considering this type of investment to think long and hard about the potential risk versus reward.”
Division of Securities