Cannabis legalization is spreading and you want in on the action. It’s big. In fact, it’s arguably one of the most lucrative and fastest growing segments in the market. Moreover, cannabis is expected to grow bigger and faster than the Dot Com industry did. For example, the North American cannabis industry raked in $6.7B in 2018, and is expected to exceed $22B by 2025, with a compound annual growth rate of over 25%.

But buyer beware, many cannabis stocks are junk. With such attractive growth and potential comes a new brand of sketchy companies, scam-artists, and stock promoters.

Sadly even some of the most prominent companies have fallen into self-dealing and enriching insiders at the expense of shareholders.

Most notably, a short seller report revealed Aphria was suspected of its second instance of insider self-dealing since March. Aphria CEO Vic Neufeld will step down from his position within the company. Aphria was accused of purchasing Latin American assets at a significant markup from an affiliate company, SOL Global Investments Corp. The purchases came at the expense of shareholders, and accusers say it enriched Aphria insiders.

Neufeld will remain a member of Aphria’s board. Fellow founder Cole Cacciavillani will also step down once the company finds successors for both positions. Both Neufeld and Cacciavillani will remain as advisors to the company, raising some eyebrows for shareholders who were victimized by the company.

Aphria will also be entering into a class action lawsuit in February — shareholders who suffered losses between July 17, 2018 and December 4, 2018 are encouraged to contact the Schall Law Firm before February 4, 2019.

To make matters worse, Aphria has had long-standing ties with Liberty Health Science Inc. who is now involved in the class-action suit as well.

In fact, Victor Neufeld, Aphria’s CEO and co-founder, served as Chairman of Liberty while Cacciavillani, Aphria’s Chief Agronomist and co-founder, served as an executive for Liberty.

The complaint alleges the defendants made false or misleading statements regarding the company’s business, operational, and compliance policies.

Specifically, the defendants failed to disclose, or made false or misleading statements, that Liberty, in conjunction with Aphria, was involved in a scheme where numerous allegedly fraudulent acquisitions and transactions were made to provide undue benefits to both companies’ insiders.

Effective January 31, 2019, Vic Neufeld and John Cervini will be stepping down from the Liberty Board of Directors.

Shareholders who purchased Class A stock from Liberty between June 28, 2018 and December 3, 2018 have until March 8, 2019 to ask the court to appoint them as lead plaintiffs for the case.

But these two companies are just the tip of the iceberg. Companies such as India Globalization Capital Inc., Insys Therapeutics Inc., Terra Tech, MedMen, and others have all been accused of fraudulent or misleading statements that allegedly led to insider self-dealing or self enrichment.

Recently India Globalization Capital was accused of changing its business model significantly to better attract cannabis and blockchain investors. Moreover, the company was accused of making false and misleading statements to the market by allegedly overstating relationships with manufacturers, distributors, and other business partners.

In May of 2018, Insys Therapeutics, which presents itself as a cannabis company, was accused of a far more insidious act — paying kickbacks to nurse and physician practitioners to prescribe Subsys (a powerful opioid medication designed to treat symptoms of cancer) to their patients.

According to the Department of Justice, many of these kickbacks took the form of speaker payments for speeches made to physicians that were in fact shams, but also took the form of jobs for prescribers’ friends and relatives, as well as lavish entertainment, including strip club visits and expensive meals.

The United States also alleges that Insys executives, including billionaire founder John Kapoor, encouraged physicians to improperly prescribe Subsys to patients who did not have cancer — “and that Insys employees lied to insurers about patients’ diagnoses in order to obtain reimbursement for Subsys prescriptions that had been written for Medicare and TRICARE beneficiaries.”

The company was further accused of encouraging physicians to prescribe doses that were higher than the recommended dose, which resulted in several patients who became addicted, had overdoses, or in some cases died.

Lawsuits against the company and doctors have been filed across the country since the charges were announced in Dec. 2016. A criminal trial in Boston is set to begin Jan. 28, 2019.

In December of 2018 Terra Tech was publicly accused of over 50 complaints including theft, stock manipulation, and filing false financial reports with government agencies.

MedMen is also facing a $19.8M lawsuit from an early investor who accused top executives in the company of self-dealing at the expense of stockholders and a breach of their fiduciary duties.

“Beneath the MedMen veneer is a complex web of interconnected subsidiary entities, virtually all of which are directly managed, directed, controlled, and owned by Adam Bierman and Andrew Modlin, and all of which always pursue the best interests of Bierman and Modlin, rather than the best interests of any stakeholder or entity,” the suit charges.

Accusations about MedMen were made public early January 2019. MedMen has also been involved in a number of other lawsuits, including accusations made in December 2018 from former employees who insisted the company violated a number of labor laws. Specifically, the company allegedly failed to pay employees for hours worked including overtime.

But to be clear, pot stocks aren’t all bad. There are a number of reputable companies worthy of investment. But once again, buyer beware, most cannabis stock news sites have a vested interest in swaying your decisions.

In fact there are a number of sites that openly accept payments from cannabis firms looking to issue press releases and disseminate positive news about their companies. This brings into question the ethics of those websites.

Stock promoters often hold positions in the companies they promote. Further, promoters will create content to get investors to buy or sell their positions, often out of fear or exuberance.

Midam Ventures LLC, owners of MarijuanaStocks.com notes in its disclaimer that it receives $20,000 per month, for a one year period from The Green Organic Dutchman to generate favorable content for TGOD.

Next Green Wave paid $150K for a one month promotion for favorable content. The company then extended its contract for another two months for an additional $175K. It’s last known coverage ended January 8, 2019.

Midam Ventures was sued by Progressive Care Inc. for selling common stock of the company in excess of the contractual agreement of 50K shares per day. Midam is noted for having an arbitration clause in their contracts which prevents their clients, in most cases, from settling in court.

Investors Hub is partnered with MarijuanaStocks.com, raising several concerns for cannabis investors. Numerous allegations have been brought against Investors Hub — but perhaps most notably occured when the SEC brought allegations of multiple pump and dump schemes against the co-owner of Investors Hub, Mathew W. Brown in 2009. Brown was sentenced to four years in federal prison.



It’s hard to blame companies for wanting to pump their stocks. And paying for advertising is as simple as it comes. But unwitting cannabis companies can become targets just as easily as investors. Stock promoters often list disclaimers alerting investors to their bias, but they don’t list their intentions to pump and dump.

While cannabis is the biggest thing since sliced bread, we urge you to do yourself a favor and dig into these companies, even just a little. If done correctly, a small amount of due diligence could save you a world of loss.