C3 International, a California-based cannabis company, refused to participate in a case in which it is being accused, along with its CEO and president, of defrauding at least 40 investors out of approximately $2 million.
The Securities and Exchange Commission (SEC) ordered the company to pay $1.9 million in reimbursement, along with $146,000 in interest and $3.1 million in civil penalties after ignoring the defendant's case, which also enabled the SEC to ask the court for the default judgment.
The company’s founders were spared as they apparently responded separately, reported the Green Market Report.
The SEC complaint (2021) alleged that from October 2011 to November 2019, Steele Smith and Theresa Smith raised about $2 million from more than 40 investors by selling shares in C3, according to the court order.
“In one instance where an investor sent $100,000 to purchase C3 shares in August 2018, Steele Smith sent $40,000 of it that same day to a Jeep dealership, as a down payment on an expensive SUV for himself,” reads the SEC complaint, which claims that the money raised was diverted for their personal expenses rather than being raised for business purposes.
But, C3 claimed that it had a patent on a cannabis pill called Idrasil. Apparently, there would only have been a provisional patent application that expired and an actual patent would never have been issued.
Is C3 In Trouble?
Smith omitted disclosing his background that he had been convicted of conspiracy to grow at least 1,000 cannabis plants in 2012, according to the complaint.
C3, which also said that "insurance companies would reimburse Idrasil expenses," but fewer than half actually accepted the drug, suggested that big pharmaceutical companies were interested in buying C3. That was also not the case.
The company’s founders also sold C3 stock without ever filing a registration statement.
Finally, the SEC's complaint seeks permanent injunctions, disgorgement with prejudgment interest, civil penalties,and officer and director bars against the Smiths, the complaint concluded.
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