SEC Charges Medbox Inc. And Execs With Touting Bogus Revenues From Marijuana Vending Machines

Posted On: 3/10/2017

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TAGS: Securities and Exchange Commission, Medbox Inc., Notis Global, pot vending machine marketer, sham transactions, Vincent Mehdizadeh, Bruce Bedrick, New-Age, Yocelin Legaspi

LOS ANGELES -- The Securities and Exchange Commission on March 9 charged California-based Medbox Inc. and its founder with falsely touting "record" revenue numbers to investors. The SEC also charged the pot vending machine marketer with claiming to be a leader in the marijuana industry while some of its earnings reportedly came from sham transactions with a secret affiliate.

According to the SEC's complaint, Medbox provided marijuana consulting services and claimed to sell vending machines capable of dispensing marijuana on a controlled basis using biometric identification.

The SEC alleges that Vincent Mehdizadeh created a shell company called New-Age Investment Consulting to carry out illegal stock sales and used the proceeds from those sales to boost Medbox's revenue.

Medbox allegedly issued press releases headlining the phony revenues as record earnings to legitimize itself as a viable commercial operation when in fact nearly 90% of the company's revenue in the first quarter of 2014 allegedly stemmed from sham transactions with New-Age.

Mehdizadeh allegedly acknowledged in a text message that "the only thing we are really good at is public company publicity and stock awareness. We get an A+ for creating revenue off sheer will but that won't continue."

Meanwhile, according to the SEC's complaint, Mehdizadeh funded the purchase of a luxury home in the Pacific Palisades with proceeds from New-Age's illicit stock sales.

The SEC's complaint also charges Medbox's then-chief executive Bruce Bedrick with being complicit in the scheme and personally profiting. The SEC also charged New-Age and Mehdizadeh's then-fiancée Yocelin Legaspi with unlawfully selling unregistered securities. Mehdizadeh installed Legaspi as the supposed chief executive of New-Age when he created the company.

"As alleged in our complaint, investors were misled into believing that Medbox was a leader in the burgeoning marijuana industry when the company was just round-tripping money from illegal stock sales to boost revenue," said Michele Wein Layne, director of the SEC's Los Angeles regional office.

Mehdizadeh and Medbox, which has since changed its name to Notis Global, have agreed to settle the SEC's charges. Mehdizadeh agreed to pay more than $12 million in disgorgement and penalties, and agreed to be barred from serving as an officer or director of a public company or participating in any penny stock offerings. The settlements are subject to court approval. The SEC's litigation continues against Bedrick, Legaspi and New-Age.