The SEC charged a fund adviser and its founder/principal with defrauding investors in funds focused on the cannabis industry. The defendants allegedly misrepresented how their funds would deploy capital and made Ponzi-like payments to investors when the funds did not generate sufficient income to pay promised returns. Additionally, the founder/principal allegedly misappropriated at least $668,000 from the funds he managed. The adviser has already settled with the SEC; the action against the founder/principal, who was forced out of the adviser in 2019, is pending. This article details the alleged fraudulent conduct, the SEC’s claims and the adviser’s settlement. See our four-part series on investing in cannabis: “Legal Background, Justice Department Guidance and State Legalization” (May 9, 2019); “Structuring Investments, Due Diligence, Offering Documents and the BSA” (May 16, 2019); “Implications of Federal Illegality and Residency Requirements” (May 30, 2019); and “International Investments, Public Perception, Valuation and Service Providers” (Jun. 6, 2019).