According to a report on Reuters, a Manhattan federal judge sentenced two former consultants for cannabis delivery company Eaze Technologies Inc to prison last Friday for their roles in a scheme to dupe U.S. banks into processing credit card transactions for cannabis purchases. The fraudulent transactions totaled $100 million in payments to the online cannabis marketplace.
U.S. District Judge Jed Rakoff sentenced Hamid (Ray) Akhavan, 43, to two and a half years in prison and Ruben Weigand to 15 months in prison. The story noted that the jury convicted the two men on one count each of conspiracy to commit bank fraud in March. Despite being sent to prison, it could have been much worse. The Judge criticized the federal sentencing guidelines, which could have resulted in life in prison for Akhavan and up to 24 years for Weigand.
“It appears to me that there has never been a case where the guidelines have been more irrational, silly and ridiculous than in their application to this case,” Rakoff said. “It boils my blood that the sentencing commission has not learned better.” The prosecutors felt that the illegally processed transactions amounted to $108 million and that the sentences should be based on that.
Rakoff also ordered Akhavan to pay a $100,000 fine and forfeit $17.2 million. Weigand had agreed after trial to forfeit $384,000 he earned related to the scheme. He was also ordered on Friday to pay a $50,000 fine.
The saga has been going for several years now. Credit card companies like Visa and Mastercard have repeatedly said they will not process cannabis transactions since the product is still federally illegal. This made normal consumer transactions incredibly difficult for legal cannabis companies, whose customers expected a typical retail experience. Eaze began operating in California and insisted at the time that it had not done anything wrong. However, the former CEO of Eaze, James Patterson pled guilty to the crime. He had been working with Akhavan and Weigand, who disguised the payments to sneak them past the banks and credit card companies.
Prosecutors said that Weigand opened merchant accounts at European banks for the phony companies. They called witnesses who testified that Eaze customers can still use Visa and Mastercard for payments on the site through a third-party digital wallet provider.
For its part, Eaze denied the allegations in the 2019 lawsuit and has said it had cooperated with federal authorities and “was not a defendant in” the case against Patterson. Eaze also quit accepting payments of this nature in mid-2019. However, legal experts say the allegations don’t end because the transactions ended. The dispensary owners are no doubt nervously watching the outcome of this case. They could also be dragged into this for committing bank fraud. If the dispensary owners knew that Visa and Mastercard would not accept payments for cannabis transactions and they still pursued a scheme that managed to make that happen, are they guilty? That is yet to be determined.
The case is U.S. v. Weigand et al, U.S. District Court, Southern District of New York, No. 1:20-cr-00188.