Jury Finds Businessmen Guilty In Cannabis Bank Fraud Case

Law360 reported that a Manhattan jury found two businessmen guilty of assisting in an elaborate plan to let California weed company Eaze process transactions without getting flagged by banks over the federally illegal substance. The website said that it took the jury six hours to come to that conclusion following a hard-fought trial that began on March 1 before U.S. District Judge Jed S. Rakoff.

Last year, the businessmen Hamid Akhavan, 42, and Ruben Weigand, 38, were each charged by the Manhattan U.S. attorney’s office for conspiring to defraud merchant banks of property rights by tricking them into processing more than $150 million of transactions on behalf of San Francisco-based Eaze, a cannabis-selling app nicknamed “the Uber of pot.” The major banks and credit card companies like Visa (NASDAQ: V) and Mastercard (NYSE: MA) refuse to work with cannabis companies as the product is still federally illegal. So any transactions using these products or lying to banks about the nature of the transactions is illegal.

Eaze has continuously stated that it had cooperated with the authorities in the case. However, the company’s former CEO James Patterson entered a guilty plea right before the trial began.

Prosecutors said Weigand and Akhavan worked with executives at an online marijuana marketplace company to facilitate the sales, although they haven’t named the business. Eaze, an online company offering delivery from dispensaries, was the subject of a lawsuit last year that alleged it worked with Akhavan to utilize shell companies to process credit card payments. That case was settled. While Eaze was not specifically named in the case by the prosecutors, only an unnamed online marijuana marketplace was mentioned, a connection has been made. Eaze was not charged in this case against the two. Patterson resigned from Eaze in 2019.

Back In The Beginning

Back in April 2019, the company DionyMed terminated its contract with Eaze and claimed that “Based on a review by outside counsel, DYME could not confirm that the processing procedure meets California regulatory requirements.” The company said it was going to invest in its own delivery service called “Chill.” DionyMed through its dispensary store Hometown Hearts claimed that Eaze was using shell accounts to create fraudulent charges and payment processing, which was the excuse it needed to terminate a three-year contract. Eaze insisted at the time that it didn’t process bank transactions, that it merely provided the software between the transactions. However, it seems Dionymed’s case, which was settled, flagged the behavior that Eaze denied.

According to Law360, prosecutors said the defendants told “layer upon layer of lies” to build a system of fake websites and third-party dummy companies that allowed Eaze to take federally unlawful credit card and debit payments between 2016 and 2019.

The indictment alleges that, from 2016 through 2019, Akhavan, Weigand, and other, unnamed co-conspirators engaged in a conspiracy, the “Transaction Laundering Scheme,” to deceive banks into processing over $100 million of credit and debit card payments to marijuana retailers by disguising the transactions so as to create the false appearance that they were unrelated to the purchase of marijuana.

The case is U.S. v. Weigand, case number 1:20-cr-00188, in the U.S. District Court for the Southern District of New York.

 

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