SEC Files Lawsuit Against Cannabis Execs, Alleges Theft Of Investor Money

The suit alleges that Kris Swaffer and Sean Williams "knowingly or recklessly committed securities fraud" for their own gains.

The U.S. Securities and Exchange Commission late last week filed a civil lawsuit against a trio of marijuana entrepreneurs, alleging that they and their company misled investors and stole millions of dollars.

The suit, filed in U.S. District Court in the Northern District of Ohio against Kris Swaffer and Sean Williams, with Swaffer’s wife, Rosalyn, listed as a relief defendant, alleges that two of the three individuals “knowingly or recklessly committed securities fraud” by raising money from investors but used most of it for their own ends.

SEC vs Kris Swaffer complaint

The SEC filing states that Kris Swaffer and Williams led the charge to raise money from investors for Texas-based POHIH and several related entities.

Swaffer and Williams told financial backers the venture would be an international marijuana company called “Pure Organic Offerings.”

Between 2016 and 2020, the pair raised more than $14 million for the business from 75 investors in 14 states, the SEC suit states.

But several millions were diverted for Swaffer’s and Williams’ personal use, the lawsuit contends, and though the investments were sold as securities, none of the businesses under the “Pure Organic” umbrella were ever registered with the SEC.

“Swaffer misled investors about his background, portraying himself to potential investors as a wealthy, successful businessman, while concealing the reality that he was deep in debt and at risk of losing his home,” the lawsuit reads.

“He claimed he would benefit from the business by receiving distributions of profit alongside other investors. In reality, he misappropriated investor funds throughout the entire time period of the Pure Organic Offerings, including by using investor money to pay off debts owed by him and his wife, Rosalyn K. Swaffer … and to fund their personal expenses.”

The lawsuit charges that Swaffer, a former Michigan auto dealer, began redirecting investor money to cover his own debts as early as 2016, taking $2.4 million for his own use.

Williams took at least $220,000, the lawsuit alleges, along with “hundreds of thousands of dollars outside of payroll,” while also taking “reimbursements for business expenses.”

Though Swaffer apparently attempted to obtain legitimate marijuana business licenses in both Michigan and Texas, he was unsuccessful. He did win a cannabis cultivation permit in North Macedonia and began growing there in 2016.

The duo also didn’t disclose to investors that the cannabis industry remains federally illegal in the U.S. and that the entire operation could be shut down at a moment’s notice, the SEC suit alleges.

All told, the Pure Organic entities “never generated revenues from operations or distributed profits to investors,” the lawsuit states, and the venture collapsed.

Swaffer stopped updating investors about Pure Organic in 2021, “by which time several investors had filed lawsuits,” the SEC suit states. Swaffer also took cover behind the Fifth Amendment during the SEC’s investigation.

The suit requests a permanent injunction, disgorgement with prejudgment interest and civil penalties against all three defendants, as well as an officer and director bar against Kris Swaffer and Williams, according to a news release.

John Schroyer


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