The U.S. Securities and Exchange Commission has secured more than $40 million in disgorgement, interest and penalties in a case involving a cannabis company and two executives accused of misleading investors and misusing company funds.
A federal court in California entered a final judgment against American Patriot Brands, Inc., several affiliated companies, former CEO Robert Lee and chief operating officer Brian Pallas.
The case centered on allegations that the companies raised millions of dollars from investors while providing false or misleading information about their financial condition, business operations and intended use of investor funds.
The SEC also alleged that millions of dollars were transferred into accounts controlled by company executives and used for personal expenses.
American Patriot Brands began pursuing the marijuana industry in 2016 through acquisitions of businesses involved in cannabis cultivation and distribution. The company had previously operated as The Grilled Cheese Truck Inc., a food truck business.
Under the final judgment, the companies were ordered to pay approximately $24 million in disgorgement and prejudgment interest, along with $13 million in civil penalties.
Lee was separately ordered to pay $6.4 million in sanctions, while Pallas was assessed a civil penalty of $472,902.
The judgment also imposed permanent injunctions and barred the executives from certain securities-related activities and leadership roles at publicly traded companies.
