SEC Obtains Final Judgments for More Than $6 Million Against Remaining Defendants in Marijuana Company Offering Fraud

November 24, 2021/US SEC

On November 19, 2021, the U.S. District Court for the Central District of California entered final judgments as to monetary relief against Guy Scott Griffithe and Robert William Russell, whom the SEC previously charged in connection with a scheme to defraud investors and misappropriate investment funds.

The final judgments find Griffithe liable for more than $5.3 million in disgorgement, prejudgment interest, and civil penalties, and Russell liable for more than $698,000 in disgorgement, prejudgment interest, and civil penalties.

According to the SEC’s complaint, [see Litigation Release No. 24722], Griffithe used Renewable Technologies Solution, Inc., an entity he controlled, to sell investors purported ownership interests in SMRB, LLC, a Washington company owned by Russell that held a license to grow marijuana under the state’s recreational cannabis laws. Griffithe and Russell led investors to believe their investments in Renewable would be used to operate SMRB. Instead, Griffithe allegedly spent investor funds on personal and unrelated business expenses, including payments toward several luxury cars for himself and a yacht for Russell, and deposited approximately $1.7 million into Russell’s personal bank accounts. To create the illusion that the marijuana business was profitable and paying dividends as promised, Griffithe allegedly paid out purported profit distributions to some investors, which were partially funded in a Ponzi-like fashion using funds from other investors.

Griffithe and Russell previously agreed to a bifurcated settlement, whereby the Court would determine any monetary remedies against them. In its final judgments, the Court ordered Griffithe to pay $2,093,336 in disgorgement, $336,194 in prejudgment interest, and $2,882,539 in a civil penalty, for a total of approximately $5,312,071. Furthermore, the Court ordered Russell to pay $275,153 in disgorgement, $44,190 in prejudgment interest, and $378,888 in a civil penalty, for a total of approximately $698,232. The judgment permanently enjoins Griffithe and Russell from violating the anti-fraud provisions of Section 17(a) of the Securities Act of 1933 (“Securities Act”) and Section 10(b) of the Securities Exchange Act of 1934 (“Securities Exchange Act”) and Rule 10b-5 thereunder; and permanently enjoins Griffithe from violating the registration provisions of Section 5 of the Securities Act. The judgment also permanently bars Griffithe from participating in the issuance, purchase, offer, or sale of any security in an unregistered offering by an issuer, and from acting as an officer or director of any issuer that has a class of securities registered or that is required to file reports pursuant to the Securities Exchange Act.

By stipulation of the parties, the Court dismissed from the case Defendants Renewable Technologies Solution, LLC and Green Acres Pharms, LLC on March 18, 2021; Defendant SMRB, LLC on May 7, 2021; and Relief Defendant Sonja Marie Russell on July 13, 2021. Accordingly, the Court’s final judgments resolve the litigation.

The SEC’s litigation was led by Duane K. Thompson, Gary Y. Leung, and HelenAnne Listerman, and supervised by Fred Block. Assisting in the litigation were Adam Eisner and Shipra Wells, supervised by C. Joshua Felker.

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