The movement to legalize marijuana has triggered a wave of investment scams by stock dealers promising high returns on dope companies that are likely to be a bad trip.
With nearly half of U.S. states now allowing marijuana use for medical or recreational purposes, the Securities and Exchange Commission is warning "about the potential for fraud in microcap companies that claim their operations relate to the marijuana industry."
"For marijuana-related companies that are not required to report with the SEC, investors may have limited information about the company's management, products, services, and finances," the SEC says. "When publicly available information is scarce, fraudsters can more easily spread false information about a company, making profits for themselves while creating losses for unsuspecting investors."
The SEC, at the time of the announcement in May 2014, had suspended trading in five marijuana companies located in California, Colorado, and Texas.
"Recent changes in state laws concerning medical and recreational marijuana have created new opportunities for penny stock fraud," said Elisha Frank, co-chair of the SEC Enforcement Division's Microcap Fraud Task Force. "Wherever we see incomplete or misleading disclosures, we act quickly to protect investors."
In other words, your expected high profits could go up in smoke.
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