Oregon Hashish Securities Litigation: One other (!) Fraud Lawsuit

securities fraud hemp oregon

The maturation of the Oregon cannabis industry in recent years has been accompanied by a huge surge in mergers and acquisitions and a surge of investment capital in the market. Unsurprisingly, our trade attorneys, both here in Oregon and elsewhere, have seen significant increases in the number of securities lawsuits. As we have extensively described, there is a right and a wrong way to raise capital – whether for marijuana or hemp – and all too often we see companies issuing “securities” without taking the appropriate steps to comply Securities laws or ensuring investors are spotted.

A recent investor lawsuit filed in Multnomah County for cause under the Oregon Securities Laws exposes risks to companies, their owners and investors. The case is Chung v. Martin et al. (Feel free to email me if you would like a copy of the complaint.) Plaintiff David Chung and his firm Elevated Society LLC (collectively, “Plaintiffs”) allege that Defendants Martin, Woodruff, We Clone LLC, and We Close Prospect LLC (collectively, “Defendant”) sold unregistered securities in violation of Oregon law and made false statements relating to the sale of securities in violation of Oregon law. According to plaintiffs, defendants urged investors to purchase up to 40 units of We Clone LLC at an issue price of $ 50,000 per unit to raise up to $ 2,000,000 and promoted the investment through advertising on bizbuysell.com, Videos posted on the Internet and communications with plaintiffs.

Defendants stated that We Clone LLC will grow and sell high quality hemp clones and flowers. Plaintiffs allege that defendants “urged” plaintiffs to “hurry and invest” because there were only a limited number of units available when in fact no units were purchased. Defendants promised quarterly profit payments and issued a Private Placement Memorandum (“PPM”) containing information about securities. Chung made a $ 200,000 investment and signed a subscription agreement but received no further documentation regarding his ownership of the LLC entities. He later received a certificate of ownership – but for the wrong company.

The complaint offers a litany of allegedly false statements and omissions of material facts related to the offer and sale of membership units. That includes We Clone actually growing hemp outdoors, not indoors as pictured; that plaintiffs had to act quickly to buy the units; that other investors had purchased units when such units were not purchased; that the defendants had to raise $ 2 million to make their “system” viable; that plaintiffs would be investing in a “fully functional business” if We Close were in fact not fully functional; that We Clone would be paid for the advice when in fact only Martin’s other companies would be paid for the advice; that We Clone had a working e-commerce platform when there was no such platform. . . and many other alleged misrepresentations and omissions.

The lawsuit makes three claims under Oregon securities laws and seeks to hold each defendant personally liable along with the defendant companies. Our readers who own or operate businesses looking to invest should be aware of this: Oregon Securities Laws Liability for fraud goes very far! For our investor readers, you may have more power than you think. As always, we’re here to help.

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