Federal securities regulators filed a complaint against Bruce Perlowin that charges the CEO of publicly-traded Hemp Inc of committing a long-running fraud by evading securities registration provisions and selling hundreds of millions of unregistered shares.
Perlowin embraced the title of ‘King of Pot’ after spending nine years in prison for drug smuggling. He was one of the leaders of the pot penny stock bubble of early 2014 that saw the shares of dozens of thinly traded marijuana companies briefly soar and then collapse.
The SEC claims that as CEO Perlowin conveyed hundreds of millions of Hemp Inc shares to companies controlled by Perlowin’s brother, Jed Perlowin, and Barry Epling, to be sold in public markets. Those companies entered into what the SEC describes as bogus consulting deals with Hemp Inc and some of the shares were given as gifts. In 2012, for example, one company linked to Epling received 100 million Hemp Inc shares in recognition of “affection and appreciation for over 20 years of friendship and loyal assistance,” the SEC complaint says.
According to the 16-page complaint the SEC filed in federal court in Nevada, Epling’s companies sold the Hemp Inc shares they received and “used a material portion of the proceeds for the benefit of and at the direction of Bruce Perlowin and Hemp.” Jed Perlowin’s companies also sold millions of Hemp Inc shares and used some of the proceeds for the benefit of Perlowin. The SEC claims the shares that were sold in such a way to investors were restricted but that investors purchasing them via market transactions would have reasonably believed they were unrestricted shares. The SEC says Hemp Inc never filed a registration statement with the SEC.