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Securing The Cannabis Industry Against Fraud

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There is an unbelievable amount of money funneling through the cannabis industry. In 2018 alone, adult-use and medical cannabis brought in an estimated $10 billion, creating thousands of jobs. As great as growth is for this stabilizing industry, the influx of demand can attract a few bad players. 

Fraud and security problems, in particular, have begun to plague the cannabis industry, serving as a somber warning for business owners and investors to do due diligence. 

Ontario-based cannabis company Green Relief is currently under investigation for fraud—$14 million was found to be missing from the brand’s cash reserves. Green Relief’s co-founders are accused of siphoning millions of company earnings for personal use over a period of 6 years. Green Relief’s new management accused the founders of using fake invoices to pay for personal expenses from the company’s accounts. The co-owners are also accused of misrepresenting claims about the company’s profitability. Once renowned for aquaponic medical cannabis, Green Relief is now known for the fallout from fraud, like its financial troubles.

On February 14, 2020, famed cannabis entrepreneur Scott Pack was found guilty on 6 charges of fraud. Although he’s awaiting sentencing, Pack could go to federal jail for over 30 years. His case was one of the largest cannabis fraud cases in Colorado state history, to the tune of $5 million. Pack claimed he was doing cannabis grows and needed investors to purchase a new facility to expand production—but that was untrue. The courts allege that Scott used investors’ money to repay earlier investors and padded his pockets in the process. 

Aside from fraud, security is another issue plaguing cannabis operators. Because cannabis is such a new industry, few operators understand the importance of locking down proprietary and customer data. In December 2019, a point of sale system designed for dispensaries exposed thousands of customers’ information. 

Moving forward, operators and investors should:

Cannabis is growing fast. Although we can enjoy the industry’s rapid growth, we have to ensure it doesn’t grow too fast for its own good. The Green Rush attracted a criminal underbelly with bad motives. Fraud and cybercrimes will cut the industry’s credibility if we allow this to continue happening.




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