(CNN) Marijuana vending machine company Medbox and its founder were charged this week with tricking investors by using a secret shell company to create “bogus” sales.
Medbox bragged in press releases about “record” profits and claimed to be a leader in the marijuana industry, authorities said. And in a May 2013 Bloomberg BusinessWeek article, Medbox was profiled as the marijuana vending machine company “plans to be the Walmart of weed.”
In reality, nearly 90% of its quarterly revenue once stemmed from “sham transactions,” according to a Securities and Exchange Commission complaint.
Medbox founder and majority shareholder Vincent Mehdizadeh allegedly orchestrated the scheme and then used the proceeds to buy a luxury home in California’s Pacific Palisades.
The SEC said Mehdizadeh installed his then-fiancee Yocelin Legaspi as CEO of New-Age Investment Consulting, a shell company that carried out “illegal stock sales” used to inflate Medbox’s revenue.