On Wednesday, two businessmen were convicted of a single count of conspiracy to commit bank fraud (18 U.S.C. § 1349) for orchestrating a scheme to disguise cannabis-related financial transactions as transactions unrelated to cannabis. The conviction followed the close of a three-week trial in the Southern District of New York, which was one of the first federal criminal trials to be held in person since the start of the COVID-19 pandemic. The jury deliberated for less than a day. Sentencing is scheduled for June 25, 2021.
The two men, Hamid Akhavan and Ruben Weigand, were former associates of an online cannabis marketplace that allowed customers to purchase cannabis products from a network of dispensaries. The marketplace obtained a critical advantage in the industry by allowing customers to make purchases using credit and debit cards. This was rare because U.S. financial institutions generally avoid financial transactions involving cannabis, given that sale of cannabis remains illegal under federal law.
Prosecutors showed that Akhavan and Weigand tricked financial institutions into processing cannabis-related transactions by disguising them as transactions with businesses unrelated to cannabis. The men created phony online businesses purporting to sell items like dog products, dive gear, carbonated drinks, green tea, and face cream. The men also used false credit card and debit card transaction codes to redirect cannabis-related transactions through offshore bank accounts for these phony businesses, disguising the true nature of the payments from U.S. banks.
The days of lax enforcement related to electronic payments appear to be over. The Department of Justice sees this case as a victory in prosecuting white collar crimes in the cannabis industry. It will likely motivate federal law enforcement to scrutinize financial transactions related to the industry for potential misconduct. As the cannabis industry continues to grow, cannabis businesses must take caution and ensure that their financial transactions are compliant with the law in anticipation of potential future investigations.
 See prior article on this case here.
Copyright © 2020, Sheppard Mullin Richter & Hampton LLP.National Law Review, Volume XI, Number 85