SEC Charges Cannabis Company American Patriot Brands, CEO, and Others with Fraud

The Securities and Exchange Commission (SEC) has filed a complaint against American Patriot Brands Inc. (APB), a company that specializes in cannabis cultivation and distribution, as well as its CEO and five other entities and individuals. The charges stem from a scheme in which more than $30 million was raised from over 100 investors across the US. The SEC alleges that the defendants made false and misleading statements to investors about various aspects of the company, including its financial condition, operations, the value of its Oregon cannabis farm, and the safety and security of investing in APB.

The complaint states that APB executives, including CEO Robert Y. Lee, and current and former executives Brian L. Pallas and J. Bernard Rice, funneled millions of investor funds to their personal accounts and spent tens of thousands of dollars on personal expenses. The SEC seeks permanent injunctive relief, disgorgement with prejudgment interest, civil penalties, and officer and director bars against Lee, Pallas, and Rice. The complaint also names three affiliated entities that allegedly received millions in investor proceeds and seeks disgorgement with prejudgment interest from them.

According to Carolyn M. Welshhans, Associate Director of the SEC’s Enforcement Division, “This action reflects the SEC’s ongoing commitment to holding accountable those who seek to profit through lies and deception.” The SEC’s investigation was conducted by Andrew Elliott and Brianna Ripa, with assistance from accountant Jamie Wohlert, and it was supervised by Welshhans and Amy L. Friedman. The litigation will be led by Samantha Williams and supervised by James Carlson.

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