$100 Million Bank Fraud Concealed Legal Weed Sales

A pair of businessmen have been convicted in the Southern District of New York on charges of conspiracy to commit bank fraud for using phony websites and shell companies to process credit and debit card transactions related to marijuana sales.  Hamid Akhavan and Ruben Weigand worked with a company called Eaze that delivered cannabis to customers in California. 

While some states have legalized marijuana, federal law still classifies it as a Schedule 1 drug.  Being federally regulated, most banks steer clear of the cannabis business as a matter of policy.  For most firms operating in the industry, this closes off access to key banking services like credit and debit card processing.  The banking obstacle leaves such businesses with few options.  They must either find a sympathetic financial institution who is willing to complete a suspicious activity report (SAR) for every transaction or deal exclusively in cash, which presents a host of other problems.

Akhavan and Weigand tried a third option, fraud.  They set up more than a dozen phony online retail businesses with names like absolutsoda.com, diverkingdom.com, and happypuppybox.com, many of which had web pages suggesting they sold legitimate goods, such as carbonated drinks, face cream, diving gear, or pet supplies.  The front companies were then used to facilitate the approval and processing of over $100 million in marijuana transactions.

The investigation was likely triggered by a 2019 lawsuit filed by an Eaze competitor, Herban Industries, which alleged Eaze was exploiting an unfair advantage by lying to banks in order to offer its customers credit and debit card payment options.  The former Eaze CEO, James Patterson, pled guilty to similar charges and likely provided evidence against the defendants.

Eaze was not named in the indictment and was cooperative with the investigation.  Akhavan and Weigand are scheduled to be sentenced in June.