Bank fraud allegations test marijuana business
02 Jul 2020

On March 9, a German businessman named Ruben Weigand was arrested at Los Angeles International Airport, during a layover on his way to Costa Rica. In an indictment unsealed later that week, federal prosecutors in Manhattan charged Mr. Weigand with a single count of conspiracy to commit bank fraud, stemming from an alleged scheme to trick banks into processing more than $100 million in marijuana sales.

The case doesn’t appear to be focused on the drugs themselves—the underlying sales seem to have been legal under state laws. Rather, prosecutors appear aimed at the alleged banking transactions and what they described in one court hearing as a multinational “criminal network” at work in the international financial system, according to court filings and people familiar with the case.

Still, the prosecution could have profound consequences for the U.S. medical and recreational marijuana industries, which operate in a legal gray zone on the outskirts of the mainstream banking system.

Mr. Weigand has pleaded not guilty and remains in custody at a jail in California, after prosecutors argued that his wealth and foreign ties made him a flight risk. Mr. Weigand’s lawyers say the case is fatally flawed, arguing in court filings the bank-fraud charge isn’t supported by the alleged facts.

At the heart of the indictment is one of the country’s largest on-demand marijuana marketplaces, Eaze Technologies Inc., a platform through which customers can buy marijuana for delivery from a network of dispensaries. Eaze wasn’t named in the indictment and hasn’t been charged; the company is cooperating with the federal investigation in hopes of leniency, court filings show.

“We are aware of this matter and are fully cooperating with the relevant authorities,” Eaze said Monday. “Eaze transitioned to supporting new payment systems over a year ago, and this matter does not impact the current customer experience.”

While the purchase and sale of marijuana for personal use has been decriminalized in many U.S. states, it remains illegal on the federal level and most U.S. banks aren’t willing to process payments related to its sale. Cannabis businesses instead rely on cash, or use workarounds, including private mobile-payment processors.

For years, California-based Eaze allowed customers to use credit or debit cards for their transactions—a practice that ended last year. Prosecutors allege that Eaze executives and other unnamed co-conspirators worked with Mr. Weigand and another businessman, Hamid “Ray” Akhavan, to devise a “transaction laundering scheme” that hid the true nature of the transactions from banks.

By Rebecca Davis O’Brien, The Wall Street Journal, 1 July 2020

Read more at The Wall Street Journal

Photo (cropped and edited): Bri / CC-BY-SA-4.0

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