SEC Charges Hemp Inc. and CEO Bruce Perlowin with Fraud

Hemp Litigation

The SEC filed civil litigation against cannabis penny stock Hemp, Inc, (OTC: HEMP)  and several affiliates, including CEO Bruce Perlowin, on June 20th, The complaint alleges that Perlowin and the company engaged in a long-running scheme involving “phony gifting” of shares and “bogus consulting” agreements that allowed insiders to sell hundreds of millions of shares that were not properly registered and that should have been restricted. Further, the SEC alleges that Perlowin and the other defendants, which included his brother Jeb and Barry Epling, made false statements to broker-dealers, Alpine Securities and Scottsdale Capital.

After founding another cannabis penny stock, Medical Marijuana, Inc. (OTC: MJNA) in 2009, Perlowin left to create Hemp, Inc, in 2011. Since then, the company has generated lots of press releases and additional shares but little in terms of revenue. The company would borrow money from Perlowin regularly and then allow him to convert it to equity indirectly by issuing him convertible preferred stock at a significant discount to its intrinsic value, a scheme I described three years ago.

The SEC took action without suspending trading in the stock. It seeks to permanently bar the company and defendants from engaging in violation of the securities laws, to return “all ill-gotten gains derived directly or indirectly” and to bar the defendants from participating in any penny stock offering. Epling and Perlowin will be permanently barred from serving as a director or officer of any public company as well.

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Exclusive article by Alan Brochstein, CFA
Alan Brochstein, CFA
Based in Houston, Alan leverages his experience as founder of online communities 420 Investor, the first and still largest due diligence platform focused on the publicly-traded stocks in the cannabis industry. With his extensive network in the cannabis community, Alan continues to find new ways to connect the industry and facilitate its sustainable growth. At New Cannabis Ventures, he is responsible for content development and strategic alliances. Before shifting his focus to the cannabis industry in early 2013, Alan, who began his career on Wall Street in 1986, worked as an independent research analyst following over two decades in research and portfolio management. A prolific writer, with over 650 articles published since 2007 at Seeking Alpha, where he has 70,000 followers, Alan is a frequent speaker at industry conferences and a frequent source to the media, including the NY Times, the Wall Street Journal, Fox Business, and Bloomberg TV. Contact Alan: Twitter | Facebook | LinkedIn | Email

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