WASHINGTON, March 9 (Reuters) - The founder of a California-based company that sold marijuana vending machines agreed on Thursday to settle charges he sold shares in a secret affiliate and used the funds to persuade investors the vending-machine firm had earned record revenues.
The Securities and Exchange Commission said Medbox and its founder, Vincent Mehdizadeh, agreed to pay $12 million in disgorgement and penalties. Mehdizadeh also agreed to be barred from serving as an officer or director in a publicly traded company.
The settlement is subject to court approval, the SEC said.
Mehdizadeh could not immediately be reached for comment.
The SEC said in a statement that Mehdizadeh created a shell company called New-Age Investment Consulting to carry out illegal stock sales, the proceeds of which were used to boost revenue at Medbox, which was seen as a leader in the medical marijuana industry.
The SEC said Medbox "issued press releases headlining the phony revenues as record earnings to legitimize itself as a viable commercial operation." In fact, nearly 90 percent of the firm's revenues in the first quarter of 2014 stemmed from "sham transactions with New-Age," the SEC said.
Mehdizadeh also bought a luxury home in California with funds from New-Age's illicit stock sales, the SEC said.
"Investors were misled into believing that Medbox was a leader in the burgeoning marijuana industry when the company was just round-tripping money from illegal stock sales to boost revenue," said Michele Wein Layne, the SEC regional director in Los Angeles.
Mehdizadeh and Medbox, now known as Notis Global, agreed to settle with the SEC. Litigation is continuing against New-Age and other individuals accused in the investigation, the SEC said.
(Reporting by David Alexander; Editing by Peter Cooney)