[dropcap class=”kp-dropcap”]N[/dropcap]ine people in the Corvallis, Oregon area have been charged with conspiracy. The defendants were allegedly using money they obtained through a credit card “bust-out” to fund a black market grow operation and the purchase of merchandise such as gold jewelry and cigarettes, which were then sold. Some of the profits were used to pay rent at a state-licensed cannabis retail business.
A statement from the U.S. Attorney’s Office District of Oregon further explained these charges.
“A credit card ‘bust-out’ is a fraud scheme that begins when perpetrators obtain credit cards and accumulate large balances. Payments are then made from co-conspirator bank accounts, reducing the credit card balances and allowing for additional purchases,” according to the statement. “After numerous purchases and payments are made, a co-conspirator would report the payments as unauthorized to their banks. Banks then seek and obtain reimbursement from the credit card companies and deposit those funds back into the co-conspirator’s bank accounts.” Following this, there are no further payments made to the credit cards, which leads to complete losses for the credit institutions.
The defendants started the fraudulent credit cards and bank accounts using the personal information of individuals in Hollywood, California. As the individuals were impoverished, they sold their information to the defendants.
The alleged fraudsters received over $1 million from financial institutions using these methods. The cannabis retail business that was allegedly involved in the scheme was the Corvallis Cannabis Club. Co-conspirators used the retail business to pack and vacuum-seal extra cannabis, and ship it out of state to California and Illinois, where it was sold on the black market, according to the AP.
In May, Billy J. Williams, United States attorney for the District of Oregon, released a memo outlining “Five Federal Enforcement Priorities.” Overproduction and interstate trafficking were both named the number one priority of the five.
“This will be a top priority until overproduction that feeds exportation of marijuana across Oregon’s borders stops,” the memo reads. “Notably, since broader legalization took effect in 2015, large quantities of marijuana from Oregon have been seized in 30 states, most of which continue to prohibit marijuana.”
Organized crime and violence, firearms or other public safety threats were also named as priorities. This case was the first cannabis case prosecuted by Williams since issuing the memo.
The investigation started when the Federal Buerau of Investigation and the United States Postal Inspection Service discovered the credit card fraud scheme in December of 2016. The Oregon State Police, Corvallis and Philomath police and the Drug Enforcement Administration also participated in the investigation.
Court proceedings began in Eugene in June. U.S. Magistrate Judge Jolie A. Russo is ruling on the case.
Cannabis is now legal, either for medical or recreational purposes, in more states than it isn’t. But that won’t stop some bad players from finding ways to break the law, which is turn creates bad publicity for the entire industry in the process.