If you expect to have a cannabis fraud prevention plan, you need to first understand how fraud works in the cannabis world.


In the five years since Uruguay first legalized marijuana in 2013, the plant has seen more acceptance globally. From 2 countries legalizing its cultivation in Africa, to 30 U.S. states legalizing its medical use and 8 its recreational use, its presence is spreading. On June 19th, 2018 legalized cannabis saw major progress when it was signed into law in Canada. Canada is now the second country to have legalized the plant. It is expected to bring in an estimate of $7 billion within its first year. In the US alone, legal marijuana is already a $10 billion industry.

But wherever the money flows, fraud will follow. Fraud is found throughout the cannabis industry. To understand cannabis fraud, you need to understand the cannabis supply chain. The supply chain is the entire life cycle of a product from conception to being purchased. A cannabis fraud event can occur at any point within the supply chain. The graphic below shows the three main phases of the cannabis supply chain. As a plant, the cannabis supply chain begins at the farm level where it is grown. It then moves into the processing of the plant to finally making its way into the hands of consumers through sales.

●     Recreational

●     Medical

●     Indoor/Outdoor

●     Field hands

●     Certifications

●     Cultivation License

●     Specialties

●     Processing

●     Medical Products

●     Oils, extracts

●     Edibles

●     Special Services

●     Dispensaries

●     Medical Prescription

●     Recreational


Stages of cannabis fraud

These various stages provide opportunity for fraud within any of these three stages. Fraud at the growers level can involve illegal growing operations, money laundering, and even tax evasion. One example from 2015 in Arizona involved five people getting arrested. The perpetraitors alleged to have provided false information to the state to get a certification to grow medical marijuana. It was part of a certification for medical marijuana caregivers.

At the production level, can also take many forms. One common fraud incident is the selling of fake marijuana referred to as “spices.” Additionally,  running an illegal cannabis product business is also found at this level. An illegal cannabis business recently made waves in the media. It was part of a hashtag justice incident in California. Alison Ettel was the CEO of TreatWell, a company that created edibles for both animals and humans. In late June 2018, she was infamous after a viral video showed her calling the police on an 8-year-old girl. The little girl’s offense was “selling water without a permit.” To her surprise and dismay, her actions resulted in attention to her own shady practices. Her company started in 2015, but recreational marijuana was not legalized in California until early 2018. This means that Ettel operated without the proper permits for at least three years. Furthermore, cannabis has yet to be approved for use with animals. This adds more criminality to her situation. She is on record with the San Francisco Chronicle as saying that her business was “kind of like ‘don’t ask, don’t tell.” Since the video backlash, TreatWell has lost several business partnerships and clients. The drastic change in climate at TreatWell has forced Ettel to step down as CEO. In this case, fraud was so routine that this perpetraitor was blind to her own double standard.

Finally at the seller level, cannabis fraud has its most diverse schemes. It can range from unlicensed dispensaries to medical marijuana fraud by licensed professionals. One example involved a lawyer being disbarred for promoting phony cannabis growing permits. In January 2018, Ian James Christensen of Florida, was caught luring clients to an unlicensed “doctor.” These were clients hoping to seek treatment with medical marijuana. This fake doctor issued fraudulent cannabis ID cards and certificates at $800 a pop. The crooked practitioner lied that the ID’s would allow for the possession, use, and cultivation of cannabis. While it is clear that Christensen lost his license to practice law, it is unclear if he and the impostor doctor faced any further consequences. His victims’ lives, however, have been impacted beyond money loss. One duped couple, Marsha and Scott Yandell, were arrested, lost their home and jobs, paid a $15,000 fine, and served 100 hours of community service. They have since relocated to another state, but after 25-years as a nurse, Marsha is now forced to seek out a new career. On top of losing her job, she also lost her license to practice nursing because of her criminal record.  In an interview with The Daily Beast, Marsha said, “I don’t want this to ever happen to another vulnerable patient, ever again.” While this cannabis fraud is at the seller level it crosses over to grower level as well. It is multi-level, double-crossing and very damaging.

Cannabis fraud prevention

It is evident that cannabis fraud is complex and varied. So too are its consequences. Sometimes justice is served to the perpetraitor and other times it’s the victim who pays the most. Whether it’s recreational marijuana or medical marijuana, one thing is true; no one deserves to be a victim of cannabis fraud. These victims’ stories show us that even those who we’re accustomed to trusting cannot always be trusted. Cannabis fraud prevention starts with serious due diligence. Ask to see proper licensing and do a little investigation yourself. Try to find others you know who can vouch for the dispensary or seller that you intend to buy from. Above all, make sure you know the laws regarding cannabis in your country or state and places you travel to. These simple steps can help you in developing your cannabis fraud prevention plan, so that you too won’t fall victim.