Two men schemed to conceal marijuana purchases using sham merchantsBoth convicted of conspiracy to commit bank fraud in MarchDefense highlighted discrepancy between state and federal law on cannabis
(Reuters) – A Manhattan federal judge sentenced two former consultants for Eaze Technologies Inc to prison on Friday for their roles in a scheme to dupe U.S. banks into handling more than $100 million in payments to the online cannabis marketplace.
U.S. District Judge Jed Rakoff sentenced Hamid (Ray) Akhavan, 43, to two and a half years in prison and Ruben Weigand to 15 months in prison. A jury convicted the two men on one count each of conspiracy to commit bank fraud in March.
Prosecutors had argued that the $108 million in fraudulently processed payments should be considered a form of loss, which leads to higher recommended sentences under the guidelines.
“It appears to me that there has never been a case where the guidelines have been more irrational, silly and ridiculous than in their application to this case,” Rakoff said. “It boils my blood that the sentencing commission has not learned better.”
Rakoff also ordered Akhavan to pay a $100,000 fine and forfeit $17.2 million, which prosecutors said was what he made on the scheme.
Weigand had agreed after trial to forfeit $384,000 he earned related to the scheme. He was also ordered on Friday to pay a $50,000 fine.
At trial, prosecutors presented evidence that the two men schemed to disguise payments to Eaze as payments to other sham retailers between 2016 and 2019.
Prosecutors called Akhavan the “mastermind” of the ruse to get the payments past banks and card payment networks, which have policies prohibiting marijuana transactions.
The substance is legal in California, where Eaze operates, but remains illegal under federal law.
Weigand, a German national, opened merchant accounts at European banks for the phony companies, prosecutors said.
The defendants’ lawyers had argued that the U.S. card-issuing banks, which prosecutors had to show were defrauded to win a conviction, did not care whether customers were buying marijuana.
They called witnesses who testified that Eaze customers can still use Visa and Mastercard for payments on the site through a third-party digital wallet provider.
The case is U.S. v. Weigand et al, U.S. District Court, Southern District of New York, No. 1:20-cr-00188.
For the government: Nicholas Folly, Tara La Morte and Emily Deininger of the U.S Attorney’s Office for the Southern District of New York
For Akhavan: William Burck, Christopher Tayback and Sara Clark of Quinn Emanuel Urquhart & Sullivan
For Weigand: Michael Gilbert of Sheppard Mullin, Shriram Harid, Steven Pellechi and Amy Lesperance of Dechert and Michael Artan
Jody Godoy reports on banking and securities law. Reach her at [email protected]