Massachusetts charges adviser with concealing information in marijuana deals

Frederick V. McDonald, Jr. allegedly failed to disclose risks and his own conflicts

Apr 17, 2019 @ 2:02 pm

By InvestmentNews

Massachusetts securities regulators have charged a state-licensed investment adviser representative with various forms of misconduct in an investment scheme involving medical marijuana ventures.

(More:Advisers struggle with the highs and lows of marijuana investing)

The state charged that Frederick V. McDonald, Jr., CEO of the Beverly, Massachusetts-based investment adviser US Advisory Group Inc., failed to disclose key risk factors, withheld information about his own conflicting interests and concealed crucial information from more than 100 investors in order to fund various medical marijuana ventures, though no licenses were ever acquired in Massachusetts and no dispensary was ever opened.

Regulators said that Mr. McDonald funded several of his ventures through one high-net-worth client, who has lost more than $3 million. Collectively, investors have lost control of more than $8 million in assets, while seeing no returns on their investments, according to an administrative complaint filed by the commonwealth's securities division today.

Frederick V. McDonald, Jr., CEO of the Beverly-based investment adviser US Advisory Group Inc., and his partners planned to open a medical marijuana dispensary in Revere, Mass. A lack of transparency and communication led to funding issues, regulators said in a release. Mr. McDonald and his partners jointly raised money for the venture, but when the partners began to dispute existing agreements, the relationship collapsed, and they subsequently failed to obtain a lease or license, according to the complaint.

(More:BlackRock invests in pot stock)

Regulators are seeking a censure, an order permanently barring Mr. McDonald and USAG from registration in the state, disgorgement of profits, a requirement that the respondents make offers of rescission and provide restitution to compensate investors for the alleged wrongdoing, and an administrative fine.

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