STATE OF OREGON DEPARTMENT OF CONSUMER AND BUSINESS SERVICES DIVISION OF FINANCIAL REGULATION. Respondents.

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1 0 Winter Street NE, Suite 0 Telephone: (0) - 0 In the Matter of: STATE OF OREGON DEPARTMENT OF CONSUMER AND BUSINESS SERVICES DIVISION OF FINANCIAL REGULATION Cannacea, LLC, and Tisha Siler, Respondents. Case No. S--000 ORDER TO CEASE AND DESIST, ORDER DENYING USE OF EXEMPTIONS, PROPOSED ORDER ASSESSING CIVIL PENALTIES, AND NOTICE OF RIGHT TO AN ADMINISTRATIVE HEARING The Director of the Department of Consumer and Business Services for the State of Oregon (hereinafter the Director ), acting in accordance with the Oregon Securities Law, Oregon Revised Statutes ( ORS ).00 to.,. and., and Oregon Administrative Rules ( OAR ) chapter, has investigated the business activities of Cannacea, LLC and Tisha Siler (collectively Respondents ), and makes the following Findings of Fact and Conclusions of Law. The Director FINDS that: FINDINGS OF FACT. Cannacea, LLC ( Cannacea ) is a member-managed Oregon limited liability company that was formed on or about July, (Oregon Secretary of State Registry No. 0-). Cannacea s principal business address is 0 NE Halsey St., Portland, Oregon 0. Cannacea s principal business is cannabis retail.. Tisha Siler ( Siler ) is an Oregon resident. At all times relevant to this Order, Siler was the CEO and controlling member of Cannacea.. Green Rush Consulting LLC ( Green Rush ) is a California limited liability company (California Secretary of State Entity No. 00) with a principal place of business located at 00 International Blvd., Ste., Oakland, CA 0. Page of NOTICE ORDER (S--000)

2 0 Winter Street NE, Suite 0 Telephone: (0) - 0. On or about August, Respondents retained Green Rush to assist Respondents with opening a cannabis dispensary facility in Portland, Oregon.. Upon direction by and in consultation with Siler, Green Rush created a document entitled Cannacea LLC Confidential Pitch Book & Private Placement Memorandum, dated November, (the PPM ). The PPM was to be used for the purpose of soliciting investors in Cannacea.. The PPM contained a number of misrepresentations, including: A. That Oregon regulators contacted and specifically invited Siler to open cannabis dispensaries in Oregon. This personal invitation was emphasized repeatedly throughout the PPM. In truth and in fact, Siler had not received any personal invitation or unsolicited contact from Oregon regulators; B. That Oregon regulators stated they would pre-approve or green light up to six of Respondents medical cannabis dispensary applications, ensuring [Siler] would sail smoothly through the application process. This pre-approval or green light was emphasized repeatedly throughout the PPM. In truth and in fact, no such statements were made by any Oregon regulator; C. That, given her experience, Siler expects that regulators may consult her when developing regulations under Measure and determining how to apply similar regulations to the medical cannabis sector. In truth and in fact, Siler had no reasonable basis for any such expectation, and; D. That Oregon regulators offered Cannacea and/or Siler a possible panel position for the OLCC [Oregon Liquor Control Commission] which would create the framework for the Oregon recreational use program rollout and regulations. In truth and in fact, Siler had no reasonable basis to believe that she or Cannacea would receive a panel position with the OLCC. Page of NOTICE ORDER (S--000)

3 0 Winter Street NE, Suite 0 Telephone: (0) - 0. The PPM stated that this pitch book contains summaries, believed by the managers to be accurate, of certain documents, copies of which are attached hereto or are available by the Company.. Siler, as the CEO and managing member of Cannacea, had sole control of the company, was the primary person upon whom all authority for company action rested, and was ultimately responsible for reviewing the contents of the PPM for accuracy.. Siler reviewed and made revisions to the PPM. Siler did not take action to remove the misrepresentations contained in the PPM, or prevent the PPM from being used to solicit investors. To the contrary, Siler was complicit in allowing Green Rush and other individuals to circulate the PPM and other offering materials to a number of prospective investors. 0. In connection with the creation of the PPM, Siler provided Green Rush with a letter, dated October,, that was purportedly from the Oregon Health Authority Medical Marijuana Dispensary Program (the MMDP Letter ). The MMDP Letter represented that Cannacea had received a green light from MMDP for six dispensary locations. In truth and in fact, the MMDP Letter was a fraudulent document. Specifically, the MMDP Letter: was created on letterhead that is not used by MMDP; contained fabricated statements, and; contained a forged signature of a regulator that did not even work in the MMDP. Upon information and belief, the MMDP Letter was created by Siler, or by another at her direction.. Respondents, directly or indirectly and in some instances with the assistance of Green Rush, offered and sold investments in Cannacea to individual investors. In the course of solicitation of the investments, one or more of the prospective investors were provided with copies of the PPM and MMDP Letter. Siler personally provided a copy of the fraudulent MMDP Letter to one or more prospective investor. Page of NOTICE ORDER (S--000)

4 0 Winter Street NE, Suite 0 Telephone: (0) - 0. Respondents did not disclose to the prospective Cannacea investors that the PPM and the MMDP Letter that were being used to solicit investors contained the misrepresentations described above in Paragraphs and 0, or that the MMDP Letter was fraudulent.. In late and early, Respondents received money from individual investors for purposes of investing in Cannacea including, but not limited to, the following: A. $0,000 from the individual identified herein as KI on or about October, ; B. $0,000 from the individual identified herein as BF on or about November, ; C. $,000 from the individual identified herein as RC on or about February 0,, and; D. $0,000 from the individual identified herein as AS on or about February 0,.. In exchange for the delivery of their investment funds to Cannacea, KI, BF, RC, and AS (collectively the Investors ) received membership interests in Cannacea, in the form of either Class A Units or Class B Units, as documented by Membership Certificates (the Cannacea Shares ).. The PPM stated that the Cannacea investments would only be offered to accredited, qualified, and/or sophisticated investors, that an investor would be required to document such status in writing, and that the Managers [of Cannacea] would not accept subscriptions from persons who do not qualify as accredited investors under regulations promulgated under the Securities Act of, as amended.. One or more of the Investors did not qualify as qualified or sophisticated investors, or as accredited investors under regulations promulgated under the Securities Page of NOTICE ORDER (S--000)

5 0 Winter Street NE, Suite 0 Telephone: (0) - 0 Act of, as amended. Upon information and belief, no efforts were made by Respondents to confirm whether any of the Investors were in fact qualified, sophisticated, or accredited investors.. The Investors did not have any control over the use of the investment funds.. The Investors were passive, in that they did not play an active role in the Cannacea business operations, and relied solely on the efforts and expertise of Siler and other officers or directors within Cannacea to realize a return on their investments.. At all times material to this order, the Cannacea Shares offered and sold by Respondents were not registered with the Director pursuant to ORS.0.. At all times material to this order, Respondents were not licensed to sell securities in Oregon pursuant to ORS... In the course of the Director s investigation of this matter, Siler, on behalf of Cannacea, made the following misrepresentations to the Director: A. That Green Rush, or an employee or agent of Green Rush, created or altered the MMDP Letter without Siler s knowledge or permission. To the contrary, the MMDP Letter was created by Siler, or by another at her direction; and B. That Siler did not review the PPM after it was created by Green Rush. To the contrary, Siler reviewed and made revisions to the PPM in at least one instance. CONCLUSIONS OF LAW The Director CONCLUDES that:. The Cannacea Shares offered and sold by Respondents to the Investors were securities within the meaning of ORS.0()(a).. Respondents offered and sold unregistered securities to the Investors, in violation of ORS.0.. Respondents sold securities to the Investors without being licensed to sell securities in Oregon, in violation of ORS.. Page of NOTICE ORDER (S--000)

6 0 Winter Street NE, Suite 0 Telephone: (0) - 0. Respondents, directly and indirectly, in connection with the sale or purchase of securities, made untrue statements of material fact, in violation of ORS.(), including: A. Misrepresenting that Oregon regulators had contacted and personally invited Respondents to open cannabis facilities in Oregon; B. Misrepresenting that Respondents had received a pre-approval or green light from Oregon regulators to open up to six marijuana facilities in Oregon; C. Misrepresenting that Oregon regulators would consult with Siler when developing regulations under Measure and determining how to apply similar regulations to the medical cannabis sector; D. Misrepresenting that Oregon regulators offered Cannacea and/or Siler a position on the OLCC panel that would create the framework for the Oregon recreational cannabis use program rollout and regulations; and E. That Respondents received the MMDP Letter from Oregon regulators, which reiterated one or more of the above-described misrepresentations, including the misrepresentation that Cannacea had received a green light from MMDP for six cannabis dispensary locations.. Respondents, directly and indirectly, in connection with the sale or purchase of securities, engaged in an act which operated as fraud or deceit on persons, in violation of ORS.(), when Respondents created, or were responsible for the creation of, the fraudulent MMDP Letter.. Respondents violated ORS.() when Siler, on behalf of Cannacea, made the following false statements or reports to the Director: A. That Green Rush, or an employee or agent of Green Rush, created or altered the MMDP Letter without Siler s knowledge or permission, when the MMDP Letter was created by Siler, or by another at her direction; and Page of NOTICE ORDER (S--000)

7 0 Winter Street NE, Suite 0 Telephone: (0) - 0 B. That Siler did not review the PPM after it was created by Green Rush, when Siler did in fact review and make revisions to the PPM in at least one instance. ORDERS The Director issues the following ORDERS: Order to Cease and Desist. The Director, pursuant to ORS.(), hereby ORDERS Respondents to CEASE AND DESIST from: A. Offering and selling securities that are not registered in the State of Oregon, in violation of ORS.0; B. Transacting business in Oregon as a securities salesperson without a license, in violation of ORS.; C. Offering and selling securities in violation of the anti-fraud provisions of ORS., and; D. Violating any provision of the Oregon Securities Law, including ORS Chapter and Oregon Administrative Rules Chapter. Order Denying Use of Exemptions to the Securities Registration Requirements. The Director, pursuant to ORS.0, hereby DENIES Respondents, and any successor business entity or any business entity owned, operated or controlled by Respondents, the use of any exemptions that would otherwise be available to them under ORS.0 or ORS.0, concerning persons, securities, or transactions exempt from the registration requirements of the Oregon Securities Law. Proposed Order Assessing Civil Penalties 0. Pursuant to the authority of ORS.(), the Director may assess CIVIL PENALTIES against persons who violate the Oregon Securities Law in an amount not to exceed $, per violation and, in the case of a continuing violation, each day s continuance is a separate violation, but the maximum penalty for any continuing violation Page of NOTICE ORDER (S--000)

8 0 Winter Street NE, Suite 0 Telephone: (0) - 0 shall not exceed $00,000.. Pursuant to the authority of ORS., the DIRECTOR hereby proposes the assessment of CIVIL PENALTIES against Respondents, jointly and severally, in the total amount of Forty Thousand Dollars ($0,000), as follows: A. A CIVIL PENALTY of Five Thousand Dollars ($,000) for violation of ORS.0; B. A CIVIL PENALTY of Five Thousand Dollars ($,000) for violation of ORS.; C. A CIVIL PENALTY of Ten Thousand Dollars ($0,000) for violation of ORS.(); D. A CIVIL PENALTY of Ten Thousand Dollars ($0,000) for violation of ORS.(); and E. A CIVIL PENALTY of Ten Thousand Dollars ($0,000) for violation of ORS.().. Pursuant to ORS., the Director designates relevant portions of the file maintained by the Oregon Division of Financial Regulation (the Division ) on this matter, which includes any materials submitted by Respondents, as the record in this case. In accordance with OAR (), the record contains sufficient evidence of the existence of facts necessary to support a final order by default should the Director issue such an order. Page of NOTICE ORDER (S--000)

9 0 Winter Street NE, Suite 0 Telephone: (0) -. Entry of this Order in no way limits or prevents further remedies, sanctions, or actions which may be available to the Director under Oregon law to enforce this Order, for violations of this Order, for conduct or actions of Respondents that are not covered by this Order, or against any party not covered by this Order. SO ORDERED this th day of July,. PATRICK M. ALLEN, Director Department of Consumer and Business Services 0 /s/ David C. Tatman David C. Tatman, Chief of Enforcement Division of Financial Regulation Page of NOTICE ORDER (S--000)

10 0 Winter Street NE, Suite 0 Telephone: (0) - 0 NOTICE OF RIGHT TO AN ADMINISTRATIVE HEARING Pursuant to ORS Chapter, any respondent against whom an order is entered is entitled to a hearing on that order. Pursuant to ORS., any respondent that wants a hearing must file a written request for a hearing within days from the date the Notice was mailed. Any respondent that does not timely file a request for a hearing will have waived the right to a contested case hearing. Pursuant to OAR , a respondent that is a natural person may submit a hearing request without the assistance of an attorney. Subject to exceptions, a person may submit a hearing request on behalf of a corporation, partnership, limited liability company, unincorporated association, trust or governmental body (an Entity Respondent ), except that, if a hearing request submitted on behalf of an Entity Respondent is not submitted by an attorney that is allowed to practice law in Oregon, the hearing request must be ratified, in writing, by an attorney that is allowed to practice law in Oregon within days of the date that that hearing request was received by the Division. The filing date will be determined by the date the hearing request was received, not by the ratification date. A hearing request that is not properly ratified will be deemed invalid. Respondents may mail their hearing requests to: Department of Consumer and Business Services Division of Financial Regulation 0 Winter Street NE, Room 0 Attn: Dorothy Bean Any respondent that requests a hearing will be notified of the time and place of the hearing. They will also be provided with information on procedures, right of representation, and other rights of parties relating to the conduct of the hearing before the commencement of the hearing. Any hearing will be held by an administrative law judge from the Office of Administrative Hearings, assigned as required by ORS. and conducted pursuant to the contested case procedures as described in ORS.0 through ORS.0. Pursuant to OAR , a respondent that is a natural person may represent themselves in the hearing or be represented by an attorney or other representative as authorized by federal or state law. An Entity Respondent must be represented by an attorney. Subject to exceptions, any attorney that represents a respondent in a contested case hearing must be licensed to practice law in Oregon. A legal aid organization may be able to assist a party with limited financial resources. Page 0 of NOTICE ORDER (S--000)

11 0 Winter Street NE, Suite 0 Telephone: (0) - 0 The Director may issue a FINAL ORDER TO CEASE AND DESIST, DENYING USE OF EXEMPTIONS TO THE SECURITIES REGISTRATION REQUIREMENTS, AND ASSESSING CIVIL PENALTIES, ENTERED BY DEFAULT against any respondent that: ) does not request a hearing within days; ) withdraws a request for a hearing; ) notifies the Division or the administrative law judge that they will not appear, or fails to appear at the scheduled hearing; or ) in the case of a request for hearing by an Entity Respondent that is not signed by a person that is allowed to practice law in Oregon, an Entity Respondent that submits a hearing request that is invalid because the request was not ratified by an attorney that is allowed to practice law in Oregon, in writing, within days of the date that the hearing request was received by the Division. STATEMENT OF REASONABLE ACCOMMODATION All proceedings will be conducted in a wheelchair accessible location. Written materials may be provided and/or graphic displays may be presented during the proceeding. For any other accommodation needed by individuals due to a disability, please contact the agency staff member noted below. AGENCY CONTACT INFORMATION Questions concerning the issues raised in this Order or Notice may be directed to Dorothy Bean, Oregon Department of Consumer and Business Services, Division of Financial Regulation, Enforcement Section, telephone (0) -0. SPECIAL NOTICE TO ACTIVE DUTY SERVICE MEMBERS Active duty servicemembers have a right to stay these proceedings under the federal Servicemembers Civil Relief Act. For more information contact the Oregon State Bar at 00--0, the Oregon Military Department at or the nearest United States Armed Forces Legal Assistance Office through Page of NOTICE ORDER (S--000)