Men Accused of Tricking Banks Into Aiding Marijuana Sales Head to Trial
Two men accused of devising a scheme to trick banks into approving around $160 million of marijuana-related transactions are set to go to trial Monday in Manhattan federal court, in a case that could have profound consequences for the U.S. marijuana industry and shed light on its place on the fringes of the mainstream banking system.
While the purchase and sale of marijuana for personal use has been decriminalized in many states, it remains illegal under federal law. Most U.S. banks steer clear of doing business related to marijuana, and have policies against processing its sale, leaving cannabis businesses reliant on cash or private mobile-payment processors.
In a notable shift from typical drug-related cases, Manhattan federal prosecutors in this case haven’t focused on the drugs themselves, which were sold in states where marijuana is legal under state law, but rather alleged subterfuge in the banking transactions behind them. The men on trial—Los Angeles businessman
Hamid “Ray” Akhavan
and German e-commerce consultant
Ruben Weigand
—are accused of devising a sophisticated fraud that brought unwitting U.S. banks into the marijuana business.
Messrs. Akhavan and Weigand were working as consultants to Eaze Technologies Inc. the country’s largest online marijuana marketplace, where customers can buy marijuana for delivery from a network of dispensaries.
Until 2019, the California-based company allowed credit and debit card transactions. That practice drew outcries from Eaze’s competitors, which claimed it was an unfair and possibly illegal business practice.
Federal prosecutors allege that Messrs. Akhavan and Weigand carried out a “transaction laundering scheme,” in which the Eaze purchases were disguised and then processed by banks and credit-card companies. They are accused of working with former Eaze executives and others to create phony online merchants, using incorrect merchant codes to conceal the nature of the transactions, and using third-party payment processors to create phony offshore corporations and offshore bank accounts.
Messrs. Weigand and Akhavan both face one count of bank-fraud conspiracy and have pleaded not guilty. Their lawyers have argued in pretrial filings that the alleged crime’s victims—dozens of U.S. banks that approved credit-card payments for Eaze purchases—weren’t defrauded. Rather, they have argued, the banks were willfully blind to the marijuana transactions, which were highly profitable.
Ira P. Rothken, a lawyer for Mr. Akhavan, said the government’s premise—that banks didn’t want to be involved in marijuana transactions that are legal on the state level—“is wrong in plain sight.”
Mr. Rothken said banks “want the cannabis business,” just as consumers “don’t want to carry around a pocket full of cash to make state legal cannabis purchases.”
A lawyer for Mr. Weigand didn’t immediately respond to a request for comment.
Eaze, through its lawyer, declined to comment. A former Eaze chief executive has pleaded guilty to bank-fraud conspiracy in the case and is expected to testify at trial as a cooperating witness, court filings show. Several other Eaze employees are expected to testify for the government. Eaze, which wasn’t charged, has cooperated with the federal investigation.
A spokesman for
Mastercard Inc.
said: “We do not…
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