Pot stocks have delivered triple- and even quadruple-digit returns to investors in 2017. For example, Amfil Technologies Inc. (OTCMKTS: AMFE) has exploded a massive 1,942.8% so far this year.
5 Things Marijuana Investors Need to Know Now
But there's still risk involved in this industry, as you'll see when we detail this recent marijuana penny stock scandal. Afterward, we'll also give you two important tips for avoiding these kinds of scams in the future…
This Marijuana Penny Stock Is Being Investigated by the SEC
The investigation involves one of 2013's top-performing marijuana stocks: CV Sciences Inc. (OTCMKTS: CVSI), which also goes by the name CannaVest. It's a Las Vegas-based cannabis firm charged with fraud back in June for falsifying its finances in 2013.
That year – 2013 – was considered a banner year for CVSI stock, which rocketed 700%, from $5 to $40. By January 2014, it had reached an all-time high of $70.
But CannaVest's 700% return in 2013 has since been overshadowed by its crash in value. As of Nov. 10, the stock has plunged 99.7%, to $0.24, from that January 2014 peak.
Shares have also declined another 20% since June 16 – the date the SEC alleged CannaVest CEO Michael Mona, Jr., overstated one of the firm's acquisitions in 2013. This led CVSI investors to believe Mona and the company had more cash reserved for acquisitions than it actually did.
In the first half of 2013, the company reported to the SEC that it bought hemp oil producer PhytoSPHERE Systems for $35 million. But in the third quarter of 2013, CV Sciences reported a much lower acquisition value of $8 million. The SEC noticed this big price difference and said it was grounds for fraud, formally filing charges against the firm on June 16.
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If CannaVest is found guilty of manipulating its acquisition price, the SEC could suspend trading on its stock. And if that happens, it's possible that CVSI investors could endure more than just the 11% loss their shares have already seen since June 16. They could end up losing all of their initial investment due to the firm's possibly intentional recording error.
Although these kinds of marijuana stock scandals can convince you to stay away from the marijuana sector, investors who avoid it can miss out on profits. That's why we want to show you how to easily determine if a cannabis stock is a safe investment.
Here are two important ways to find safe marijuana stocks to buy…