Marijuana may not have been the only thing that Robert W. Russell was cultivating at the cannabis farm he operated just off Highway 20 near Anacortes.

Russell, a 60-year-old Duvall resident, is accused of using Green Acre Pharms in an elaborate Ponzi scheme that, from 2015 to 2017, took in $4.85 million from at least two dozen investors in Washington, Arizona, California and Texas, according to the U.S. Securities and Exchange Commission.

Investors, many of them using retirement funds or family loans, were enticed by promises of enormous profits from Russell’s farm, according to an SEC complaint filed Jan. 21 in federal court in Santa Ana, California.

But Green Acre Pharms, which closed in December, was never profitable, according to the SEC. Meanwhile, Russell and his partner, a small-time California film executive named Guy Scott Griffithe, spent $3.5 million of the investors’ money on luxury cars, a 65-foot yacht and other “extravagant luxuries, inappropriate personal expenditures, and unrelated business ventures,” the SEC complaint said.  It charges Russell and Griffithe with civil violations of federal securities law and seeks the return of “all ill-gotten gains.” No criminal charges have been filed in the case.

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Federal officials pointed to the Green Acre Pharms case as symptomatic of the gold-rush mentality that has characterized the early years of legal cannabis sales in Washington, where a recreational marijuana market opened in 2014, as well as in other states.

“Griffithe and Russell exploited popular interest in the cannabis industry to obtain millions of dollars from investors who thought they were buying into a profitable business,” said Melissa R. Hodgman, associate director of the SEC’s Enforcement Division, in a statement.


But the case also underscores the challenges of an industry where high startup costs and scarce bank financing might tempt even honest operators to seek investment outside state-approved channels. Violations of the state’s cannabis investment laws climbed from 11 in 2016 to 49 in 2019, state records show. Operating a large-scale cannabis operation “takes a lot of capital,” said Brian Smith, spokesperson for the Washington State Liquor and Cannabis Board, which has permanently discontinued Green Acre Pharms’ license to produce and process cannabis.

The SEC complaint also lists Russell’s wife, Sonja Russell, co-owner of the Anacortes farm, as a “relief defendant.” Although she isn’t charged in the case, the SEC filings say Sonja Russell “was unjustly enriched by receiving proceeds from the fraudulent conduct alleged herein in the form of cash, property, and other benefits.”

Green Acre Pharms, which is the trade name for the Russells’ company, SMRB, also has been sued by at least one aggrieved investor in King County Superior Court.

Neither Robert Russell, who has operated other businesses in Washington and elsewhere, nor Griffithe, 40, who has twice filed for bankruptcy, most recently in June 2019, could be reached for comment. James Dickmeyer, a Kirkland attorney who is reportedly representing Robert Russell, did not respond to an interview request.

According to federal investigators, the Green Acre Pharms scheme dates back at least to the summer of 2015, when the Russells received a state license for SMRB to produce and process marijuana.

In July that year, shortly before the license was granted, Robert Russell agreed to sell part of SMRB for $1.5 million to Griffithe, of Laguna Niguel, California, with the understanding that Griffithe would offer “securities of SMRB to other investors,” the SEC said.


Although Washington state cannabis regulations prohibit third-party investors without approval from the state liquor and cannabis board, neither Robert Russell nor Griffithe  sought or obtained that approval, the SEC said.

Starting around August 2015, Griffithe used a succession of California–based companies, in which Robert Russell had managerial involvement, to sell shares in SMRB to at least 25 investors, the SEC said. Many of these investors had been solicited by Griffithe or by friends and associates of Griffithe, according to the SEC.

Investors were told their money would pay for new farm equipment or land for a farm expansion, the SEC said. Investors and prospective investors were given farm tours and were shown “obsolete or surplus equipment and fixtures that [Robert Russell] falsely said were going to be installed when he received money from their investments,” according to the SEC complaint.

For example, some of the $650,000 that a Contra Costa County, California, resident named Steven Bagot invested was supposedly intended for a “Cryogenic Oils Processing Machine” that would allow Green Acre Pharms to process $1 million in cannabis products each month, according to a lawsuit Bagot filed Jan. 9, 2019, in King County Superior Court. (Bagot and his attorney declined to comment for this story.) But according to a state investigator’s report in April 2019, Green Acre Pharms never had any processing equipment.

Although the farm was never profitable – it generated $3,715,052 in revenue during its roughly two years in operation, according to state records – SMRB created financial documents and newsletters purporting to show the farm’s profitability, the SEC said.

To further create the illusion of profitability, at least $340,000 in funds from later investors were paid out as “distributions” to earlier investors, the SEC said.


But Russell and Griffithe spent a large share of the investors’ funds — around $3.5 million — on unrelated items, including a 2008 Bentley Continental, a 2012 Mercedes-Benz C-Class, a 2015 Porsche Panamera, along with $250,000 toward a yacht and expenses related to Griffithe’s movie company, Bridgegate Pictures, the SEC said.


Around December 2017, according to the SEC, the distribution payments to investors stopped – largely because the partners’ business accounts were nearly out of funds. In June 2018, the state liquor and cannabis board received a complaint about SMRB and eventually opened an investigation.

According to state records, Griffithe and Robert Russell tried several times to delay the state investigation, in several cases by telling investors that cooperation with the board would make it unlikely they would be paid back.

In April 2019, the board cited SMRB for, among other things, relying on unapproved investors, and issued an order canceling its cannabis license. SMRB appealed, but later asked the state to discontinue its license. On Dec. 31, SMRB destroyed its remaining inventory as two board officers watched, said Smith, the state board spokesperson. SMRB then turned over the farm property to its landlord, who was in the process of evicting the business, Smith said.

No trial date has been set for Russell and Griffithe.

Aaron Pelley, a Seattle attorney specializing in the cannabis industry who briefly handled a lawsuit against SMRB, said he expects to see more investor litigation involving the state’s cannabis industry. Although intense competition and high taxes have made cannabis a low-margin business for many players, Pelley said, it continues to attract entrepreneurs and investors, many of whom will be disappointed in the results of even honestly run operations.

“It’s still really sexy and cool to think you can own or be part of the ownership interest in a cannabis company and I don’t think the messaging has really gotten out that farming is hard work and retail is limited,” Pelley said. The industry is still “so nascent and so many more companies are failing than succeeding.”

Correction: An earlier version of this story incorrectly described which highway the cannabis farm was near.