Federal authorities raided a state-legal cannabis retail store in Oregon this week, accusing nine people of running a conspiracy to use credit card fraud to finance black market marijuana trafficking. The investigation has been ongoing since December of 2016, when a joint task force of the FBI and the U.S. Postal Inspection Service began investigating a credit card fraud scheme in Corvallis, Oregon. The perpetrators of this fraud allegedly used the money to open a licensed recreational pot store, the Corvallis Cannabis Club, as well as illegal cannabis grow-ops.
The FBI accused the individuals of running a credit card "bust-out," a fraud scheme in which perpetrators run up large credit card balances, which are gradually paid off via co-conspirators' bank accounts. These co-conspirators then report these payments as unauthorized, fraudulent transactions, and seek to have the money reimbursed by the banks. The Justice Department alleges that these individuals defrauded banks of over $1 million in this operation.
"Proceeds from the fraud were allegedly used to establish and operate illegal marijuana grows and fund a state-licensed marijuana retail business, the Corvallis Cannabis Club located in Corvallis," the Oregon U.S. Attorney's Office said in a statement. "Some of the marijuana grown in Corvallis is alleged to have been transported and sold outside of Oregon." On Tuesday, a joint task force comprised of FBI and DEA agents, along with local police, raided the retail establishment and reportedly seized items from the premises.
In addition to opening the Corvallis Cannabis Club, the fraudulently-obtained funds were allegedly used to set up an illegal cannabis grow in a local warehouse. The nine individuals have been charged with bank fraud, wire fraud, mail fraud, and conspiracy — in addition to conspiracy charges relating to manufacturing, distributing, and dispensing a controlled substance. Three individuals were arrested during the raid at the retail store, but it is not clear whether or not authorities have apprehended the other six individuals at this time.
This raid may signal the beginning of a larger crackdown on illegal cannabis operations in Oregon. Since 2013, federal prosecution of state-legal marijuana operations was restricted by an Obama-era guidance known as the Cole Memo, but Attorney General Jeff Sessions rescinded it in January as part of his personal crusade against cannabis. In February, Oregon U.S. Attorney Billy Williams held a summit with state and federal law enforcement to discuss the fact that Beaver State cannabis farmers were producing more than three times the amount of weed that local residents could consume.
Federal authorities have reported that a large amount of this excess weed was being smuggled to states where cannabis is still illegal, and threatened federal intervention if the state was not able to correct this problem itself. State regulators stepped up to increase oversight, but were not able to resolve the issue quickly enough. Last month, Williams announced that federal prosecutors would begin to bring cases against illegal operators in the state, and the recent raid of the Corvallis Cannabis Club indicates that he is following through on his promise.
