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The cannabis industry’s next big threat: Hacks and fraud

San Francisco (CNN Business)Cannabis is an emerging industry with stratospheric growth expectations. Like the California Gold Rush, the dot-com boom and every other new market with boundless potential, the cannabis industry also has the tendency to attract some sketchy characters with dubious motives.

Security experts have long warned that the cannabis industry is susceptible to both cybercriminal and fraudulent activities. It’s not exactly the Wild West anymore: Businesses and state-legal markets have matured. But risks and concerns about criminal activity and fraud haven’t waned.
Just weeks into 2020, the cannabis industry has been the subject of several high-profile incidents: a reported dispensary point-of-sale system hack that potentially exposed the data of 30,000 people; the US Securities and Exchange Commission charging two men who allegedly used a fake cannabis company as a front for a Ponzi scheme; and the conviction of a former Colorado cannabis entrepreneur in one of the state’s largest fraud cases.
“These industries are targets just because they’re new and there is lots of controversy — whether it’s political or social — with some of the things they’re doing,” Michael Bruemmer, the vice president of data breach resolution and consumer protection for consumer credit reporting company Experian, told CNN Business.
Experts are cautioning companies to shore up their security practices and for consumers to be mindful of opportunities that seem too good to be true.

Fraud

Cannabis’ emerging market status makes it a prime target fraud, said Jodi Avergun, a former federal prosecutor and DEA chief who now heads law firm Cadwalader, Wickersham & Taft’s white-collar defense and investigations group.
“Consumer and retail investors are not taking appropriate precautions,” she said.
The cannabis industry is teeming with interest and speculation, she said. Most cases brought by the US Securities and Exchange Commission involve operations that purport to be cannabis businesses but instead are schemes — typically of the Ponzi and pump-and-dump variety, she said.
To Read The Rest Of This Article By Alicia Wallace on CNN Business
Published: February 20, 2020
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