SEC Obtains $1.59 Million Judgment Against Robert Newell and Black Hawk Funding Over Cannabis Fund Fraud Allegations

What Were the Verde Funds and How Did Black Hawk Funding Raise $37 Million?

On the surface, the offering looked straightforward. Black Hawk Funding Inc. presented itself as a private lender making asset-backed loans to cannabis operators in California’s Coachella Valley. Marketing materials described a sprawling “Coachella Campus” that would house cultivation, distribution, extraction, lab testing, and manufacturing operations, a vertically integrated cannabis hub backed, in theory, by real property.

To attract investors, Newell and Black Hawk Funding distributed Executive Loan Summaries for the Verde Ventures and Verde Holdings funds, each promising a steady 10% annual return. Verde Partners used a private placement memorandum framing the investment as cannabis project financing. The pitch was polished, the geography was specific, and the numbers were clean.

According to the SEC, the reality behind those materials was materially different. The agency’s complaint, filed on July 22, 2024, alleged that investors were never told their money would be used to pay undisclosed sales commissions, fund payments to earlier investors from later investors’ capital, or cover personal expenses. Those omissions, the SEC asserts, were not accidental.

What Did the SEC Allege Was Wrong With the Verde Fund Offerings?

The SEC’s complaint identified several features of the Verde fund offerings that it characterized as hallmarks of fraudulent private fund activity:

Alleged misuse of at least $668,000 in investor capital for purposes that were not disclosed in offering materials Approximately $408,689 in sales commissions drawn directly from investor funds without disclosure to the investors whose money funded those payments Payments to earlier investors sourced from later investor capital, a characteristic the SEC frequently associates with Ponzi-like structures Commingling of funds across entities and uses in a manner that obscured how investor money was actually deployed

According to the complaint, key offering documents, including the Executive Loan Summaries distributed to potential Verde Ventures and Verde Holdings investors, did not disclose any of these alleged uses. The SEC asserts that this lack of disclosure was intentional and that it deprived investors of information they needed to make informed decisions about whether to invest at all.

Why Are Private Cannabis Fund Offerings Particularly High-Risk for Investors?

The structure of the Verde fund offerings is consistent with a category of private placement that carries elevated risk for individual investors. Several factors compound that risk:

Suitability concerns: Private funds investing in a single industry sector may not be appropriate for investors who depend on liquidity or have conservative risk tolerances. Under FINRA Rule 2111, recommendations must align with an investor’s goals and financial situation.

Liquidity constraints: Private fund investors often face redemption restrictions that make it difficult or impossible to exit during periods of stress.

Concentration risk: Single-sector exposure, particularly in an industry with the regulatory complexity of cannabis, can amplify losses when conditions deteriorate.

Supervision gaps: When securities are sold through off-channel arrangements or by individuals operating outside registered broker-dealer oversight, standard supervisory safeguards under FINRA Rule 3110 may not apply.

Disclosure failures: Undisclosed commissions and commingled accounts can mask losses for months or years, leaving investors without the information they need to act.

The combination of these factors, including polished marketing, private structure, undisclosed conflicts, and alleged fund misuse, made it difficult for investors to assess the true risk of the Verde offerings until meaningful damage had been done.

What Was the Result of the SEC Enforcement Action Against Robert Newell?

The SEC filed its complaint against Robert Newell and Black Hawk Funding Inc. on July 22, 2024. Black Hawk Funding settled on the same day the complaint was filed. Without admitting or denying the allegations, the entity agreed to a permanent anti-fraud injunction under the Securities Act, the Exchange Act, and the Investment Advisers Act, as well as a permanent offering bar. The SEC imposed no monetary penalty on the corporate entity because, according to the agency, Black Hawk Funding was defunct and held no assets.

The outcome for Newell personally was more consequential. On May 7, 2026, the court entered a final judgment that requires Newell to pay $1,590,667, broken down as follows:

• $668,300 in disgorgement (repayment of alleged ill-gotten gains)
• $254,067 in prejudgment interest
• $668,300 civil penalty

The full amount is due within 30 days of the judgment date. Without admitting or denying the allegations, Newell also consented to permanent anti-fraud injunctions under the Securities Act, the Exchange Act, and the Investment Advisers Act, bars that cannot be discharged in bankruptcy under Section 523(a)(19) of the Bankruptcy Code.

Additionally, Newell is subject to a five-year conduct bar prohibiting him from participating, directly or through any entity he owns or controls, in the issuance, purchase, offer, or sale of any security, with the sole exception of transactions in his personal accounts. The SEC enforcement team responsible for this matter included Alfred A. Day and David H. London, under the supervision of Jason H. Lee.

What Legal Standards Apply to Private Fund Offerings Like the Verde Funds?

The statutory framework for the SEC’s charges against Newell and Black Hawk Funding is worth understanding, because it reflects the broad range of investor protections that allegedly went unmet:

Section 17(a) of the Securities Act prohibits fraud in the offer or sale of securities, covering misstatements, misleading omissions, and deceptive schemes. Section 10(b) of the Exchange Act and Rule 10b-5 prohibit deceptive devices and material misrepresentations in connection with the purchase or sale of any security. Investment Advisers Act provisions address fraud committed by investment advisers and those managing pooled investment vehicles, a category that encompasses private fund operators like those behind the Verde funds.

Together, these provisions establish that investors in private offerings are entitled to material, accurate information about how their money will be used, including how sales commissions are funded and whether payments to earlier investors are being made from new investor capital.

How Meyer Wilson Werning Helps Investors Harmed by Private Fund Fraud

The investors who put money into the Verde funds were not reckless. They reviewed marketing materials that described a real geographic location, a real industry, and a real return. What they were not told, according to the SEC, was where their money was actually going. That gap between what was promised and what was done is the foundation of every private fund fraud case Meyer Wilson Werning handles. The final judgment against Robert Newell does not close the door for investors. It confirms what happened and opens the path to recovery.

With more than $350 million recovered for investors nationwide, Meyer Wilson Werning has spent over 25 years holding private fund operators and the professionals who sold their offerings accountable for exactly this kind of misconduct. If you experienced losses connected to Robert Newell, Black Hawk Funding, or the Verde funds, contact us today for a free and confidential consultation. You pay nothing unless we recover for you.

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