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California-based marijuana vending machine company Medbox saw its supposed revenues go up in smoke after the firm faced an investigation from the U.S. Security and Exchange Commission (SEC). Essentially, the agency charged the company and its founder with falsely touting “record” revenue numbers to investors and claiming to be a leader in the marijuana industry while some of its earnings came from sham transactions with a secret affiliate.

For some background: the company provides marijuana consulting services and sells vending machines known as Medbox devices capable of dispensing marijuana on the basis of biometric identification.

The SEC alleged that Vincent Mehdizadeh created a shell company called New-Age Investment Consulting to carry out illegal stock sales and used the proceeds from those sales to boost Medbox’s revenue.

However the firm dug itself a deeper hole when Medbox allegedly issued press releases headlining the phony revenues as record earnings to legitimize itself as a viable commercial operation when in fact nearly 90% of the company’s revenue in the first quarter of 2014 stemmed from sham transactions with New-Age.

Mehdizadeh allegedly acknowledged in a text message that “the only thing we are really good at is public company publicity and stock awareness. We get an A+ for creating revenue off sheer will but that won’t continue.” Mehdizadeh also allegedly funded the purchase of his luxury home in the Pacific Palisades with proceeds from New-Age’s illicit stock sales.

It did not stop with Mehdizadeh. Medbox’s then-CEO, Bruce Bedrick, is being charged with being complicit in the scheme and personally profiting. Mehdizadeh’s then-fiancée, Yocelin Legaspi, was charged as well with unlawfully selling unregistered securities. She was installed as the supposed CEO of New-Age when the company was created.

According to the SEC report:

Mehdizadeh and Medbox, which has since changed its name to Notis Global, have agreed to settle the SEC’s charges. Mehdizadeh agreed to pay more than $12 million in disgorgement and penalties and agreed to be barred from serving as an officer or director of a public company or participating in any penny stock offerings. The settlements are subject to court approval.  The SEC’s litigation continues against Bedrick, Legaspi, and New-Age.