CANNABIS CROOKS! Siphon MILLIONS from Investors! Grilled Cheese Truck Becomes Weed Racket!

SEC v. American Patriot Brands, Inc., Robert Y. Lee, Brian F. Pallas, et al. — U.S. Securities and Exchange Commission Litigation Release No. 26335, dated June 26, 2025.

The SEC partially won a summary judgment against American Patriot Brands (APB), its CEO Robert Lee, COO Brian Pallas, and others for defrauding investors out of over $30 million. The company, which pivoted from food trucks to cannabis, allegedly made false statements about its assets, financial performance, and use of funds. The court found the defendants liable for these misrepresentations, with remedies to be determined later.

In Plain English

Imagine a company that used to sell grilled cheese sandwiches but then decided to sell marijuana instead. They told people they needed money to grow their marijuana business and promised investors things like secure loans and a strong team. But, secretly, they took millions of dollars that investors gave them and spent it on themselves instead of using it for the business. The court looked at the evidence and said, 'Yes, they lied and took the money,' making them responsible for the fraud.

Disclaimer: all facts are drawn from the SEC's own filings; the claims described are allegations unless and until a court rules or the parties settle, and some cases end in dismissal.

How the Alleged Scheme Worked

1. Pivot to Cannabis American Patriot Brands, Inc. (APB), previously known as 'The Grilled Cheese Truck, Inc.', decided to enter the marijuana business around 2016. They acquired cannabis-related operations, including a 275-acre farm in Oregon.
2. Executive Control CEO Robert Y. Lee and COO Brian F. Pallas held ultimate responsibility for APB and its subsidiaries. They approved investor materials, raised money, and controlled company finances, including those of Urban Pharms, DJ&S Property #1, and TSL Distribution.
3. Investor Solicitations Begin From 2017 to early 2019, Lee, Rice, and APB solicited debt and stock investments from individuals and groups in what was termed 'The Initial Offering'.
4. Secured Notes Offering Between July and November 2019, APB engaged Stonecrest Capital Markets to sell secured convertible notes. These notes were purportedly secured by a first priority pledge of membership interests in APB subsidiaries Urban Pharms and DJ&S.
5. Further Fundraising Efforts From approximately July 2021 to April 2022, Lee, Pallas, and APB attempted to raise money through an offering of secured convertible debt involving a new entity, 'APB Real Estate Holdings, Inc.'
6. Garden Unit Sales From May 2022 to March 2023, Lee, Pallas, APB, and DJ&S sold membership units in two entities, Value Properties I and II, which leased the Oregon Farm's gardens.
7. False and Misleading Statements Throughout these offerings, the Defendants allegedly made false and misleading statements about APB's assets, the security for investment funds, the company's financial performance, the involvement of a prominent individual, and how investor funds were being used.
8. Misappropriation of Funds The SEC's complaint alleged that the Defendants siphoned off millions of the raised funds to enrich themselves, rather than using them for the stated business purposes.

The Enforcement Action

On June 16, 2025, the U.S. District Court for the Central District of California granted the SEC partial summary judgment against American Patriot Brands, Inc. (APB), CEO Robert Y. Lee, COO Brian F. Pallas, alleged former executive J. Bernard Rice, and APB subsidiaries Urban Pharms, LLC, DJ&S Property #1, LLC, and TSL Distribution, LLC. The court found these Defendants liable for violating antifraud provisions of the securities statutes due to material false and misleading statements and omissions concerning APB's assets, security for investment funds, financial performance, executive team involvement, and use of investor funds. The court found that each Defendant acted at least recklessly. Remedies will be determined at a later time. The SEC's complaint, originally filed in the U.S. District Court for the District of Puerto Rico and transferred to the Central District of California, charged the Defendants for their alleged participation in a scheme that raised over $30 million from more than 100 investors.

Named in this action: American Patriot Brands, Inc., Robert Y. Lee, Brian F. Pallas, J. Bernard Rice, Urban Pharms, LLC, DJ&S Property #1, LLC.

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