The CEO of a private equity investment firm admitted Thursday to defrauding a South Jersey investor out of $1.35 million with promises of creating a marijuana extract company.
Karl James, 48, of Phoenix, Ariz., claimed to be CEO of Gore Capital LLC. Gore, James said, specialized in investing in start-ups. According to court documents, James was also the founder of CLS Co. 2016, LLC.
James struck an agreement in February 2016 with an Ocean County investor to partner in CLS. Each man would deposit $1.5 million in a Maryland bank account to build the company, which would extract lucrative cannabinoids from cannabis. In April, the victim wired $500,000 to the account. In July, he wired $1 million more.
James didn’t contribute a dime. Instead, he used $150,000 of the partner’s invested money for CLS.
“Thereafter, defendant Karl James withdrew the vast majority of the money in CLS’s bank account and absconded,” according to documents filed in federal court.
James spent the funds on vacations, gambling, traveling on private jets and yachts, and for other personal expenses, according to investigators.
James pleaded guilty on Thursday to a count of wire fraud in U.S. District Court in Camden. When he is sentenced on Jan. 6, 2020, James faces up to 20 years in prison and a fine of $250,000.