(Associated Press file)

“High risk, high reward” — Who is penny pot-stock wizard David Weiner?

The Milken Institute likes to keep up with the newest new thing, so it was no surprise that its April conference in Los Angeles included a panel on investing in marijuana.

The moderator, Mike “Zappy” Zapolin, a trainee at Drexel Burnham Lambert when junk-bond king Michael Milken reigned there, spent several minutes talking about Zappy Inc., a company he’s formed to profit from cannabis. Another member of the panel, Craig Ellins, showed an infomercial for the hydroponic pot-growing chambers developed by his new company, GrowBlox Sciences.

And Todd Denkin described how DigiPath plans to train people to work in pot dispensaries and become the new baristas of weed, Bloomberg Markets will report in its July-August issue.

The three men — half the panel — share a pot pedigree: They all worked at GrowLife, a money-losing company in Woodland Hills, Calif., backed in 2011 by a much more private man. His name is David Weiner, and he’s had a hand in financing at least five penny-stock companies like GrowLife since 2004.

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The shares of all of them spiked and then plunged. Weiner has prospered. He lives in a luxury apartment building on Wilshire Boulevard in Los Angeles, according to Ellins, who says he’s known Weiner, 57, for 22 years. He owns three Signature condominiums developed by the MGM Grand in Las Vegas, property records show, and once paid $3.3 million for a house on the beach in Santa Monica.

“He has bought and sold cars like other people sell coins,” Ellins says. “To him, they’re toys. He’s the guy that goes for the high risk, high reward. When David lends a company money, it’s usually when they can’t get it anyplace else.”

With GrowLife, Weiner joined an investor frenzy for any product related to marijuana. The sale and use of pot is now approved for medical purposes in 22 states and the District of Columbia and is legal for recreational sales in Colorado and Washington state. That has entrepreneurs and investors seeing green — both kinds.

“We’re talking about a 50- to a 100-billion-dollar industry that’s just starting,” Zapolin said at the conference.

There are now at least 130 public companies that claim to be in the pot business, and most of them are so-called penny stocks, defined by the SEC as stocks trading for less than $5 a share. They often trade in the risky and potentially lucrative over-the-counter market. Brendan Kennedy, chief executive officer of Privateer Holdings, a firm that invests in the marijuana industry, says he shuns the public companies.

“They’re full of shenanigans and charlatans,” Kennedy says. “Most of them will revert to zero.”

Hemp investors are undaunted. On some days, cannabis- related stocks account for 15 percent or more of all penny-stock trading, according to OTC Markets Group, which runs the trading venue once known as the pink sheets. Since September 2012, the market capitalization of those stocks has soared from $500 million to more than $7 billion as of May 30.

Weiner arrived early at the party. His investment company, W-Net Fund I , has acquired at least 130 million shares of GrowLife since it went public in 2011, regulatory filings show, with millions of them flowing to him through loans to GrowLife that were paid off in stock rather than cash.

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In March, W-Net loaned $198,000 to Vape Holdings, a firm located next door to GrowLife in a low-slung, open-air office complex owned by a partnership that shares an address linked to Weiner, according to company filings. Vape sells devices that turn cannabis into smokeless vapor.

DigiPath, the training company, was located in the same office complex until April, a government filing shows, and National Marijuana News, an Internet-based radio and television station, listed its address there until June, when the information disappeared from its website.

Weiner, through his lawyer, declined to say whether he owns the building or whether he is an investor in DigiPath. Joe Tanner, a former Washington state senator, says he met with Weiner before becoming chairman of DigiPath in June. He says he doesn’t know whether Weiner is an investor.

Weiner wouldn’t comment on anything in this article, says Sallie Hofmeister, his representative at public relations firm Sitrick & Co. in Los Angeles.

Anthony Glassman, Weiner’s lawyer, says his client has never had a management role at GrowLife.

“At no time during the course of GrowLife’s operations did Mr. Weiner have any ability to direct the activities of that company,” Glassman, a partner at Beverly Hills, Calif,-based Glassman, Browning, Saltsman & Jacobs, writes in a June 3 letter responding to questions from Bloomberg Markets.

Asked whether Weiner had a stake in a half dozen other marijuana-related companies, including Vape, Zappy and GrowBlox, Glassman said Weiner would not answer questions about his private finances.

The U.S. Securities and Exchange Commission, which last year formed a special task force to fight what it calls microcap fraud, has taken an interest in the burgeoning public pot companies. In May, the SEC, without naming any companies, warned investors to be wary, not greedy.

“Fraudsters often exploit the latest innovation, technology, product or growth industry — in this case, marijuana — to lure investors with the promise of high returns,” the SEC said in a statement.

The SEC has suspended trading in eight public marijuana companies this year.

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Trading in GrowLife was halted for two weeks on April 10. The SEC said it acted “because of questions that have been raised about the accuracy and adequacy of information in the marketplace and potentially manipulative transactions.”

Sterling Scott, who was GrowLife’s CEO at the time of the SEC action, says he was baffled by the trading suspension.

“We don’t know exactly what the SEC’s concern was,” Scott says. “The SEC is under no obligation, evidently, to provide any details.”

The SEC had no comment.

Scott resigned as GrowLife CEO on May 22 for “personal reasons,” according to a company news release. Public records show he sold 5.7 million shares of GrowLife for $2.9 million on April 9, the day before the SEC suspension. His wife filed on April 8 to sell 7.8 million shares.

Penny-stock companies market their shares through press releases and research reports that they sometimes pay to have written. Day traders pass them around on message boards and Twitter, hyping their favorites. Steve DeAngelo, president of a cannabis investors club called the ArcView Group, says investors believe so strongly in the marijuana surge that they’ll seize on anything that looks like positive news as a reason to buy.

“A lot of small investors want to support the growth of this industry and might be fleeced,” says DeAngelo, who says he helped organize pot smoke-ins outside the White House in the 1970s. “There seems to be very little real activity going on.”

GrowLife shares soared 1,206 percent in the 12 months ended on March 17, when they peaked at 77.7 cents, lifted by a mania for all things cannabis and by a steady stream of press releases extolling the company. On the day of the high, for example, GrowLife touted a research partnership with Vape, its neighbor.

GrowLife shares jumped 18.9 cents, or 32 percent, for the day, lifting its market valuation to $629 million, even though it lost $21.4 million in 2013 on sales of $4.9 million.

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Glassman says Weiner had no role in writing or issuing GrowLife press releases.

The SEC trading suspension killed GrowLife’s buzz. Its shares closed at 50.2 cents the day before and skidded to 21 cents on the day trading resumed. They closed at 11 cents on June 17.

The SEC never mentioned Weiner or Scott in its suspension, and they have never been accused of wrongdoing or been sanctioned by the SEC.

Weiner earned a master’s degree in business administration from the University of California, Los Angeles, in 1981, according to his LinkedIn profile, which was taken down after Bloomberg Markets began reporting on this story. He joined Deloitte & Touche as a consultant in 1988. Ellins says he was a Deloitte client and met Weiner there.

Then Weiner went to work for music retailer K-tel International, another Deloitte client, in 1993, his LinkedIn profile said. He became president there in 1996 and left in 1998, when he started W-Net.

In filings, Weiner’s W-Net Fund I lists its address as 12400 Ventura Boulevard, Los Angeles. That’s a mailbox in a cluttered shop called Universal Mail & Business.

Jihoon Hyeon, a 33-year-old day trader in Los Angeles, was once an enthusiastic GrowLife investor and said in late May he was still in the black on the stock, which he bought for less than 5 cents a share. Yet he says he’s seen the value of his holdings drop since the March 17 peak by $100,000, to $26,250 as of May 28. After the trading suspension, Hyeon, who is disabled, had his brother drive him to GrowLife’s Woodland Hills offices. He says he was surprised by how small they were.

“The office was like an H&R Block,” Hyeon says. “I thought, ‘Maybe the SEC was right'” in suspending stock trading.

Weiner and W-Net have done better. In June 2011, according to an SEC document in which he filed to sell some of his shares, Weiner was the biggest outside holder of shares in GrowLife, then called Phototron Holdings. At least 10 times in 2013, W-Net exchanged interest-bearing convertible notes for GrowLife shares at deep discounts. W-Net got a total of 81.5 million shares for 0.7 cent apiece, according to regulatory filings, and 32.5 million at 2.15 cents each.

In an April 2, 2013 transaction, for example, W-Net swapped a $119,000 loan to GrowLife for 17 million shares at 0.7 cent per share. The stock closed that day at 5.9 cents.

Attorney Glassman says Weiner sold most of his GrowLife stake before 2014, when the stock soared, and that he owned just a “tiny fraction of the 900 million shares outstanding” as of June 3.

If Weiner had sold all the shares he acquired in 2013 at GrowLife’s average price for that year — 5.8 cents — he would have made $5.5 million on a $1.3 million investment.

“You can make a ton of money in this business,” says John Lux, a securities lawyer in Bethesda, Md.