The media glare on Orange County after January’s jail break revived buzz over a separate, sensational crime: the brutal kidnapping and torture of a local pot shop owner.

One of the escaped inmates was accused of being part of a trio that drove the dispensary owner to the Mojave Desert, where they mistakenly believed he had stashed cash. Wh en the man couldn’t lead his kidnappers to buried treasure, authorities allege the escapee and his accomplices burned him with a blowtorch, severed part of his penis and left him for dead.

It appears to be the most salacious tale of violence linked to the large amounts of cash swirling around the county’s pot dispensaries. But it’s not the only one. A marijuana delivery driver was beaten and robbed in Lake Forest in 2014, and a would-be thief was killed by a guard at an illegal Anaheim dispensary a year ago.

Critics of more liberal marijuana laws cite such incidents in calling for a ban on retail pot sales. But advocates for legalization of medical and recreational pot say such crimes are the product of backward and dangerous federal drug laws that force marijuana businesses to operate with cash.

A growing number of companies are developing technologies designed to pull the burgeoning U.S. marijuana industry from the financial dark ages to a digital future that doesn’t use cash at all.

“The risk of violent crimes is overwhelming when you’ve got people driving around with tens of thousands of dollars in their car,” said Kenneth Berke, CEO of the online payment system PayQwick. “We need to take cash out of the transaction.”

While 28 states have legalized medical marijuana and eight allow recreational use, major banks and credit card companies won’t do business with growers, distributors and dispensaries because federal law still classifies cannabis as a Schedule I narcotic, the most dangerous category that includes heroin.

“What that means for banks is that the revenue they receive from serving marijuana businesses – whether it’s legal or not under state law – is considered dirty money under federal law,” said Tom Dresslar with the California Department of Business Oversight, which regulates the state’s financial industries. “So as soon as they accept it, they’re laundering it.”

Critics argue the federal government’s stance, ironically, has created a cash industry – estimated at $5.4 billion last year – ripe for illegal activity.

Some local banks and credit unions are quietly taking on marijuana businesses, according to Tustin resident Jeff Goh, CEO of the cannabis firm Notis Global. A December report from American Banker showed 266 of the nation’s nearly 6,200 financial institutions had accounts with marijuana-related businesses.

But big banks aren’t budging, Goh said, which makes it tough for companies that work in multiple states to keep funds in the regulated financial system.

“It’s really mind-boggling that the business is as robust as it is operating on a cash-only basis,” said Chris Francy, who relies on armored truck services for his OC3 dispensary in Santa Ana. “It’s very, very difficult to run a business where the only payments you have are cash.”

Even with checks and balances, Francy said, operating in cash makes businesses vulnerable to internal theft. They struggle with simple transactions like paying workers and bills. The state Board of Equalization says some dispensaries have settled tax bills with duffel bags stuffed with up to $150,000. Plus, multiple studies show customers spend on average 20 percent less when they can’t use credit or debit cards.

Some dispensaries have resorted to installing ATMs without telling banks that process those funds how they’ll be used, which triggered hundreds of machines being shut down in 2014, according to media reports. Francy complains that other retailers misreport pot purchases paid with credit cards as something else. Doing so can result in Visa or MasterCard blacklisting them for life.

Industry members are calling for a federal solution, either through removing marijuana from the Schedule I drug list or approving legislation that opens traditional banking services to cannabis companies. A tipping point on such federal law changes could be near, Dresslar said, because a dozen more states are poised to vote on legalizing medical or recreational use in 2016.

In the meantime, “potrepreneurs” are ramping up alternative, noncash payment options. Here are a few of those approaches:


PayQwick has been dubbed the PayPal for pot.

Dispensary owners can use the online payment platform to pay vendors, landlords and workers. Customers can use a preloaded PayQwick card to make purchases and collect rewards, with an app version for smartphones expected soon. The Los Angeles-based company collects an average 2.75 percent transaction fee from vendors.

The system was designed with current federal banking regulations in mind, Berke said.

“We’re not trying to get around the law,” he said. “We’ve figured out a way to comply with it.”

PayQwick will operate only in states with thorough seed-to-sale enforcement programs, which track pot from cultivation to purchase, Berke said. The company also conducts its own compliance checks four times a year, he said. And clients who aren’t following the rules are dropped from the system.

Still, PayQwick has encountered banking challenges.

The platform was set to launch two years ago through a Washington regional bank, which pulled out of the arrangement at the last minute. So PayQwick turned to community banks, Berke said, and both sides breathed a sigh of relief when those banks passed Federal Deposit Insurance Corp. audits in December.

“We like the fact that people are able to pay with something other than cash,” said Pam Senstermacher, a manager at Seattle’s Cannabis City dispensary, which uses PayQwick.

So far, only a couple of Cannabis City customers are regularly using the PayQwick option, she said.

“It’s just something new,” Senstermacher said. “People are always a little wary of companies they haven’t heard of.”

PayQwick hopes to soon expand its brand to Colorado. And once California begins enforcing a seed-to-sale program that was approved in October under the Medical Marijuana Regulatory and Safety Act, Berke said it plans to offer the system here.


If PayQwick is the PayPal of pot, Greenito is closer to the industry’s Groupon.

The Denver-based company lets dispensaries and delivery services offer discounted packages, such as edible samplers. Shoppers pay for those packages plus a small “access fee” with a credit card online, then get a certificate to redeem through the retailer.

Since the company’s May launch, businesses in Northern California, Colorado, Arizona, Michigan and Oregon have used Greenito, CEO Mary Smith said.

“Deliveries like us because they don’t have to send their drivers around with cash,” Smith said. And storefront dispensaries are happy, she added, because “the average sale on our site is higher than the average sale in a normal cash retail environment.”

Greenito also offers an accounting and bill-paying system that helps pot retailers stuck in a cash-only system. Once a shopper has bought a coupon, the seller can have Greenito deposit funds into their bank account – if they’re lucky enough to have one at the few banks offering those services. But Greenito can also wire funds to a third party, such as the dispensary’s utility company.

Because Greenito doesn’t deal directly with marijuana, Smith said it has no trouble finding a bank. That frees employees to focus on marketing, like offering consumer data for retailers and creating content to help online cannabis shoppers feel less intimidated by the process.

The Holistic Center medical dispensary in Phoenix is offering specials like a $90 “vape escape package” through Greenito, manager Laura Potter said. In five months, just under 25 vouchers have been redeemed.


The pot vending machine ZaZZZ, made by American Green in Arizona to go inside dispensaries, accepts cash along with bitcoin – the most well-known digital currency.

Such encrypted, digital currencies can be converted into dollars, but are chiefly circulated outside traditional financial systems.

Trees, a high-end cannabis delivery service in the Bay Area, accepts bitcoin. And company CEO Marshall Hayner, who has a background at cryptocurrency startups, said the firm is getting ready to add a credit card payment option linked to ledger-keeping technology that manages and secures bitcoin transactions.

Such user-friendly interfaces should reduce consumer and retailer resistance to digital currency, which they generally doesn’t understand, Hayner said.

Indeed, the OC3 dispensary in Santa Ana has never considered accepting bitcoin or other cryptocurrency, Francy said, because they’re still looking for “real, bona fide solutions.”

Goh believes digital currency and other technology solutions will pay a growing role in the marijuana industry – at least until the federal government opens up traditional merchant services.

“Banking in the marijuana industry is when, not if,” Francy said.

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