California Weed

He got SLO County's first marijuana sales permit. Now he's indicted in a dark web sting

Marijuana is still a Schedule 1 controlled substance under federal law.
Marijuana is still a Schedule 1 controlled substance under federal law.

The owner of the first cannabis business to receive a permit from San Luis Obispo County was indicted on federal drug and money laundering charges in a nationwide undercover sting to shut down illegal markets on the dark web.

Daniel Boyd McMonegal, the owner of marijuana delivery company West Coast Organix, is accused of selling marijuana on illegal online markets and then laundering the Bitcoin proceeds of his sales through an undercover federal agent located in New York.

While operating a nonprofit medical marijuana cooperative on the Central Coast, he allegedly received boxes of cash in exchange for Bitcoins he earned by selling pot online under various monikers, including "ChristmasTree."

McMonegal, 35, of San Luis Obispo is one of 35 suspects arrested in a nationwide sting targeting vendors of illicit goods on the darknet in a yearlong operation that's led to 90 open cases involving the work of more than 40 U.S. Attorney's Offices, according to a news release issued by the U.S. Department of Justice.

A federal grand jury in Fresno returned an 11-count indictment against McMonegal on May 17. He appears to be out of custody, and his next court date has been set for Aug. 20.

On June 15, nearly a month after he was indicted, San Luis Obispo County issued McMonegal's company a land-use permit to operate a non-storefront dispensary near the airport. It is the first permit the county has issued. The company has not yet been issued a business license or a state license.

The county did not immediately respond to a request for comment. A county Planning and Building Department employee said a department official would respond to questions on Wednesday.

Among the accusations, McMonegal is charged with conspiracy to distribute a Schedule I controlled substance and distribution of a controlled substance, for marijuana sales. Penalties for those federal crimes are up to 20 years in prison and a $1 million fine.

The DOJ alleges that from at least December 2016 until May 2018, McMonegal used the online names "Sawgrass," "Ross4Less," and "ChristmasTree" to sell pot online in dark web marketplaces like Dream Market that can't be accessed by a regular web browser.

McMonegal is also charged with money laundering for allegedly transferring Bitcoins to an undercover agent in exchange for thousands of dollars.

According to a recently unsealed indictment, federal agents in New York sent boxes of cash to McMonegal's Mariposa address six times. The first, in April 2017, was $10,000 sent in exchange for 9.409 Bitcoins. The most recent listed in the indictment was $21,000 sent in exchange for 5.5 Bitcoins on March 13, 2018.

McMonegal owns and operates West Coast Organix, which is an existing nonprofit medical marijuana cooperative.

Before the county issued the business a permit under its new commercial cannabis ordinance, West Coast Organix was operating in the approved location illegally without a land-use permit, according to a June 1 Planning and Building staff report.

The business acquired a land-use permit after working to correct the issue and undergo the land-use permit process.

"Staff uncovered that West Coast Organix was operating illegally without an approved land-use permit for a cannabis dispensary at 712 Fiero Lane #29. Staff took the proper enforcement action to cease all business activities at 712 Fiero Lane #29 until an approved land-use permit has been approved," the staff report says.

In response to the charges, West Coast Organix manager Rose Brochini said the county permit was granted to West Coast Organix, not McMonegal himself.

The company was in the process of trying to obtain a state license. She said she was unaware how the federal charges will impact the business and its future plans.

Clarification: This story was updated June 27 to include additional information about the licenses West Coast Organix still needs in order to operate legally.