The cannabis industry has always had its fair share of dramas; that seems to come with the territory for a federally illegal industry. Each year there are a slew of fraud cases, unwound acquisitions with lots of accusations, bankruptcies, and corruption.
But 2023 may have set a high mark for the future. Here are Green Market Report’s top scandals of the year.
Bankruptcies are never pleasant, but this one is a doozy. Not only was Skymint drowning in a sea of debt, but the CEO was accused of having an inappropriate relationship with another executive and spending company funds on the woman.
Since it’s cannabis, the company couldn’t go through normal bankruptcy channels, so the lenders agreed to a reorganization. The only problem is that 3Fifteen Cannabis, a Merida Capital Holdings company, got caught up in the craziness after Skymint said it would buy the company but never paid for it.
3Fifteen asked a judge to let it out of the deal, but the judge disagreed. On appeal, 3Fifteen is trying to get its company back while Skymint’s lenders are preparing to take over the company.
It wasn’t an earthquake that shook California cannabis, it was the implosion of Herbl. The cannabis distributor was rumored to have faced issues of companies not paying bills, which made it impossible to keep the company running.
Laid off employees took to social media to announce what the company wouldn’t: the company shut down.
Without bankruptcy as an option, the company went into receivership. It left many cannabis companies in the state scrambling to find a new distributor for their products. Plus, many of these small cannabis companies lost inventory in the process and weren’t paid for their product, which put them in jeopardy as well.
Now it seems everyone is fighting over the scraps. Cannabis companies, a bank, and even the state of California want money from the company that ran out of it. This situation remains unresolved.
In May, the U.S. Securities and Exchange Commission obtained an emergency order to halt an alleged ongoing offering and Ponzi-like scheme by Integrated National Resources Inc., which does business as WeedGenics, and its owners, Rolf Max Hirschmann and Patrick Earl Williams.
Under the scheme, Hirschmann and Willians allegedly raised more than $60 million from investors to expand their cannabis operations, but instead used the money to make $16.2 million in Ponzi-like payments and to enrich themselves.
The scam started in 2019, but the SEC didn’t shut it down until 2023. The agency alleged that in an attempt to avoid detection, Hirschmann, acting as the face of the company, used the fake name Max Bergmann when he communicated with investors, while Williams, as vice president of the company, worked behind the scenes. Williams was also accused of spending investor funds on his more public career as rap musician BigRigBaby.
Long-time cannabis publication High Times and its current owner Adam Levin found themselves the subject of a stock fraud investigation for the seemingly never-ending stock offering.
Levin originally bought the title with the idea of taking it public and flipping the stock for a profit. However, things didn’t go according to plan, and Levin just kept taking money from investors and changing the value of the stock, from $11 to $1.
The company ran afoul of the SEC for paying a stock promoter and not disclosing that to investors. Investors have complained that the magazine took their money and then never provided any additional information or updates.
Benzinga’s AI Interview
Who’s gonna know, right? In November, business news website Benzinga ran a contributed interview with rap star and Cookies founder Berner (whose real name is Gilbert Milam).
The only problem was that Berner said he didn’t do the interview.
Journalist Grant Smith Ellis suggested the interview was AI-generated and ran it through an AI content detector. David Daxsen, the contributor, insisted he did the interview even though Berner also insisted he never spoke to Daxsen.
Ultimately, Benzinga pulled the story after two days, apologized to Berner, and ended the relationship with the writer. It could be argued Benzinga was scammed by the contributor, but that’s what editors are for and the media company’s slow response didn’t help matters by allowing it to grow legs.
Cookies managed to make the list twice this year, but in two different capacities. This time Cookies was hit with multiple breach of contract lawsuits. One was from a business partner alleging theft and fraud, while the other lawsuits alleged Cookies routinely used threats of violence and retribution in business dealings.
Among the allegations was that Berner and associates stole valuable cannabis genetics as well as profits from SeedJunky through a joint business venture, Minntz, and that Berner and company officials have been misappropriating company funds and resources for their own private “slush funds.”
Berner said the complaints were made by predatory investors, and shortly thereafter one lawsuit was dropped. As far as we can tell, the other lawsuit is still in play.
Cannabis companies and operators weren’t the only ones finding themselves in the headlines for less-than-positive reasons. Even regulators got in on the fun.
The Massachusetts Cannabis Control Commission found itself in more hot water this year after the state treasurer suspended Chair Shannon O’Brien. O’Brien is now suing the CCC over that suspension.
But that’s not all. Acting Executive Director Debbie Hilton-Creek then suspended Chief Communications Officer Cedric Sinclair and Director of Human Resources Justin Shrader in December.
The shenanigans didn’t stop with the executive board room shuffles. There were claims of retaliation against independent journalist Grant Smith Ellis when commission officials allegedly cited the content of a journalist’s testimony before the Joint Committee on Cannabis Policy as part of the justification for stripping the journalist of their press credentials.
If that wasn’t enough, the commission also allegedly shared a document containing the names, addresses, phone numbers, emails, and other sensitive personal information of every cannabis worker, active or inactive, in Massachusetts. The commission was criticized from the beginning for having an opaque and lengthy process to receiving a license.
The whole commission might need a reboot after this year.
While this scandal can be traced back to 2017, the bribery case involving a top cannabis regulator in Michigan and some lobbyists came to a resolution this year.
In April, Brian Pierce and Vincent Brown pleaded guilty to conspiring to commit bribery. According to their plea agreements, they did lobbying work via Philip Alan Brown Consulting and Michigan Grower’s Consultants on behalf of various businesses that sought licenses from the board that was created to regulate the industry under a 2016 law.
They helped to give $40,000 in cash to former Chair of the Marijuana Board Rick Johnson between 2017 and 2019. At Johnson’s request, Pierce paid $2,000 to a Detroit stripper who was having commercial sex with Johnson.
In October, Pierce was sentenced to two years and a $25,000 fine from U.S. District Judge Jane Beckering in Grand Rapids while Brown received 20 months and a $25,000 fine. Johnson was sentenced to 55 months in federal prison.