Legal Archives - Green Market Report

Debra BorchardtJanuary 21, 2022


The New York State adult-use cannabis program has been pushed back to a later date and as a result, the state’s projections for early tax revenues have been adjusted as well. When adult-use sales or recreational marijuana was first legalized in the state, sales were originally planned to begin in April 2022. However, former Governor Andrew Cuomo stalled on making appointments to create the cannabis program and it wasn’t until the current Governor Kathy Hochul took over that the program got a jump start. Still, those delays have now affected the state budget. The program is slotted to receive $46 million as it ramps up.

Originally, Comptroller Thomas DiNapoli had estimated that in the fiscal year of 2021-2022 the state would bring in $20 million in marijuana tax revenue. that was then projected to grow to $115 million in the fiscal year of 2022-2023, $158 million in 2023-2024, and $245 million in 2024-2025.

The new state budget now calls for the state to collect $56 million in revenue in the fiscal year of 2023. The majority of that revenue will come in the form of licensing fees. After that, sales are expected to kick in, and in the fiscal year of 2024, New York projects $95 million in tax revenue. That will grow to $158 million in 2025, $245 million in 2026, $339 million in 2027, and $363 million in 2028.

According to the program’s current design, there will be a 9% state excise tax on cannabis. It will be divided with 40% going to education, 40% to community reinvestment and 20% to drug treatment. Another 4% tax will go to the counties, which will receive 25 %, while municipalities get 75% if they allow marijuana businesses. There’s also a separate potency-based tax on cannabis products.

The Governor has also set aside $200 million to assist social equity applicants. Last month, Sen. Jeremy Cooney (D) introduced that would include transgender and non-binary people in the cannabis social equity program. Cooney also proposed other cannabis legislation related to business tax benefits and licensing.


Many cities and towns in the state have opted out of the adult-use program. The Rockefeller Institute of Government has tracked the towns that have decided against the program for now. Currently, 765 out of 1,521 have decided against dispensaries and 869 have decided against consumption lounges. Many have stated that the lack of specific rules and regulations from the state has caused them to remain on the sidelines for now. They can opt-in at a later date.

Julie AitchesonJanuary 19, 2022


Only eighteen of the forty-seven states, four U.S. territories, and the District of Columbia that have legalized some form of marijuana have passed legislation to allow for recreational cannabis use, but that number is poised to grow in 2022. Lawmakers in Delaware, Maryland, Ohio, Pennsylvania, and South Dakota are already making moves to get recreational cannabis legislation passed in their respective states.

Delaware State Representative Ed Osienki’s proposed legislation may have fizzled due to numerous proposed amendments in 2021, but Osienski has been revising the bill to incorporate these amendments for 2022 and hopes to see it pass this year. In its original incarnation, House Bill 150 would allow anyone over the age of 21 to possess, use, purchase, or transport marijuana under one ounce but does not permit individuals to grow their own cannabis. The bill also proposes to tax cannabis in the same way as alcohol and contains several prohibitions, including those against the use of marijuana in public by drivers or passengers, smoking cannabis where any other form of smoking or vaping is not allowed, and selling it where alcohol is also being sold.

House Bill 1 was introduced by Baltimore City Delegate Luke Clippinger in the state of Maryland this month. HB 1 is a constitutional amendment that would allow General Election voters to decide whether or not to legalize recreational marijuana use for those 21 years and older at the polls. The new bill proposes that the General Assembly would decide upon the use, distribution, possession, regulation, and taxation of marijuana. A recent Goucher College poll in the state showed that 77% of Democrats support legalization, 50% of Republicans would like to see the measure passed and 60% of Independents are in favor of the bill.

Pennsylvania’s Senate Bill 473 is a bipartisan attempt at passing recreational use legislation where partisan efforts have repeatedly failed. In addition to legalizing marijuana use for those 21 and over, the bill includes social equity and decriminalization measures. But SB 473 isn’t lawmakers’ only bipartisan attempt. Senate Bill 107 decriminalizes cannabis by changing possession of a small quantity (30 grams or less) to a summary offense, which is a third-degree misdemeanor.

South Dakota had a bit of a false start with legalization when the state’s Supreme Court upheld a lower court’s ruling to nullify the voter referendum to legalize recreational marijuana that passed in 2020 (due to an amendment with provisions related to multiple subjects– marijuana, medical marijuana, and hemp). Not to be deterred, South Dakota lawmakers have seen to it that more than 25 of the 38 introduced pieces of legislation for 2022 so far deal with either medical or recreational marijuana use. Petitions for the ballot initiative to legalize the possession, use, and distribution of marijuana are currently circulating.

While the legal status of marijuana at the federal level remains uncertain and hotly debated in Congress, states are making inexorable strides towards recreational use. As states like California and Colorado see eye-popping recreational tax revenue, lawmakers from around the country are rallying to make sure that their constituents have access not only to the medicinal benefits that a thriving cannabis market has to offer, but the economic benefits as well.

Debra BorchardtDecember 20, 2021


The Securities and Exchange Commission (SEC) has reached a settlement with the regulator, according to a court filing Friday with TruCrowd Inc. as reported by Law360. TruCrowd, also known as Fundanna agreed to pay $243,747 in disgorgement, interest and penalties with regards to a claim that the company ignored red flags about businessman Robert Shumake Jr. In September, the SEC  filed charges against three individuals and one issuer on a crowdfunding scheme for two cannabis companies that raised $2 million. The money was supposed to be used to buy and invest in cannabis properties, but no money was ever used for those purposes. Instead, the money was siphoned off for personal use. In addition to that, the SEC also charged the registered crowdfunding portal, TruCrowd, and its CEO Vincent Petrescu, who placed the offerings on the portal’s platform. For his part, Petrescu will pay a $9,700 fine as part of the settlement. Law360 reported that neither he nor TruCrowd admits or denies the SEC’s allegations against them.

In addition to those settlements, Shumake’s associate Nicole Birch has also agreed to settle the claims against her by paying more than $679,000 in disgorgement and interest as well as a $200,000 fine. The report also stated that she also neither admits nor denies the claims.

Scam Cannabis Real Estate Companies

According to the SEC’s complaint, Robert Shumake, alongside associates Nicole Birch and Willard Jackson, conducted fraudulent and unregistered crowdfunding offerings through two cannabis and hemp companies, Transatlantic Real Estate LLC and 420 Real Estate LLC. The complaint alleges that Shumake and Birch raised $1,020,100 from retail investors through Transatlantic Real Estate, while Shumake and Jackson raised $888,180 through 420 Real Estate. Shumake, Birch, and Jackson allegedly diverted investor funds for personal use rather than using the funds for the purposes disclosed to investors.

Birch was the CEO of Transatlantic Real Estate and Bangi, Inc. The complaint alleges that Birch facilitated the payment of money from the Transatlantic Real Estate offering to herself and to H.B. Associates. Birch is also CEO of Bangi, which is a publicly-traded company that supposedly specializes in the acquisition and leasing of properties that support the cannabis industry. Bangi’s common stock trades in the over-the-counter market under the symbol “BNGI.”  Jackson was the CEO of 420 real Estate and is accused of Jackson taking the payment of money from the 420 Real Estate offering to the Jackson Entities. 420 Real Estate is a Houston TX LLC.

Shumake’s Criminal Past

Investors were unaware of Shumake’s criminal past when they invested in the real estate companies. According to the filing, in December 2017, Shumake pled guilty to two misdemeanor violations of the Michigan Credit Services Protection Act, and on behalf of his business, to two felony counts of obtaining money by false pretense, for improperly taking upfront fees for mortgage audit services that he promised, but failed to deliver (People v. Shumake, et al., Mich. 46th Jud. Dist. (Feb. 15, 2017)). The filing went on to say that the presiding court sentenced Shumake to a probationary period of 18 months, during which time Shumake was forbidden to work in a position where he could have “direct control over, or access to, another person’s money.” Before his probation ended in May 2019, he is said to have begun working with the Transatlantic Real Estate offering with Birch and set in motion the 420 Real Estate offering with Jackson.

The complaint suggested that Shunake’s personal relationship with Birch led them to create the crowdfunding scheme and hide Shumake’s involvement with the company. The complaint also says that “Shumake regularly attended and participated in Bangi Board meetings, gave direction to the company’s officers and directors, and conducted business on behalf of Bangi. Board minutes identify Shumake as the founder of Bangi. Bangi Directors and Shumake discussed his criminal history and its potential impact on prospective investors. Despite his involvement in the affairs of Bangi, Shumake elected not to serve as an officer or director of the company. Nor was he listed on Bangi’s website.”

Through the Bangi company, Shumake connected with Jackson to create 420 Real Estate and also hide his involvement with that company. The fear was that if investors became aware of Shunake’s criminal past they wouldn’t want to commit any money.

Lies To Investors

The SEC alleges that The Transatlantic Real Estate offering statement lied to potential investors. They claim that Transatlantic Real Estate told investors it had employed a senior management team that had significant experience in the real estate industry and sophisticated finance and capital markets expertise, which wasn’t the case. Investors were also told that Transatlantic Real Estate had acquired a 9-plus acre property with 80,000 Square Foot Green Houses located in California; and that Transatlantic Real Estate would use $584,220 of the proceeds for “property improvement.” None of which was true. 420 Real Estate is also being accused of making similar false claims to investors.

Shumake’s connection to the company was kept secret even though he directed communications with current and prospective investors, lined up a transfer agent for Transatlantic Real Estate, helped prepare documents and promote the offering, solicited Transatlantic Real Estate advertisements from third parties, and drafted advertising scripts for social media.  Shumake is also accused of performing similar duties for 420 Real Estate without that being disclosed to investors.

TruCrowd is Not So Truthful

The crowdfunding site called TruCrowd is a registered funding portal. The SEC alleges that CEO Vincent Petrescu hosted the Transatlantic Real Estate and 420 Real Estate offerings on its platform but is accused of failing to address red flags including Shumake’s criminal history and involvement in the crowdfunding offerings, and otherwise failed to reduce the risk of fraud to investors. Some 2,000 investors from various states gave money to the companies without knowing that they were being given false information about the companies.

Petrescu is responsible for selecting the companies for his site. He also assisted in preparing the documents for the offerings. In exchange for its services in connection with the Transatlantic Real Estate and 420 Real Estate crowdfunding offerings, TruCrowd received $91,679 and $48,412, respectively. Petrescu was aware of Shumake’s deep involvement with the companies and continued to keep investors in the dark about his connections. Petrescu continued to work with Shumake despite learning of his past through a securities lawyer who declined to work with Shumake for a Reg-A offering proposed for Bangi.

Apparently, it didn’t take investors long to suspect they were being scammed and began sending complaints to Petrescu, who either ignored them or assured the investors that everything was okay. No registration statements were filed with the SEC.

The SEC’s complaint, which was filed in the U.S. District Court for the Eastern District of Michigan, charges Shumake, Birch, Jackson, and 420 Real Estate with violating the antifraud and registration provisions of the Securities Act of 1933 and Securities Exchange Act of 1934, and seeks disgorgement plus pre-judgment interest, penalties, permanent injunctions, and officer and director bars. The complaint also charges TruCrowd and Petrescu with violating the crowdfunding rules of the Securities Act and seeks disgorgement plus pre-judgment interest, penalties, and permanent injunctions.

Debra BorchardtDecember 9, 2021


It may have taken a while but former Doyen Elements CEO Geoffrey Thompson was charged last week in federal court in Chicago for ripping off cannabis investors to the tune of $950,000. Thompson was charged with one count of wire fraud and the arraignment is set for Dec. 9, 2021, at 11:30 a.m., before U.S. District Judge John F. Kness. Wire fraud is punishable by up to 20 years in federal prison. According to a notice from the Department of Justice, the charge was announced by John R. Lausch, Jr., United States Attorney for the Northern District of Illinois; and Emmerson Buie, Jr., Special Agent-in-Charge of the Chicago Field Office of the FBI.  The government is represented by Assistant U.S. Attorney Matthew Getter.

Last year. Thompson agreed to a settlement with the Securities and Exchange Commission (SEC) for an amount over half a million. The settlement was related to stock fraud associated with Accelera Innovations and Synergistic Holdings. Thompson had agreed to a payment of $350,000, representing profits gained as a result of the conduct alleged in the Complaint, along with prejudgment interest in the amount of $ 74,849.97, for a total of $424,849.97. In addition to that, Thompson has agreed to pay a civil penalty in the amount of $100,000 in the form of four payments of $25,000 each. He is also barred from serving as an officer of a public company for five years and from participating in an offering of penny stock, including engaging in activities with a broker, dealer, or issuer for purposes of issuing, trading, or inducing or attempting to induce the purchase or sale of any penny stock.

Thompson continually told investors that an IPO of the company he was raising money for was imminent when it was not. He raised $952,000 and used most of the money for personal expenses. The complaint also stated that Thompson told investors that the company  had secured access to bank financing, when it had not, and represented to investors that the company had revenues resulting from an acquisition of another company when it did not

It was a classic ponzi scheme in that Thompson is accused of using newer investor money to pay out to older investor money to assure them that their investments were secure.

The statement did note that the information is not evidence of guilt.  The defendant is presumed innocent and entitled to a fair trial at which the government has the burden of proving guilt beyond a reasonable doubt.    If convicted, the Court must impose a reasonable sentence under federal statutes and the advisory U.S. Sentencing Guidelines.

Thompson Background

In September of 2017, the SEC alleged that Thompson, acting through a company called  Accelera Innovations Inc. and Synergistic Holdings LLC, sold approximately $1.7 million worth of Accelera stock to investors and that the sale was not registered or subject to an exemption from registration. At the same time that the SEC filed the complaint about Thompson and Accelera, Thompson and Doyen Elements were selling shares online.

Beginning in 2011, Thompson, through the limited liability company which he co-owned with his wife, GNNT, LP, owned and controlled Synergistic Group, LLC. Synergistic was a commodity pool operator, commodity trading advisor, and investment adviser that was registered with the State of Illinois. Thompson was the Managing Member and Chief Compliance Officer of Synergistic Group, LLC. Through GNNT, LP, Thompson owned at least 75% of Synergistic Group, LLC.

The Commission’s complaint in that matter alleged that from approximately January 2012 through September 2014, Thompson, acting through Synergistic Holdings, LLC and Accelera Innovations, Inc., sold at least 849,886 shares of Accelera common stock to 69 investors for a total of $1,700,301. The complaint further alleged that there was no registration statement in effect for the sales of the shares and that the sales were not exempt from the registration requirements. The complaint further alleged that $1.3 million of the $1.7 million in proceeds from the sale of Accelera common stock was deposited into an account controlled by Synergistic Group.

Doyen Elements

Shareholders have been confused over the Doyen situation. They invested money into Doyen Elements and when their money disappeared, they learned there were two Doyens. At the time, Thompson said the confusion stemmed from the fact that there was Doyen International (Canada) and Doyen Elements (U.S.). Thompson said the Doyen Elements company is the group that is ignoring shareholders and has renamed itself Reach Genetics. He said that this is the company these shareholders really invested in, not Doyen International.

He said that Doyen International sued Doyen Elements accusing the group of hijacking the Reg. A fundraising and requesting that they stop using the Doyen name. In March 2019, Doyen International announced it was rebranding and renaming itself to Covalent Collective. In addition, the company announced Bill Gregorak would be the Chief Executive Officer. Prior to being named CEO, Mr. Gregorak served as Chief Financial Officer of Covalent Collective since February 2018. Mr. Gregorak takes over as CEO from Geoffrey Thompson, a co-founder of Covalent Collective, who will continue as leader of the merger and acquisitions because Thompson was in the process of agreeing with the SEC that he would not be a director of a company.

Covalent Collective

In June 2019, the SEC filed a subpoena enforcement action in the U.S. District Court for the Northern District of Illinois against Covalent Collective, Inc. f/k/a Doyen Elements International, Inc. f/k/a Advantameds Solutions, Inc. (“Doyen”) for failure to produce documents in an investigation. The SEC’s application alleges that Doyen, through its founder, Geoffrey Thompson, may have violated the registration provisions of the securities laws by engaging in an unregistered offering of securities and may also have made misleading representations to investors and potential investors about the operations, acquisitions, and projected stock price of Doyen and related entities.

As part of its investigation, the staff in the SEC’s Chicago Regional office served Doyen with a document subpoena on October 24, 2018. The SEC’s application alleges that Doyen repeatedly refused to produce any documents in response to the subpoena, notwithstanding multiple efforts by the SEC to secure its compliance. The company finally gave the SEC the documents in July 2019.

“When we submitted our document production on July 23, 2019, we were confident that we had provided everything necessary to comply with the SEC’s subpoena,” commented Mr. Bill Gregorak, CEO of Covalent Collective.  “It is gratifying to have received confirmation from the SEC and we are happy to be able to put this issue behind us and move forward with our corporate strategy of acquiring assets in our geographic priorities.” The only thing that Covalent had put behind it was giving the documents requested with the investigation, not that the investigation was ended.

Covalent Collective raised millions of dollars from cannabis investors and planned to buy a property called the Colorado 16 (CO16). Now the company is asking those investors for more money to fight a lawsuit over the acquisition and is accusing its former director Geoff Thompson of being a co-conspirator with the CO16 sellers. Covalent spent roughly $9 million on the failed Colorado 16 acquisition.

Black Bear Farms

The situation of this company gets even messier and more tangled with the current owners of Covalent. Various emails to the shareholders, which Green Market Report has reviewed explain how Covalent shareholders would receive a part of a cannabis farm called Black Bear Farms so that their investments won’t be zeroed out. Black Bear also operates as a company called Cultive. Covalent’s President Sal Milazzo is also President of Cultive. Gregorak recently told Covalent shareholders in an email, “Covalent shareholders collectively own the majority of both Black Bear Farms and AmaVie.” Yet, in a later email, Gregorak stated that Covalent shareholders only owned a 5% interest in Cultive (or Black Bear Farms).

More confusing is a letter from Milazzo as President of Cultive saying that the company was acquiring Covalent. Gregorak stated in another email that Cultive had a valuation of $49 million. This valuation is hard to verify as one shareholder complained he had never seen a financial statement.

There is also apparently a rogue group of angry shareholders sending around information to other shareholders that Gregorak has referred to in his communications. However, Green Market Report hasn’t seen those emails and can’t verify their existence.

In Closing

Unfortunately for the shareholders who were duped, they will likely never get their money back. It may be cold comfort if Thompson is found guilty and sent to jail. However, the saga of Covalent/Cutive looks as if it will carry on for some time and Green Market Report will keep an ear to the ground if more news develops.


Debra BorchardtNovember 23, 2021


MedMen Enterprises Inc.  (CSE: MMEN) (OTCQX: MMNFF) has won its case that was brought by former CFO James Parker. In 2019, Parker filed a lawsuit against MedMen, alleging wrongful termination, breach of contract, and retaliation, seeking in excess of $20 million in damages. The case was notable for its scandalous accusations including the creation of a toxic workplace and suggestions that the company paid a third party to buy the stock and push up share prices.

“We are thrilled that the jury concluded that James Parker is not the victim here, but the perpetrator, and that MedMen owes no damages,” said Michael Serruya, MedMen Chairman and Interim CEO. “The false allegations brought by Mr. Parker have grossly misrepresented the environment at MedMen in 2018, and certainly bear no resemblance to the MedMen before us today. We are pleased to put this chapter to rest and focus wholly on taking this company to the next level—leveraging the strength of the MedMen brand and consumer experience to expand across the United States, Canada and internationally.”

MedMen said it has always maintained that the lawsuit and claims were baseless and without merit. The jury agreed, ruling in favor of MedMen on all claims and determining MedMen does not owe Parker any damages. MedMen also asserted affirmative claims against Parker. The jury found that Parker breached his contract, his fiduciary duty, his duty of loyalty, misappropriated trade secrets, and committed conversion, but that there was no harm/damage resulting from his misconduct.

According to Law360, Natalie Lowis, the jury’s foreperson, told Law360 after the trial that the jurors quickly dismissed Parker’s claims that the allegedly toxic environment had anything to do with his quitting. The article also reported that she said they also dismissed his testimony that he felt no choice but to quit because he feared civil or criminal liability due to potentially illegal activity by the company.

“Ultimately, we just kind of felt that there was no harm all around,” she said

She added, “I just didn’t really find it very credible or that [Parker] suffered anything. It seemed, when you tipped the scales, I just believed the company more than him.”

“Now with the record about [Parker’s] lies cemented by this verdict, I think the real story about MedMen and the birth of this industry can come out from behind the last three years of this guy’s baseless lawsuit,” Bierman told Law360.

He added: “[Parker] clearly threw anything he could fabricate up against the wall to see if it would stick. I think the problem is that the jury found that none of it was true.”


StaffNovember 15, 2021


Democrats support cannabis legislation, unfortunately, they haven’t been able to move the ball over the line. Seeing an opening, Republican members of Congress said they plan on formally introducing a bill to federally legalize and tax marijuana called the States Reform Act or SRA. Rep. Nancy Mace (R-SC) is sponsoring the bill along with five Republican cosponsors. Democrats have two different piece of legislation being considered. One focuses mostly on banking whereas the other is more far reaching. The industry has been pushing for the banking reform because they felt that they could get the Republicans on board.

However, the Democrats seemed to get bogged down in wanting to go further than just banking reform. The Republican version would end federal prohibition while existing cannabis companies can continue operating as federal rules change.

The States Reform Act:

  • Federally decriminalizes cannabis and fully defers to state powers over prohibition and commercial regulation
  • Regulates cannabis products like alcohol products
  • Institutes a 3% federal excise tax on those products to fund law enforcement and small business programs.
  • Ensures the continued existence of state medical cannabis programs and patient access while allowing for new medical research and products to be developed
  • Protects our veterans by ensuring they will not be discriminated against in federal hiring for cannabis use or lose their VA healthcare for following their doctor’s advice to use medical cannabis
  • Protects children and young adults under 21 from cannabis products and advertising nationwide

The following industry leaders have weighed in:

Trulieve – Kim Rivers, CEO

“The States Reform Act is a consequential step in the right direction for common sense cannabis reform at the federal level. Our current piecemeal approach to legalization is not only unnecessarily cumbersome from a compliance perspective, but ultimately stymies the long-term growth of the legal industry. Allowing our existing federal structure to regulate cannabis businesses will allow legal companies to operate by a set of standardized guidelines, which ultimately bolsters consumer trust and minimizes risk for investors. Until the bill is passed, Trulieve believes Congress must still prioritize passing the SAFE Banking Act to ensure cannabis companies can fully access the financial resources they need to scale.”

Entourage Effect Capital – Matt Hawkins, Managing Partner

“While Representative Mace’s States Reform Act (SRA) applies necessary pressure on Congress to pass cannabis reforms, Congress’ primary focus should still be the SAFE Banking Act. At this stage, public safety and tax compliance are two key issues that both cannabis industry stakeholders and regulators want to address immediately, and this can be done directly through SAFE without broaching the topic of legalization. Considering the immense growth of the legal industry in the past year alone, it is imperative to bring cannabis into the mainstream financial system so that businesses of all sizes can build constructive relationships with federal regulators and access the appropriate resources to scale.”

Curaleaf – Joe Bayern, CEO

“We’re incredibly encouraged by this proposed bill, which is a thoughtful approach to decriminalization and includes common sense parameters for existing state markets, regulation, taxation, safe harbor, criminal justice reform, age-appropriate restrictions, hiring practices and veterans’ access. We are grateful to Representative Nancy Mace for blazing another trail in the quest to destigmatize this plant and unlock the economic and job creation opportunities of our emerging industry, along with the health and wellness possibilities for millions of Americans who have already demanded an alternative to traditional routes of medication and relaxation.”

Glass House Brands – Kyle Kazan, CEO

“While we continue to build a multi-billion dollar cannabis industry and debate the details of legalization, many thousands of people are wasting away behind bars. Within this bill are the keys to their cells, and that’s the reason to support it. The time for discussion is over, and we must act as though it is our loved ones who are watching precious moments of their lives tick away. Pass this bill.”

Ayr Wellness (OTCQX:AYRWF) – Jon Sandelman, CEO

This bill represents the latest step towards the mainstreaming of the U.S. cannabis sector. This industry has thrived despite federal illegality, delivering results and experiencing incredible growth despite headwinds of all types. The industry and its participants of all sizes deserve the opportunities that federal reform will provide.

We applaud the courage we’ve seen on both sides of the aisle in addressing this important issue, most recently Rep. Mace who added a new Republican voice to the discussion of common-sense cannabis legalization. While this discussion is still in its early phases, we believe it is important that both sides of the aisle are actively engaging in conversation to create a fair, safe and regulated cannabis industry that benefits all stakeholders, including local communities and those disproportionately impacted by the War on Drugs.”

Ascend Wellness (OTCQX:AAWH) – Abner Kurtin, CEO

“U.S. Representative Nancy Mace (R-SC) has introduced a strong middle-ground solution to federal cannabis legalization with the States Reform Act —[it’s not as ambitious as the CAOA but is more productive than the STATES Act, and thus more likely to see the 60 votes needed to pass the Senate. The presentation of a Republican-led cannabis reform bill is a huge milestone for cannabis, proving that leaders on both sides of the fence recognize the major importance of our industry in terms of public health, local and state tax growth and the creation of hundreds of thousands of U.S. jobs. Although we would have liked more emphasis on social equity initiatives, we’re glad to see measures in the bill support increased access to the legal market, small businesses and re-entry into society for those with nonviolent cannabis offenses.”

Greenlane – Nick Kovacevich, CEO

“Everyone knows that the current Democratic leadership is eager to legalize cannabis, but the fear is that they won’t be able to find a path through Republican resistance. The fact that a Republican is dropping a legalization bill is very encouraging because it will display a middle ground toward accomplishing this ever-important goal — the legalization of cannabis. Furthermore, this is a smart move by the GOP since they are gaining momentum into the midterms and cannabis is such a popular issue with the voters. If successful with cannabis legalization, it could result in broad election success come a year from now.”

Pelorus Equity Group – Rob Sechrist, President

“At a time when the cannabis industry has added hundreds of thousands of jobs, millions in tax dollars, and large-scale infrastructure projects without government handouts, this measure would be a meaningful step forward towards continuing the economic growth that cannabis has created. A more targeted approach is the most likely to get the bipartisan support necessary to get the 60 votes required in the Senate. We look forward to seeing State laws being deconflicted from Federal law as soon as possible.”

Jushi Holdings – Jim Cacioppo, Chief Executive Officer, Chairman and Founder

“Jushi commends U.S. Representative Nancy Mace, R-SC for her interest in responsibly bringing an end to federal cannabis prohibition and her excellent work in preparing the States Reform Act. Representative Mace’s States Reform Act is a comprehensive, thoughtful measure that strikes a commonsense balance between supporting important public health, safety, and welfare priorities on the one hand, and ensuring disproportionate enforcement of minor, non-violent cannabis possession crimes cannot continue to harm communities across our country on the other. ”



Kaitlin DomangueNovember 5, 2021


California-based, vertically integrated Glass House Brands Inc. (NEO: GLAS.A.U) (NEO: GLAS.WT.U) (OTCQX: GLASF) (OTCQX: GHBWF) announced its subsidiary, GH Group Inc., has filed a lawsuit against Element 7 CA, LLC (E7), a California dispensary with multiple locations across the state, and its principals Josh Black and Robert “Bobby” DiVito. The claim was filed at the Los Angeles County Superior Court – Central District earlier this week on November 2nd. 

The lawsuit was filed in an effort to enforce the complete transfer of retail licenses GH Group was set to acquire, per a Merger and Exchange Agreement between the two companies dated February 23rd, 2021. E7 was contractually committed to transfer seventeen retail licenses to Glass House Brands. Only three out of the seventeen have been fully transferred so far. Those three licenses are located in Dunsmuir, Hesperia, and Eureka, California. GH Group has also terminated the License Development Consulting Agreement between the two parties, also dated February 23rd, 2021. 

E7 In the News

This isn’t the first time E7 has made the news under less-than-ideal circumstances, with a petition included, garnering nearly 700/1,000 signatures. Namely, those who are against corporate cannabis. E7 filed an application with the town of Fairfax, California to operate a dispensary and delivery service. The company was accused by Fairfax residents of pushing local business owners out and bringing corporate cannabis in. The cannabis company applied for a storefront location at 1930 Sir Francis Drake Blvd, which is a family-owned acai bowl shop and cafe, Mana Bowls. “We are not a national chain and we don’t use locals as a front,” Josh Black, who was named in the Glass House Brands suit, told Marin Independent Journal. But Mana Bowls private Instagram account links the petition in their bio, potentially supplying a level of truth to Fairfax residents’ concerns about pushing out local businesses. 

There was also concern from people who didn’t want to make the town a “go-to” location for cannabis. “Fairfax already has the pot store and the CBD store,” said Ed Tilton, Fairfax resident who lives behind Mana Bowls, to the Marin Independent Journal. Parents of young children have also expressed their disinterest, as Mana Bowls is a place where families can be together. “Our town and kids need Mana Bowls. Cannabis can easily be delivered and does not need a storefront in Fairfax,” says one commenter on the petition. 

Glass House Brands feels confident the remaining fourteen licenses will be transferred. E7 has not yet made any statements about the lawsuit with Glass House Brands. 

Debra BorchardtOctober 6, 2021


The Securities and Exchange Commission (SEC) charged CanaFarma Hemp Products Corp. and its co-founders with fraudulently raising approximately $15 million from investors, and misappropriating a significant portion of the investor funds for personal use like buying luxury cars.

The SEC’s complaint alleges that in 2019 and 2020, CanaFarma, a Canadian startup hemp company with offices in Vancouver and New York City, and its co-founders Vitaly Fargesen and Igor Palatnik raised millions of dollars from investors.  According to the complaint, while raising these funds, the defendants made misrepresentations to investors, including claims that CanaFarma was a fully integrated company that was processing hemp from its own farm when in fact it had not processed any of this hemp and its products used hemp supplied by third parties.

The complaint also alleges that financial information provided to investors misstated historical revenue numbers and included baseless projections about future revenues. For example, the company claimed that it would have revenues of $25 million in the first year of operation. The company also claimed that money was used for marketing expenses like a road show in Europe that never occurred. The executives were also transferring money out of the CanaFarma account to companies owned by its largest shareholder for “services” but then sending the money back to make it look like sales. The company also claimed it used $3 million for marketing expenses which were untrue.

Fargesen was criminally charged on October 5 by the U.S. Attorney’s Office for the Southern District of New York with securities fraud, wire fraud, and conspiracies to commit both securities fraud and wire fraud in connection with the CanaFarma investment offering. Palatnik has also been charged in the indictment in the Criminal Case with securities fraud, wire fraud, and conspiracies to commit both securities fraud and wire fraud in connection with the CanaFarma investment offering.

The company is also accused of using the CEO as a figurehead only. David M. Lonsdale is listed on the company’s website as its Chief Executive Officer. He is the President of the Lonsdale Group, a boutique finance firm. He had 10+ years as president of private investment bank Allegiance Capital.

CanaFarma was incorporated in June 2017 under the name KYC Technology Inc. In March 2020, as part of a reverse merger, KYC acquired CanaFarma Corp. and changed its name to CanaFarma. The company then listed its shares on the Canadian Stock Exchange with the ticker: CNFA.CN) and is quoted on the OTC Markets using the ticker CNFHF.

“As alleged in our complaint, the defendants pitched investors with falsehoods about a fully integrated hemp company with rosy financial projections” said Richard R. Best, Director of the SEC’s New York Regional Office.  “We will relentlessly pursue those who deceive investors and misappropriate and misuse their funds.”
Hemp Farming
The company leased two hemp farms, one in Dutchess County NY, and the other in Syracuse NY. Despite harvesting hemp at the farms, none of the products was used in the company products. The SEC says the hemp was instead put into storage and never used. The company purchased hemp oil from a third party and used that to make its Yooforic hemp-infused chewing gum. The company initially got off to a good start making $832,000 in revenue for September 2019, but then sales began dropping. By June 2020, monthly sales had declined to $26,000.
The company also told investors that it was a “Vertical Integrated Hemp Business”  saying in investor presentations “From seed to counter, our fully integrated hemp business helps us promote in-demand hemp oil infused products that continue to fuel the direct response marketing engine.” The investor presentation then includes the description “processing” as one of the ways CanaFarma’s business was “integrated.” None of which was true. The company also included testimonials in its presentations, which were for a different product that the company never sold.
Vertical Wellness
Last month, CanaFarma said it was merging with Vertical Wellness, whose CEO Smoke Wallin is a long-time cannabis industry executive. Wallin was set to become the CEO of the combined businesses. The announcement claimed that the combined companies would be worth $50 million. Vertical Wellness has also partnered with Kathy Ireland Worldwide (kiWW) to produce CBD products, with the first brand release of kathy ireland HEALTH & WELLNESS CBD Solutions planned for Fall 2021. Kathy Ireland is Chair, CEO, and Chief Designer of kiWW.
Wallin issued the following statement with regards to the charges:
“We are surprised by the allegations against CanaFarma and named executives.  Neither Vertical Wellness nor any of our advisors, attorneys, or those we work with every day, had any prior knowledge about this situation.  We hope that CanaFarma can work through these issues and the truth will subsequently come to light. Vertical Wellness, a separate corporate entity, will continue to expand our business as planned. Vertical Wellness has created or acquired several long-planned health and wellness brands; we are full speed ahead launching our CBD beverages and exciting products in the category.  We will naturally evaluate strategic options in light of today’s allegations.”

The SEC said it is seeking permanent injunctions, disgorgement and prejudgment interest, and civil penalties against the defendants, and also seeks officer-and-director and penny stock bars against them.

The SEC’s investigation was conducted by John Lehmann, Lee A. Greenwood, and Thomas P. Smith Jr., and was supervised by Sanjay Wadhwa.  The litigation will be led by Mr. Lehmann and Mr. Greenwood.  The SEC appreciates the assistance of the U.S. Attorney’s Office for the Southern District of New York and the Federal Bureau of Investigation.

Debra BorchardtOctober 5, 2021


New York’s Cannabis Control Board is moving quickly to make up for the lost time under the previous administration. In the group’s first meeting since incoming Gov. Hochul stepped in and nominated people for the board, they approved raw cannabis flower as a medical product effective immediately.

Boris Jordan, the founder and chairman of Curaleaf (OTC: CURLF) said on Twitter:

Thank you, NY Gov. Hochul & the Office of Cannabis Management for allowing the sale of whole flower. This decision impacts 151k+ medical patients in NY who will now have access to quality & safe whole flower. Action (not talk) from our new Gov!

In addition to approving flower, the Board also loosened other restrictions.

  • Doctors can approve medical patients
  • 30 day supply increases to 60 day supply
  • $50 registration fee for patients is waived
  • Streamlining dispensation

Currently, New York cannabis law states that adults 21 and older can possess up to three ounces of cannabis or 24 grams of concentrates in New York. The irony is that regular citizens could legally smoke cannabis flower in public, while medical patients weren’t allowed such a form factor.

The meeting was a quick one and lasted roughly 30 minutes. The board members are Tremaine Wright (Cannabis Control Board Chair) , Jessica Garcia, Rueben McDaniel III, Jen Metzger, Adam Perry and Chris Alexander (Executive Director). The meeting also named Jason Starr as the Chief Equity Officer. He served as assistant counsel to former New York Gov. Andrew Cuomo (D) and also worked at the New York Civil Liberties Union.

Patrik Jonsson, Regional President of the Northeast at Curaleaf said, “The expansion of New York’s medical program allowing the sale of whole flower is a very big deal for the thousands of patients affected who now have access to the most cost effective and natural form of the plant. On behalf of Curaleaf and our patient community, I want to thank legislators and the Office of Cannabis Management for their leadership on this issue. This continued evolution of the medical program, which includes expanded qualifying conditions and the removal of application fees, will empower more patients to make choices that work best for their needs. These changes will give New Yorkers access to whole flower that has undergone standardized procedures and testing protocols, ensuring quality and safety. Curaleaf looks forward to expanding our product offerings to best serve our valued patients.” Curaleaf said it could have products on the shelf in November after state testing.

Stocks See Lift

Several of the cannabis companies with large exposure to New York saw stock prices immediately jump on the news. Curaleaf Stock rose as did Green Thumb Industries (GTBIF).

Debra BorchardtOctober 5, 2021


Last week, Sundial Growers (OTC: SNDL) enjoyed some success in the courtroom when a case brought against the company by investors was dismissed. In May 2020, several investors had charged that Sundial made claims in investor presentations that weren’t true. However, U.S. District Judge Andrew L. Carter Jr. said that the various statements made in the presentations were either protected, forward-looking statements or weren’t all that misleading at the time the statements were made.

The issue stems back to 2018 when Sundial tried to raise $50 million in order to buy an agricultural company based in the UK called Bridge Farm. According to the court filing, the January Investor Presentation said that Bridge Farm had a hemp license that would allow for cultivation, processing, and export of finished products from the UK. It went on to say that Bridge Farm would “provide a platform for scalable growth with only ~C$20 mm in incremental Capex needed to facilitate CBD production and extraction” and that the “[o]peration enables us to produce and distribute at scale almost immediately and more quickly than competitors.” At the time, Sundial said it expected Bridge Farm to generate C$256 million in revenue and C$115 million of EBITDA in 2020.

Bridge Farm Plans

Then Sundial upped the fundraise and said it wanted $70 million versus the original $50 million. The investors say they ponied up $7 million in the pre-IPO round based on the projections of the Bridge Farm acquisition. In 2019, Sundial filed to go public and stated in Form F-1 that Bridge Farm’s hemp license would expire in December 2021. In August 2019, the company went public pricing its shares at $13 and netting $134 million. The investors were unable to sell their shares for the next six months.

Also in August, the case says that during an investor call Tamy Chen from BMO (one of Sundial’s IPO bankers) said “I know that there’s a couple of licenses, you’re waiting for before you can start really converting and growing hemp at Bridge Farm’s facilities.” BMO then issued a note stating that “Bridge Farm requires key licenses and we expect there will be a natural ramp and learning curve associated with the conversion of Bridge Farm’s greenhouses from growing herbs and ornamental flowers to growing hemp.” The lawsuit  also stated that BMO wrote, “That there was no indication as to if, or when, Bridge Farm would receive the necessary licenses to extract CBD and/or to make over-the-counter CBD products.”

Then during its fourth-quarter earnings call for 2019, Sundial reported that its net loss for that quarter was C$145.1 million which was “primarily due to the impact of a non-cash  impairment charge of $100.3 million related to the goodwill recorded upon the acquisition of Bridge Farm.” The Plaintiffs alleged that Sundial’s accountants determined that “(i) the goodwill the Company had attributed to the purchase price for Bridge Farm . . . was grossly inflated . . . and/or (ii) Bridge Farm’s ability to generate cash flows deteriorated such that the fair value of Bridge Farm’s goodwill dipped below its book value.” Not long after Sundial said its core management team was leaving the company and the stock continued to slide on negative news.

By March 2020, Sundial said it was selling the Bridge Farm property and in April 2020, the stock had slid from its offering price of $13 to just fifty cents. The investors believed that Sundial wasn’t being truthful when telling them about the Bridge Farm’s hemp licenses. They allege that Sundial used the Bridge Farm acquisition as a reason for people to invest in the company, but knew all along that it didn’t have the hemp licenses it said it had.

Judge Disagrees 

However, Judge Carter said the investors didn’t demonstrate that Sundial didn’t believe the claims it had made in the presentations. The court order stated, “Corporate officials need
not be clairvoyant; they are only responsible for revealing those material facts reasonably available to them.” It went on to say, “The Second Circuit has repeatedly stated that plaintiffs must do more than simply assert that a statement is false—“they must demonstrate with specificity why and how that is so.” The judge also pointed out that the company was covered by saying the claims about Bridge Farm were forward-looking statements, which were accompanied by cautionary language about risk.

The Judge said that the plaintiffs hadn’t proved that Sundial knew the statements were false.

The investment companies behind the complaint are SUN, A Series of E Squared Investment Fund LLC; E-Squared Capital Fund LP; S.H.N Financial Investments Ltd.; Flamingo Drive M&M LLC; and Stable Road Capital LLC.

Current Day Sundial

Sundial shares were lately trading at roughly 64 cents per share. In January, the company priced an offering in which it would receive approximately $100 million. The company said it planned to use the money for possible acquisitions of, or investments in, equipment, facilities, assets, equity or debt of other businesses, products or technologies and for working capital and general corporate purposes. The additional issuance of shares wasn’t viewed favorably by the market and the price of shares dropped. The company now has a whopping two billion outstanding shares

In August the company reported that its total net revenue for the quarter ending in June was just $18.6 million,  while the net loss was $52.3 million. “Following Sundial’s restructuring in 2020, we have been able to rapidly reshape the business model to focus on a two-pillar strategy that we believe will position our shareholders for future success,” said Zach George, Chief Executive Officer of Sundial. 

He went on to say, “Our second-quarter performance continued to be impacted by the liquidation of discounted inventory and our refusal to push sub-optimal product into the market. We have undertaken a significant retrenchment in our cultivation activities, which has included changes to our cultivation processes as well as workforce and other cost reductions. We have seen continuous improvement in our cultivation outcomes as we remain focused on best practices to deliver strong results in potency, yield and terpenes. In the last two months of the quarter, we experienced the highest successive average potency at harvest since operations began at Olds.”

Sundial did acquire the Inner Spirit and the Spiritleaf retail network on July 20, 2021. The company said in a statement, “Adding Canada’s largest cannabis retail store network will enable Sundial to reach consumers through an entirely new channel, generate a deeper understanding of consumer buying trends, and provide depth of data to enhance decision making around product and distribution strategies. System-wide retail sales through Spiritleaf stores reached $124 million on a trailing 12-month basis to March 31, 2021, the last reported period prior to acquisition. In July 2021, the retail network achieved its highest ever one-day and monthly sales since inception. Through the acquisition of a retail segment, Sundial now has direct access to more comprehensive customer data and expects revenue increases to be generated by the integration of our distribution channels commencing in the third quarter of 2021.”




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