Parallel's Investors Argue Wrigley Doesn't Have 'Get out of Jail Free' Card

Parallel Cannabis, also known as Surterra Wellness, had hoped to get its investor lawsuit dismissed, but the investors say not so fast. The latest chapter in the ongoing case has the defendants TradeInvest Asset Management Company (BVI) Ltd., First Ocean Enterprises SA, and Techview Investments Ltd. understandably opposing the request to dismiss the case. 

Surterra Holdings which is also known as Parallel Cannabis filed a motion to dismiss and the hearing for this is scheduled on September 9, 2022. It wasn’t until August 5, that the TradeInvest group pushed back on the request to dismiss. In their response, they wrote, “Defendants claim they have a “get out of jail free” card. The excerpts from the documents they cite, according to Defendants, actually allowed them to make multiple, material misrepresentations to the SAFE Plaintiffs—which were critical to their decision to invest—with no liability for lying.” The investors also claim in their court filing that Surterra can’t fall back on the disclaimer of forward-looking statements language. The investors wrote,  “They argue that certain representations are protected, forward-looking statements—but concede that protection does not apply where the speaker knows the statement is false (and/or is using it to aid in fraud).”

Original Complaint

Green Market Report has covered this case extensively. In March, GMR wrote that the investors alleged that chewing gum heir Beau Wrigley (the former Surterra CEO) convinced the plaintiffs to invest in a Simple Agreement for Future Equity or SAFE. A SAFE is a relatively new type of security in which an investor’s cash investment generally converts to equity in the issuing company under conditions specified in the SAFE. They are often issued to provide a company with bridge financing until it can complete an additional capital raise or a sale of the company, and will often convert to equity upon the occurrence of that future, specified event.  They say they sent the money to the company on September 27, 2021. Although much is redacted, it does allege that the investors were misled and had they been told the truth would likely not have made the SAFE investment. 

They say they weren’t aware that the company was in financial trouble, having defaulted on some debt already. They also claim that their investment money wouldn’t be tapped until Wrigley matched the investment with his own money. Instead, they allege their investment money was used to pay off other debts causing them to claim it was a Ponzi scheme

Lawyers Leaving

Also happening in the background of this case, the lawyers for the investors are apparently trying to get off of the case. They wrote to the judge on August 2, “Mr. and Mrs. Morgan are partners in a large law firm. Given the substantial costs and time associated with prosecuting this action, and the fact that only a subset of holders of Senior Notes had joined and agreed to bear such expenses, on July 7, 2022, Mr. Morgan notified Quinn Emanuel that they no longer wish to be represented by us and that they were accordingly releasing the firm.” The legal firm went on to say in a letter to the judge, “We had understood that the Morgans would either be representing themselves or continue appearing through their law firm, which Mr. Morgan advised me has over 800 lawyers.”

John and Ultima Morgan are part of the TradeInvest group. However, the firm Quinn Emanuel also stated they hadn’t been given any instructions for new counsel and they remain on the case for now. Indeed, the latest court filing arguing against dismissing the case was filed by Quinn Emanuel’s lawyers.

Parallel Moves Forward

Despite the financial troubles with its debt, Parallel continues to operate and move forward. In June, the company announced opening its third dispensary in Miami Florida. “As Surterra continues to expand its dispensary locations across Florida, we’re excited to increase our presence in the sunny home to hundreds of thousands of Miami residents who seek high-quality medical marijuana products, which we’re proud to provide,” said Parallel CEO James Whitcomb. Whitcomb replaced Wrigley as the lawsuit laid bare issues with repayment of the company’s debt.  The company said it has 45 Medical Marijuana Treatment Centers in the state of Florida, with more planned to open in 2022.

 

Debra Borchardt

Debra Borchardt is the Co-Founder, and Executive Editor of GMR. She has covered the cannabis industry for several years at Forbes, Seeking Alpha and TheStreet. Prior to becoming a financial journalist, Debra was a Vice President at Bear Stearns where she held a Series 7 and Registered Investment Advisor license. Debra has a Master's degree in Business Journalism from New York University.


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