Eaze Archives - Green Market Report

Julie AitchesonJanuary 27, 2022
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The Covid pandemic has been impacting our economy in so many ways for such a while now that it’s hard to parse which marketplace developments are driven by a climate of uncertainty and crisis versus a myriad of other factors. Online ordering and delivery, which was already gaining ground as a popular mode of consumerism pre-pandemic, received a massive boost in popularity from the endless restrictions that Covid-19 has placed on our daily lives. 

But delivery’s spiking popularity is not solely due to attempts at avoiding Covid infection. Meadow co-founder David Hua, who notes that retail cannabis deliveries went up 50% in 2021 from 2020, anticipates that the continued growth of this trend will see ongoing benefits beyond staying Covid-free. These include heightened delivery times and expanded access to a greater range of offerings for consumers, while businesses can expect to see increases in the size of their customer base and boosted sales.

 A January report on delivery service trends produced by The Harris Poll for delivery management software company Onfleet found that over half of those surveyed stated that if they were going to purchase legal cannabis products, they would be much more willing to do so via delivery versus in person. The convenience factor and remaining taboos regarding cannabis use are likely factors here, but other safety concerns cannot be discounted. Christine De La Rosa, co-founder and CEO of The People’s Ecosystem, highlights the rise in instances of mob robberies at retail locations in places like California and Oregon, and predicts a commensurate rise in cannabis delivery services by small businesses “rather than face the risk to their safety, their employees’ safety, and their business safety in the current climate.” 

In several parts of the U.S., however, cannabis delivery services face a number of potential legal challenges. Recreational marijuana became legal to buy in Maine almost a year and a half ago, but weed shops and dispensaries remain relatively thin on the ground in Vacationland due to a slow acceptance of the cannabis industry in some areas. To leapfrog this slow thaw, some in the Maine cannabis industry are pushing for a legal door-to-door delivery system. Direct delivery is already allowed for medical cannabis in the state, and many legal businesses owners hope recreational cannabis delivery will give them an edge in competing with illicit operations. (Due to an eight-fold increase in calls for unintentional marijuana poisoning among children since 2012, many Mainers fear that door-to-door delivery will only place kids at greater risk.)

Not far from Maine, Lantern has thrived in Massachusetts. Lantern is among the leading cannabis e-commerce marketplace and delivery platforms in the U.S and was formerly part of the Drizly Group, a top alcohol delivery company. Lantern currently offers on-demand cannabis delivery for patients and adult-use consumers in MassachusettsMichigan, and Colorado.  In February 2021, Uber announced an agreement to acquire Drizly for approximately $1.1 billion in stock and cash. As part of the deal close, Lantern has transitioned to a separate corporate entity and received $40 million in capital from Drizly Group. The price paid for Drizly has certainly sparked dollars signs in cannabis delivery company’s eyes. Lantern experienced 350% year-over-year growth following the expansion of its on-demand marketplace delivery platform into Colorado and Michigan, two of the fastest-growing cannabis delivery markets in the U.S. Additionally in July 2021, Lantern became the first adult-use delivery platform to launch in Massachusetts and serve the Greater Boston area.

Eaze is one of the largest cannabis delivery companies and the best known. It is a vertically-integrated company with over 7.6 million deliveries completed to date and over two million registered customers. Eaze carries over 100 brands and 600 individual products on its menu and is a nationally-recognized leader in promoting social equity licensees, who have sold nearly $7.7 million in products via the Eaze platform. In July, Eaze launched the first-of-its-kind shoppable cannabis app for Apple. Eaze has also entered into the product side of the business as well and acquired a dispensary from the company Manifest Seven (OTC: MNSFS) in November for $6.7 million.

Despite these success stories, it isn’t all rosy in the delivery business. Stem Holdings Inc. (OTCQX: STMH) (CSE: STEM) sold its wholly-owned subsidiary Driven Deliveries, Inc. to Driven Deliveries’ founders in return for 12.5 million shares of Stem. At the time, Steve Hubbard, Interim CEO of Stem, commented, “After careful consideration with the Board, we have made the strategic decision to divest and discontinue operations of Driven Deliveries for several reasons. First, the delivery and e-commerce cannabis business in California has become increasingly more challenging due to oversupply in the market, which has reduced price per pound approximately 50%. More competition in California has also increased marketing expenses, which has resulted in low margin deliveries consistently. This divestiture will dramatically reduce our monthly expenses and improve our balance sheet, putting the company is a much healthier financial position to focus all of our resources on cultivation, processing, retail and our award-winning brands in California, Oregon and new markets.”

Despite the inevitable legal challenges and logistical complications that come with expanding cannabis delivery systems, Onfleet’s report paints a promising picture for a rising use of (and reliance upon) delivery for all kinds of consumables. With 55% of America’s Gen Z and 60% of Millennials owning up to having more delivery apps than streaming services on their phones (and older customers having grown more comfortable with delivery apps during the pandemic), delivery is a field ripe for innovation. That is, as long as that innovation doesn’t rely on robots or autonomous vehicles. According to Onfleet’s survey, It’s a brave new world, but not that brave. At least not yet. 

 


Julie AitchesonDecember 2, 2021
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The numbers are in and it’s official—Green Wednesday 2021 was a big one for the cannabis industry, while Black Friday fizzled in comparison. Green Wednesday saw cannabis sales increase across the U.S. Black Friday did not have the sales growth seen in previous years, though some data (Flowhub) showed larger order values and bigger discounts than Green Wednesday. Data from market analytics and cannabis companies like Headset, LeafLink, Lantern, Glass House Brands, and others show common trends regarding most popular products and year-over-year sales numbers. Using this data, companies extrapolate some possible variables affecting this year’s numbers, including a decreased emphasis on Black Friday door-buster deals targeted towards packing stores with bargain-hungry shoppers, focusing instead on online sales spread out over the holiday season (Springbig).

Headset’s Green Wednesday 2021 data showed a 33% increase in total retail sales compared with the four previous Wednesdays, with a marked trend of customers taking advantage of promotions on offer to receive discounts on holiday shopping, with the average discount up 29 percent. This was in contrast to a slight decrease in sales (-4.6%) on Black Friday relative to the previous four Fridays, despite the fact that average Black Friday discounts increased by 56% from the previous four Fridays.

Flowhub’s data showed an average Green Wednesday discount of $9.57 (up from $8.94 in 2020) and an average Black Friday discount of $11.09. Notable in Flowhub’s findings was the conclusion that while Green Wednesday was a big sales day, Thanksgiving weekend as a whole had lower pre-tax sales than a typical Wednesday through Sunday. Jushi Holdings (OTC: JUSHF) didn’t seem to notice, however, experiencing its best online sales day in the company’s history on Green Wednesday 2021 with an 80% uptick in sales during Thanksgiving week and online ordering up 200% on Green Wednesday. Eaze saw a 135% increase in deliveries compared to a typical Wednesday in 2021, making it their second biggest day this year by both numbers of deliveries and sales after 04/20/21.

Edibles Most Popular For Green Wednesday

Headset’s data on category winners by sales numbers showed edibles leading the pack with 67% growth on Green Wednesday and 11% on Black Friday. Topicals and tinctures took second and third place while beverages saw a whopping 86% growth. Leaflink showed flower holding the top spot for most popular category in the month leading up to Green Wednesday making up 33% of sales with cartridges coming in second up 24.9% from the previous month. Jane Technologies saw its biggest category sales increases in edibles (94%), vapes (84%), and flower (73%) compared to the previous three Wednesdays, with chocolates and disposables leading subcategory sales by increases of 126% and 100% respectively. For Glass House Brands (OTC: GLASF), flower, carts, and edibles were the big winners.

LeafLink’s data measured the growth of sales (10.61%) during the month leading up to Green Wednesday compared to October, with the biggest sales increase (16%) coming during the week of November 14th over the previous week. The run-up to Green Wednesday broke records for cannabis company Lantern, with a 44% rise in average daily sales leading up to Green Wednesday, though there was no significant change to daily Average Order Value.  As the cannabis economy continues to transform to meet a shifting retail environment and shopping behaviors adaptive to these uncertain times, market analysts and retailers will continue to keep an eye on Green Wednesdays and Black Fridays to come as annual bellwethers for the market.

 


StaffAugust 18, 2021
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Private cannabis delivery company Eaze is buying multi-state retail operator Green Dragon and will provide service to customers and patients in California, Colorado, Michigan, and Florida. Eaze said in a statement that the combined company will operate 42 delivery and storefront retail locations and serve markets with a combined value of nearly $10 billion. The company did not disclose the valuation of the transaction.

Green Dragon is a multi-state operator, with stores spanning major metropolitan areas in Colorado and Florida, cultivation operations in both states, and more than one million transactions in 2020 alone. The company said that Green Dragon’s retail stores in Colorado achieved a 39% growth in 2020. In July, Green Dragon announced the opening of its first two Florida dispensaries and plans to have at least 20 locations secured in Florida by the end of 2021.

“Eaze has achieved exponential growth over the last two years by successfully shifting to vertical operations and continuing to grow our loyal customer base,” said Eaze CEO Rogelio Choy. “Green Dragon’s airtight operations in Colorado and expansion into Florida’s booming market adds key operational capabilities to our national footprint and cements our leadership as California’s largest MSO. Together, we are well-positioned to leverage the market’s explosive growth now and into the future.”

The combined company expands Eaze retail operations into four of the fastest-growing U.S. markets. It also positions the company for expansion over the next 18 months in Florida and Colorado.

Green Dragon Co-Founder and Chief Development Officer, Alex Levine said, “We are incredibly excited to be combining our retail and production expertise with the nation’s leading cannabis delivery platform. Together, Eaze and Green Dragon will be able to expand access to even more patients and customers via an ever-expanding delivery network as well as physical storefronts across the country.”

Eaze is a vertically integrated cannabis marketplace operating in California and launching in Michigan, with over 7.6 million deliveries completed to date, two million registered customers, and $190 million in transaction value over the past 12 months. Eaze carries over 100 brands and 600 individual products on its menu and is a nationally recognized leader in promoting social equity licensees, who have sold nearly $7.7 million in products via the Eaze platform. In July, Eaze launched the first-of-its-kind shoppable cannabis app for Apple.

The transaction is pending local and state regulatory approval. In 2020, Eaze raised $35 million in order to pivot to become a plant-touching operation.


Debra BorchardtJune 21, 2021
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According to a report on Reuters, a Manhattan federal judge sentenced two former consultants for cannabis delivery company Eaze Technologies Inc to prison last Friday for their roles in a scheme to dupe U.S. banks into processing credit card transactions for cannabis purchases. The fraudulent transactions totaled $100 million in payments to the online cannabis marketplace.

U.S. District Judge Jed Rakoff sentenced Hamid (Ray) Akhavan, 43, to two and a half years in prison and Ruben Weigand to 15 months in prison. The story noted that the jury convicted the two men on one count each of conspiracy to commit bank fraud in March. Despite being sent to prison, it could have been much worse. The Judge criticized the federal sentencing guidelines, which could have resulted in life in prison for Akhavan and up to 24 years for Weigand.

“It appears to me that there has never been a case where the guidelines have been more irrational, silly and ridiculous than in their application to this case,” Rakoff said. “It boils my blood that the sentencing commission has not learned better.” The prosecutors felt that the illegally processed transactions amounted to $108 million and that the sentences should be based on that.

Rakoff also ordered Akhavan to pay a $100,000 fine and forfeit $17.2 million. Weigand had agreed after trial to forfeit $384,000 he earned related to the scheme. He was also ordered on Friday to pay a $50,000 fine.

Eaze Payments

The saga has been going for several years now. Credit card companies like Visa and Mastercard have repeatedly said they will not process cannabis transactions since the product is still federally illegal. This made normal consumer transactions incredibly difficult for legal cannabis companies, whose customers expected a typical retail experience. Eaze began operating in California and insisted at the time that it had not done anything wrong. However, the former CEO of Eaze, James Patterson  pled guilty to the crime. He had been working with Akhavan and Weigand, who disguised the payments to sneak them past the banks and credit card companies.

Prosecutors said that Weigand opened merchant accounts at European banks for the phony companies. They called witnesses who testified that Eaze customers can still use Visa and Mastercard for payments on the site through a third-party digital wallet provider.

For its part, Eaze denied the allegations in the 2019 lawsuit and has said it had cooperated with federal authorities and “was not a defendant in” the case against Patterson. Eaze also quit accepting payments of this nature in mid-2019. However, legal experts say the allegations don’t end because the transactions ended. The dispensary owners are no doubt nervously watching the outcome of this case. They could also be dragged into this for committing bank fraud. If the dispensary owners knew that Visa and Mastercard would not accept payments for cannabis transactions and they still pursued a scheme that managed to make that happen, are they guilty? That is yet to be determined.

The case is U.S. v. Weigand et al, U.S. District Court, Southern District of New York, No. 1:20-cr-00188.


StaffMarch 24, 2021
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Law360 reported that a Manhattan jury found two businessmen guilty of assisting in an elaborate plan to let California weed company Eaze process transactions without getting flagged by banks over the federally illegal substance. The website said that it took the jury six hours to come to that conclusion following a hard-fought trial that began on March 1 before U.S. District Judge Jed S. Rakoff.

Last year, the businessmen Hamid Akhavan, 42, and Ruben Weigand, 38, were each charged by the Manhattan U.S. attorney’s office for conspiring to defraud merchant banks of property rights by tricking them into processing more than $150 million of transactions on behalf of San Francisco-based Eaze, a cannabis-selling app nicknamed “the Uber of pot.” The major banks and credit card companies like Visa (NASDAQ: V) and Mastercard (NYSE: MA) refuse to work with cannabis companies as the product is still federally illegal. So any transactions using these products or lying to banks about the nature of the transactions is illegal.

Eaze has continuously stated that it had cooperated with the authorities in the case. However, the company’s former CEO James Patterson entered a guilty plea right before the trial began.

Prosecutors said Weigand and Akhavan worked with executives at an online marijuana marketplace company to facilitate the sales, although they haven’t named the business. Eaze, an online company offering delivery from dispensaries, was the subject of a lawsuit last year that alleged it worked with Akhavan to utilize shell companies to process credit card payments. That case was settled. While Eaze was not specifically named in the case by the prosecutors, only an unnamed online marijuana marketplace was mentioned, a connection has been made. Eaze was not charged in this case against the two. Patterson resigned from Eaze in 2019.

Back In The Beginning

Back in April 2019, the company DionyMed terminated its contract with Eaze and claimed that “Based on a review by outside counsel, DYME could not confirm that the processing procedure meets California regulatory requirements.” The company said it was going to invest in its own delivery service called “Chill.” DionyMed through its dispensary store Hometown Hearts claimed that Eaze was using shell accounts to create fraudulent charges and payment processing, which was the excuse it needed to terminate a three-year contract. Eaze insisted at the time that it didn’t process bank transactions, that it merely provided the software between the transactions. However, it seems Dionymed’s case, which was settled, flagged the behavior that Eaze denied.

According to Law360, prosecutors said the defendants told “layer upon layer of lies” to build a system of fake websites and third-party dummy companies that allowed Eaze to take federally unlawful credit card and debit payments between 2016 and 2019.

The indictment alleges that, from 2016 through 2019, Akhavan, Weigand, and other, unnamed co-conspirators engaged in a conspiracy, the “Transaction Laundering Scheme,” to deceive banks into processing over $100 million of credit and debit card payments to marijuana retailers by disguising the transactions so as to create the false appearance that they were unrelated to the purchase of marijuana.

The case is U.S. v. Weigand, case number 1:20-cr-00188, in the U.S. District Court for the Southern District of New York.

 


StaffMarch 1, 2021
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Editors Note: This article was submitted by Ashley Elsner Co-Founder and COO of Artery Pay.

On Friday, February 19, 2021, Jim Patterson, the former CEO of Eaze, was charged with and pled guilty to conspiracy to commit bank fraud in connection with credit card processing for cannabis products on the Eaze platform as part of an ongoing criminal trial against Hamid Akhavan and Ruben Weigand. In this article, I explain what is alleged, why it’s illegal, why you should care, and how to protect yourself and your business.

What did Mr. Patterson and his co-conspirators allegedly do?

On March 31, 2020, Hamid Akhavan and Ruben Weigand were charged with conspiracy to commit bank fraud in violation of 18 U.S.C. § 1349. The indictment alleges that, from 2016 through 2019, Akhavan, Weigand, and other, unnamed co-conspirators engaged in a conspiracy, the “Transaction Laundering Scheme,” to deceive banks into processing over $100 million of credit and debit card payments to marijuana retailers by disguising the transactions so as to create the false appearance that they were unrelated to the purchase of marijuana.

-United States v. Akhavan, S3 20-cr-188(JSR), (S.D.N.Y. May. 20, 2020)

Jim Patterson has pleaded guilty to his part in the above criminal indictment. For your reference, below are the definitions of the crimes alleged in the indictment.

18 U.S.C. § 1349 states:

Any person who attempts or conspires to commit any offense under this chapter shall be subject to the same penalties as those prescribed for the offense, the commission of which was the object of the attempt or conspiracy.

The underlying offense here is bank fraud defined in 18 U.S.C. § 1344, which states:

Whoever knowingly executes, or attempts to execute, a scheme or artifice—

(1) to defraud a financial institution; or

(2) to obtain any of the money, funds, credits, assets, securities, or other property owned by, or under the custody or control of, a financial institution, by means of false or fraudulent pretenses, representations, or promises;

shall be fined not more than $1,000,000 or imprisoned not more than 30 years, or both.

In essence, Akhavan, Weigand, and Patterson are charged with lying to financial institutions about what the transactions on the Eaze platform were for to trick them into processing transactions for cannabis products in the US. 

Why is this illegal?

First, a little background in how card processing works. There are a number of financial institutions that are involved in the processing and clearing of card-based transactions. Each one has to consent to process and clear the transactions. To do this, card networks like Visa, Mastercard, American Express, and Discover, that provide transaction systems, have created specific network rules and category codes that apply to card processing. Card issuing banks, such as Bank of America, Chase, Wells Fargo, Citigroup, and Capital One, underwrite the consumer transactions that the card networks feed them according to those same rules and category codes that they developed in collaboration with one another. Both the card networks and the card-issuing banks have to agree to support transactions for specific products and services so that those specific products and services get a category code. The category code is transmitted at the time of transaction and lets the underwriting bank determine if that transaction can be accepted for the specific consumer for the specific products and services. 

Why is this important? Because neither card networks, that provide the systems, nor card-issuing banks, that provide consumers with the cards that are presently in their wallets, have agreed to process cannabis transactions until federal legalization of cannabis products at the earliest. Large national financial institutions, the card networks, and card-issuing banks included, have taken the position that as defined in their network and institutional rules, the US federal prohibition makes cannabis products illegal, and therefore, they will not process and clear those transactions via their systems and institutions. 

To that end, the card networks have not provided a category code for US cannabis products. In order to trick card networks and card-issuing banks into processing and clearing cannabis product transactions, someone would have to miscode those transactions as an accepted category code. Miscoding financial transactions to a bank in any way is bank fraud. In this case, it is also money laundering because it deliberately hides the true source of the transaction.  

But why should I, a cannabis business owner, care what happened to Jim Patterson from Eaze?

The simple answer is that bank fraud and money laundering cases get prosecuted. To that point, Judge Rakoff, the federal judge hearing the case, refused to grant dismissal against Weigand and Akhavan for 2 arguments that I hear from industry professionals all the time. 

First, and I admit this argument (and it’s inverse that everything is federally illegal so who cares) always makes me laugh, Weigand and Akhavan’s attorneys argued that the Rohrbacher-Farr Amendment to the 2014 congressional spending bill prevents federal prosecutors from going after marijuana operations that comply with state law. Judge Rakoff’s response was that they are accused of bank fraud, not engaging in state-licensed cannabis business. “The Rohrbacher-Farr Amendment does not condone bank fraud by a medical marijuana dispensary any more than it condones murder, robbery, or assault.” I don’t think I can say that any more clearly but I’ll try. Cannabis protections from federal prosecution do not extend to other crimes.

Second, “no harm, no foul”. That is just not true. Financial crime laws are instrumental in protecting the US and its citizens from all kinds of criminal and terrorist organizations. It was money crimes that took down the mafia and made it possible to prove criminal organization. It is money crimes that allow law enforcement to track, monitor, and dismantle terrorist organizations, gangs, and cartels now. Money laws are paramount to public safety so money crimes are not “no harm crimes”. 

I will add that the stability of the US economy and our financial markets is due in large part to the expectation of legal enforcement against fraudulent behavior. Fraud is a crime that does hurt people and businesses. I don’t like to make slippery slope arguments, but this is one of the rare cases where it actually applies. If you let some people get away with fraud, others see that fraud laws are not enforced and start committing fraud too. Then no one can trust anyone anymore and it becomes impossible to engage in free enterprise. Fraud breaks capitalism which relies on legitimate information and intention.

Finally, I’m going to add one more argument that wasn’t put forward but I hear all the time: “I didn’t set up the bank fraud so I’m not responsible for it.” Unfortunately, that’s not true; RICO is why. “RICO” stands for Racketeer Influenced and Corrupt Organizations Act (18 U.S.C. §1961 – §1968.) It is an extremely important tool for law enforcement for dismantling criminal organizations. RICO allows criminal liability for predicate offenses, like bank fraud and money laundering, to be extended to executives that control and order predicate offenses in furtherance of an enterprise. That means that criminal liability for these types of scams can extend to you, the business owner, just for using the scam, and sadly, it doesn’t matter if you know it’s a scam or not. You can still face prosecution. And, RICO requires forfeiture of “ill-gotten gains.” That means that by using the scam, you made legitimate transactions into illegal ones that can be subject to being frozen and seized. 

How can I protect myself and my business from getting into similar trouble?

  1. Never lie to a financial institution about what you do. When you fib, financial institutions always eventually catch you and account shutdowns are substantial disruptions to your business and annoy your customers. If you are a licensed cannabis business that follows your applicable regulations and you don’t take products or money across state or international lines, you are not doing anything wrong. If the bank or processor chooses not to work with you because you are a cannabis business, that is their right. There are other banks and payment systems that will work with you as long as you haven’t fibbed to other banks in the past. It’s not necessarily easy or cheap but getting legitimate, open cannabis banking and cannabis payment platforms is the best thing for you and your business. It’s legal, reliable, and sustainable. 
  2. Due diligence your financial providers and their offerings. You should be able to find out who they are, if they actually have appropriate experience, be able to contact and confirm with their backing banks that they have approved working with cannabis and that they know that your payment platforms are working with cannabis. If you find this to be too difficult, ask your lawyers and accountants to help you. They are your fiduciaries and have legal and moral obligations to make sure that you and your business are protected. 
  3. Don’t use “workarounds”. There are no “workarounds” in finance. Attempts to “workaround” getting direct, verifiable consent from banks, card networks, other financial institutions are a bad idea. Not only can you be held personally criminally liable for misrepresenting your business and your transactions, like what happened to Mr. Patterson, your assets under these scams are freezable and seizable. Using “workarounds” can expose you to other threats to your business as well. For example, when your bank catches you, they can shut down your bank account and will submit your information to the terminated merchant file (TMF). The TMF is used by banks, payment processors, other financial institutions to determine if you are a “bad actor. This status can kill your ability to obtain any financial support in the US, think insurance, lending, banking, payments, listing on stock exchanges, etc. Also, this reputation will follow you and the rest of your executive team to future businesses. It’s not limited to your present company. 

Don’t play games with your money.

Ashley Elsner is a financial lawyer and the Co-Founder and COO of Artery Pay, a payments company making payments and banking easy for cannabis businesses. Artery Pay unifies payments and banking compliance into a single system so that merchants and the banks and credit unions that support them are able to work with each other easily, effectively, and transparently. Whether you want non-cash payments or need help with your cash, Artery Pay can manage all of your transaction needs. Artery Pay is easy, fun, cheap, and legal – the way cannabis should be. For more information, visit www.arterypay.com or contact Ashley directly at ashley@arterypay.com.


Kaitlin DomangueFebruary 24, 2021
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It’s time for your Daily Hit of cannabis financial news for February 24th, 2021. 

On the Site 

Ardent Life: A Company Revolutionizing Cannabis Technology

Ardent Life Inc., was founded in 2015 by Shanel Lindsay. The Green Market Report is featuring  a series of Black-owned businesses for Black History Month, and Ardent Life is part of that. 

Lindsay developed the sublingual method of administering cannabis after years of fiddling with her dose. This administration route had never been introduced to the cannabis industry before, which led to Lindsay immediately protecting her concepts before other companies could grab hold of it. In 2014, G.W. Pharmaceuticals gave $100 million to the company to support FDA trials of the company’s sublingual sprays, Sativex and Epidiolex.

Besides her work with Ardent, Shanel is an attorney and activist for the cannabis industry, fighting for equity amongst the industry.

 

Michigan May Get Its Own Marijuana Stock Exchange

Cimone Casson is the owner of cannabis insurance brokerage firm Cannas Capital, Michigan Chapter President for Minorities 4 Medical Marijuana, and the driving force behind another initiative that is poised to push Michigan to the forefront of social equity. Casson’s objective is to create a local stock exchange, the Michigan Marijuana Market, that focuses on raising capital for minorities in local communities impacted by the War on Drugs. 

 

Former Eaze CEO Pleads Guilty in Bank Fraud Case

James Patterson, the former CEO of California cannabis delivery platform Eaze pleaded guilty to one count of conspiracy to commit bank fraud according to a report at Law360. The plan was a scheme to deceive banks into processing more than $100 million worth of credit and debit payments for marijuana purchases. The major banks and credit card companies like Visa (NASDAQ: V) and Mastercard (NYSE: MA) refuse to work with cannabis companies as the product is still federally illegal. So any transactions using these products or lying to banks about the nature of the transactions is illegal.

 

The Pros and Cons of CBD Joints

Pros:

  • Great flavor
  • Easy to assemble ahead of time
  • Higher bioavailability

Cons:

  • Potential danger to your health
  • Antisocial 

In Other News

Agrify Announces New Advisory Board

Vertical grow solutions company, Agrify (NASDAQ: AGFY), has announced the formation of its new Strategic Advisory Board. 

Rosie Mattio, Founder and Chief Executive Officer of MATTIO Communications, and Matthew Kressy, Founding Director of the MIT Integrated Design & Management (IDM) program, have both been appointed to serve as trusted advisors to the Company. The Advisory Board has been established to bring together a talented and accomplished group of outside leaders to provide strategic guidance and industry expertise on various aspects of Agrify’s business, including market opportunities, public relations, and hardware and software design and solutions.


Debra BorchardtFebruary 24, 2021
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James Patterson, the former CEO of California cannabis delivery platform Eaze pleaded guilty to one count of conspiracy to commit bank fraud according to a report at Law360. The plan was a scheme to deceive banks into processing more than $100 million worth of credit and debit payments for marijuana purchases. The major banks and credit card companies like Visa (NASDAQ: V) and Mastercard (NYSE: MA) refuse to work with cannabis companies as the product is still federally illegal. So any transactions using these products or lying to banks about the nature of the transactions is illegal.

The timing of the guilty plea is worth noting as the bank fraud trial of businessmen Ruben Weigand and Hamid Akhavancomes is scheduled for March 1 in the Southern District of New York federal court. In March of 2020, Ruben Weigand and Hamid “Ray” Akhavan were charged with conspiracy to commit bank fraud over charges that occurred between 2016 and 2019. They were alleged to have created a bunch of fake companies to trick banks into processing credit and debit payments for marijuana products from legal sellers. The two asked the court to dismiss the indictment saying that no one was harmed in the scheme.  However, the case was allowed to move forward.

Prosecutors said Weigand and Akhavan worked with executives at an online marijuana marketplace company to facilitate the sales, although they haven’t named the business. Eaze, an online company offering delivery from dispensaries, was the subject of a lawsuit last year that alleged it worked with Akhavan to utilize shell companies to process credit card payments. That case was settled. While Eaze was not specifically named in the case by the prosecutors, only an unnamed online marijuana marketplace was mentioned, a connection has been made. Eaze was not charged in this case against the two. Patterson resigned from Eaze in 2019.

It is being suggested that the plea could be an indication that Patterson is with prosecutors and could testify against other defendants in an effort to lower his punishment.

According to Law360.com, Patterson is reported to have admitted to working with Weigand and Akhavan to disguise the purchases because he “understood that if banks were aware of the nature of the transactions they would not allow them.”

Eaze Denies Involvement

For its part, Eaze denied the allegations in the 2019 lawsuit and has said it had cooperated with federal authorities and “is not a defendant in” the case against Patterson. Eaze also quit accepting payments of this nature in mid-2019. However, legal experts say the allegations don’t end because the transactions ended. The dispensary owners are no doubt nervously watching the outcome of this case. They could also be dragged into this for committing bank fraud. If the dispensary owners knew that Visa and Mastercard would not accept payments for cannabis transactions and they still pursued a scheme that managed to make that happen, are they guilty? That is yet to be determined.


Julie AitchesonNovember 18, 2020
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Though April 20th takes the top prize in cannabis sales year after year, Green Wednesday (Black Friday’s cannabis counterpart) has come in a strong second place since its inception in 2016, and 2020 looks to be no different. As a result of clever moves by retailers to offset pandemic-related impacts on buying behavior, starting deals and discounts earlier in the season than ever before, and tailoring the shopping experience to customer health and safety concerns, Green Wednesday sales for 2020 are poised to hit an all-time high. 

A November 16th press release from the National Retailers Federation and Prosper Insights and Analytics cited the results of an annual survey which showed that shoppers are getting an earlier start on purchasing for the upcoming holidays. According to the survey, 59 percent of holiday shoppers had already started making purchases as of early November– a 21 percent increase over figures from ten years ago. Despite the Covid crisis, consumers seem to feel confident in the efforts retailers are making to keep them Covid-free, with 70 percent saying they feel safe shopping in stores. One such safety measure includes stocking shelves with gift items earlier in the season and offering special deals to avoid overcrowding as the season progresses.

Deliveries Increase

Eaze, a cannabis delivery platform in California, posted new data showing that Green Wednesday 2019 saw a 90 percent increase in deliveries over a typical Wednesday and a 147% increase in deliveries over the previous year. Cannabis data and analytics provider Headset posted a comparison of Green Wednesday and Black Friday sales from 2019 on its blog, which showed record Green Wednesday sales, although savings lagged behind Black Friday bargains. The study attributes this to bigger discounts and lower average item prices on Black Friday.

Retailers hit hard and early with special deals and holiday gift packages to tempt those seeking to spread some cheer this holiday season and they’re not letting up as the week of Thanksgiving approaches. Beyond the standard pre-rolls, tinctures, and vape paraphernalia, companies like Her Highness, a lifestyle brand based in New York City, offer 25% off gift items like the Grindzilla Cannabis Grinder and the Lip Service Ashtray (shaped like, you guessed it, lips) while Indiana brand Cannabolish is promoting its products with a 30 percent Green Wednesday deal featuring its popular Odor Removing sprays and gels and candles to make sure cinnamon and pine are the only top notes in your holiday home. 

Caliva is also offering a variety of deals on products that will help you survive the season – whether that be teaching grandma how to get on zoom (again) or kickstarting your metabolism for the big Thanksgiving feast. On Green Wednesday (11/25) Caliva is offering up to 40% off select top brands: Caliva, DELI Nickels, Plus Gummies, KIVA, and more! On Black Friday the company said customers will receive an extra deal when they pay through Hypur, the first digital payment solution for cannabis transactions. The promotion will be available through Caliva delivery online and all Caliva / DELI retail stores.

Top Selling Products

Chart provided by Headset

According to LeafLink, a B2B e-commerce wholesale marketplace that connects retailers and brands, in 2019, sales through LeafLink increased by 5.45% during the two weeks leading up to Green Wednesday and the Thanksgiving holiday weekend. What products were the most popular as retailers stocked up for the holiday weekend? Flower was the most popular product category at the time, making up 31.2% of the market share in the week leading up to Thanksgiving. However, Disposable Cartridges and Pre-Rolls experienced the biggest sales lifts, seeing a 29% increase and a 44% increase, respectively.

Here are the top 5 selling Pre-Rolls of 2020, according to LeafLink List:

  • Caviar Joint from Kaviar (CO)
  • Mini Fuzzies from Sublime, CA
  • Wedding Cake Pre-Rolls from Pacific Stone, CA
  • Relax & Chill Pre-Rolls from Exotic Blendz, OR
  • Bubble Joints from the Flower COllective, CO

So whether you go for some fancy swag, all-natural home care products, or perhaps a cozy fireside read like Bong Appetit (a weed cookbook from the editors of Munchies), there are ample ways to cross some friends and family off of your shopping list this year. If consumer behavior and favorable legislation continue on their current trajectory and retailers keep ably adapting to these uncertain times, Green Wednesday could give Black Friday and Cyber Monday some serious competition when the sales numbers come through for 2020.


Debra BorchardtJuly 16, 2020
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10min45931

The dispensary credit card fraud scheme that has ensnared the delivery company Eaze is set to move forward.

In March, Ruben Weigand and Hamid “Ray” Akhavan were charged with conspiracy to commit bank fraud over charges that occurred between 2016 and 2019. They are alleged to have created a bunch of fake companies to trick banks into processing credit and debit payments for marijuana products from legal sellers. The two asked the court to dismiss the indictment saying that no one was harmed in the scheme.

[The major credit card companies have refused to work with the cannabis industry as it is still federally illegal. This has caused major difficulties for retailers whose customers are accustomed to using debit and credit cards for most transactions. Numerous workarounds have been devised like installing ATM machines in dispensaries or creating a transaction where the buyer is making a debit transaction versus a credit card transaction.]

The two also argued that in addition to no one being harmed, “the Rohrabacher-Farr Amendment, a rider on a congressional appropriations bill that bans the U.S. Department of Justice from using its funding to prosecute businesses engaged in a state’s legal medical marijuana industry.”  Law360 has reported that “on Wednesday, the government said the amendment has nothing to do with charges of conspiracy to commit bank fraud. The allegations center on the pair’s efforts to mislead the banks, which is a crime no matter what industry is involved.”

“The indictment clearly alleges facts showing that the issuing banks maintained a property interest in the funds they used to settle credit and debit card transactions for their cardholders, and that the banks issued such payments as a direct result of the deceptive scheme outlined in the indictment,” the prosecutors wrote.

Eaze Not Named

Prosecutors said Weigand and Akhavan worked with executives at an online marijuana marketplace company to facilitate the sales, although they haven’t named the business. Eaze, an online company offering delivery from dispensaries, was the subject of a lawsuit last year that alleged it worked with Akhavan to utilize shell companies to process credit card payments.

While Eaze was not specifically named in the case by the prosecutors, only an unnamed online marijuana marketplace was mentioned, a connection has been made. Eaze was not charged in this case against the two.

The Eaze Connection

In a lawsuit filed in 2019, Herban accused Eaze of ongoing, pervasive criminal activity. It should be noted that this case was dismissed by parties in January 2020 according to Law 360. Eaze was not charged.

 To gain an unfair competitive advantage in the California cannabis delivery market, Eaze is directing,
coordinating, and participating in a scheme to defraud credit and debit card companies and financial
institutions into processing cannabis transactions in violation of a host of criminal laws, including
prohibitions against: (1) wire fraud (18 U.S.C. § 1343); (2) bank fraud (18 U.S.C. § 1344); and (3)
criminal fraud (Cal. Pen. Code § 532). By running a business that avoids the constraint of California
and federal laws, Eaze has obtained an unfair advantage over its competitors, including Herban,
who have been harmed and continue to be harmed by Eaze’s ongoing criminal acts.
To perpetrate these frauds, Eaze created or partnered with Cyprus- and U.K.-
based shell corporations that purport to sell these seemingly innocuous products but in fact exist
solely or primarily for the purpose of misrepresenting the nature of the underlying transactions (the
“Eaze Shell Companies”).
Herban owned Chill, a group of former Eaze employees that split off to create a competing platform. Back in April 2019, the company DionyMed terminated its contract with Eaze and claimed that “Based on review by outside counsel, DYME could not confirm that the processing procedure meets California regulatory requirements.” The company said it was going to invest in its own delivery service called “Chill.” DionyMed through its dispensary store Hometown Hearts claimed that Eaze was using shell accounts to create fraudulent charges and payment processing, which was the excuse it needed to terminate a three-year contract.
Eaze countersued and claimed in its countersuit that Hometown Heart knew that the payment processors it accused of fraud, were its own processors, not Eaze’s. Eaze has said repeatedly, “It doesn’t process claims.”
In its customer delivery receipts, Eaze tells its customers that they will see the charge for their purchase through Eaze on their card statement, and that the charge will be associated with some entity other than the actual merchant from whom they purchased the product. The customer delivery receipts reflect an express promise by Eaze to submit false information into the credit and debit card payment system, which Eaze does, on information and belief, to ensure that the transactions are not flagged or caught by the Payment Card Companies as Precluded Activities.
The complaint went on to say:

Eaze worked with an individual named Hamid “Ray” Akhavan (“Akhavan”) in an effort to restart credit and debit card processing on the Eaze Platform. Eaze directed several cannabis dispensaries, including some of its largest partners, to

meet with Akhavan in Calabasas, California regarding a new credit and debit card solution. In or around March or April 2018, at Eaze’s direction, representatives from various dispensaries attended the meeting with Akhavan in Calabasas (hereinafter the “Akhavan Meeting”). On information and belief, when the representatives for the dispensaries arrived at the meeting
location, Akhavan’s ostentatious purple Lamborghini was parked outside.

Are The Dispensaries Guilty?

Eaze quit accepting payments of this nature in mid-2019. However, the allegations don’t end because the transactions ended. The dispensary owners are no doubt nervously watching the outcome of this case. They could also be dragged into this for committing bank fraud. The case uses the term “conspiracy,” indicating that it isn’t just these two and that others could be involved. If the dispensary owners knew that Vias and Mastercard would not accept payments for cannabis transactions and they still pursued a scheme that managed to make that happen, are they guilty?
At least while cannabis foe Attorney General Bill Barr is at the top of the Department of Justice, the dispensaries are probably right to be worried. Some dispensaries tried to back out of the Eaze deal and were refused by Eaze who told them they had to meet certain volume goals.

In a statement, Eaze said the company is aware of the case and is “fully cooperating with the relevant authorities. Eaze transitioned to supporting new payment systems over a year ago, and this matter does not impact the current customer experience.”

 

 


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The Green Market Report focuses on the financial news of the rapidly growing cannabis industry. Our target approach filters out the daily noise and does a deep dive into the financial, business and economic side of the cannabis industry. Our team is cultivating the industry’s critical news into one source and providing open source insights and data analysis


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