It seemed a simple proposition – perhaps too simple. JuicyFields, a cannabis investment platform, launched in 2020, allowed trading in both conventional and crypto funds without the background checks typically required for investment banking transactions.
According to Swedish attorney Lars Olofsson, it’s likely that many of JuicyField’s clients – he estimates up to 125,000 accounts – were unaware of the background check requirement or other discrepancies, which should have been red flags. Many of them were inexperienced investors that bought into JuicyFields based on the company’s slick marketing or on word-of-mouth from other clients that had seen significant returns – at first.
“Definitely, there was a grooming process,” Olofsson said of the company’s persuasive sales pitch. “At first, the investors did get some returns on investment, and many of them deposited more money then and told friends about it.”
In June, when JuicyFields was banned from investments and fined by German financial regulator BaFin, Olofsson believes its shadowy operators realized the jig was up. By July, the platform had shut down, with clients locked out of accounts overnight and the company’s social media accounts shuttered.
Olofsson’s research revealed that Juicy Fields GmBH was founded in Germany in 2017, with Dutch (Juicy Fields B.V.) and Swiss (Juicy Fields AG) subsidiaries to follow.
Viktor Bitner, a German citizen with Russian ties, founded the company as a “research & development company,” Olofsson said, but it didn´t start operations until spring 2020.
Following the money
Olofsson, who is also the CEO and founder of Malmo-based business consultancy PrioStarup AG, said that details have surfaced in contracts that JuicyFields held with various consultants and executives that indicate irregular activities.
“Bitner signed an agreement with a Swiss company, ALPINE Asset Management, and (its CEO) Fransesca Grecco, who received an annual management fee for $3 million. This is absolutely crazy and is 10 times as much as normal for these kind of consulting services. The only explanation is that both parties knew this was a criminal operation,” he surmised.
“I’ve [got] the agreement that was later signed with a Mr. Alan Glanse, who has presented himself as the [JuicyFields] CEO. This is not correct according to public records. … You can see that his compensation was $120,000 per year – only a 20th of what the Swiss lady got,” Olofsson added.
In fact, Glanse sparked rumors of Russian mafia involvement in July when he told Spanish finance publication El País Financiero that “three people with Russian passports” had hired him, adding he’d met with them only five times and that he was innocent of any wrongdoing.
During the interview, when confronted with documentation apparently leaked to the publication, Glanse said that Russian citizens and JuicyFields “shareholders” Paul Bergholts, Alex Vaimer, and Vasily Kandinski were “the real owners.”
Bitner also was mentioned as a “front man” in the article, though his actual role at the company has been obscured by a cast of hired consultants and executives that held C-suite positions.
Attempts to reach Bitner for comment were futile on social media accounts that have long been stagnant. A LinkedIn page lists Bitner as CEO at Juicy Grow GmbH. An attempt to reach Swiss consultant Grecco also did not receive response.
Reflections of Wirecard downfall
Clues from JuicyFields are scattered like seeds across news outlets, blogs, and social media, especially in the countries where the company found many of its investors, such as Spain, France, Germany, the Netherlands, Portugal, Greece and Malta.
Bloggers and social media observers that track cyber criminals and scams began speculating on JuicyFields as early as 2021, with some making comparisons to the epic downfall of German payment processor Wirecard.
Listed on the Frankfurt Stock Exchange in 2005, Wirecard eventually became Europe’s largest fintech firm with a valuation of $28 billion – more than traditional financial institutions such as Deutschebank at one point. Though alleged money-laundering and fraud at the company had been reported by industry analysts and insiders since 2016, it was listed as one of the 30 most valuable companies in Germany by 2018 and expanded to establish an Asia Pacific branch and subsidiary in Dubai.
In 2019, the Financial Times reported on a series of suspicious transactions at Wirecard, which the company aggressively denied, as it had done with previous allegations. Wirecard filed suit against FT for misrepresenting “company secrets” in their reporting. Independent auditors were brought in by the company to address allegations.
By mid-June 2020, auditors revealed that $2.3 billion of cash balances that should have been in escrow accounts could not be accounted for, amounting to massive, complicated fraud. A search for the funds conducted by the company came up empty. This was quickly followed by the arrests of Wirecard’s top executives and insolvency proceedings by the end of June.
Police raids on the Wirecard offices continued, amid accusations of money-laundering and defrauding of creditors. Repercussions from Wirecard’s downfall brought about the resignation of then-president of German financial regulatory watchdog BaFin Felix Hufeld, and former Chancellor Angela Merkel and then-Finance Minister Olaf Scholz were called to testify in the scandal.
Why did it take so long for financial authorities to act, when irregular activities had been alleged for years? In 2019, regulator BaFin had already announced an inquiry into the company’s accounting and banned short-selling Wirecard stock. And it’s a question that’s come back around in the JuicyFields case.
The German regulator said they are unable to comment on Olofsson’s case but offered further details on JuicyFields.
“On 3 June 2022, BaFin prohibited Juicy Holdings B.V. from offering capital investments in the form of investment opportunities in JuicyFlash, JuicyMist, JuicyKush, and JuicyHaze cannabis plants to the public in Germany due to a violation of the German Capital Investment Act. Juicy Holdings B.V. is therefore not authorized to offer capital investments in the form of investment opportunities in cannabis plants in Germany,” a BaFin representative stated.
“Regarding our warning in relation to Juicy Holdings B.V.’s, I want to highlight that Juicy Holdings B.V.’s (alleged) capital investments were/are unregulated capital market products. This means that a company that offers such products does not require authorization from BaFin and is therefore not subject to ongoing supervision.”
The Daily Hit is a recap of cannabis business news for Oct. 20, 2022.
ON THE SITE
High Times Owes ExWorks $28.8 Million
High Times Holding Corp. filed an update with the Securities & Exchange Commission on Oct. 19 that it is in default on its loan to ExWorks for $28.8 million. In 2017, High Times Holding Corp. took out a loan to acquire Trans-High Corporation (THC), which was the original corporate name for the magazine. The filing stated, “All of our obligations to ExWorks are currently in default.” Read more here.
The Flowr Corp. Seeks Creditor Protection from Canadian Court
Toronto-based The Flowr Corp., (TSX.V: FLWR) (OTC: FLWPF), announced Thursday that the company and its subsidiaries plan to seek an order for creditor protection from the Ontario Superior Court of Justice under the Companies’ Creditors Arrangement Act (CCAA). Such a filing is similar to a company in the U.S. seeking Chapter 11 bankruptcy protection. Read more here.
SPAC Announces Plan to Acquire New Mexico Cannabis Company
BGP Acquisition Corp. (NEO: BGP.U) (OTCQX: BGPPF) (OTCQX: BGPAF), a special purpose acquisition company based in British Columbia, has agreed to acquire Craft 1861 Global Inc. The deal is expected to close in the fourth quarter. Read more here.
Leaked Document Hints at Adult-Use Cannabis Legalization in Germany
Germany might be moving closer to legalized adult-use cannabis, according to a leaked report that lays out a proposed framework for such an industry. The document, obtained by RedaktionsNetwerk Deutschland (RND), reportedly includes recommendations from Germany’s Health Minister Karl Lauterbach on how such an industry should be structured. Read more here.
CENTR Brands Corp.
CENTR Brands Corp. (CSE: CNTR) (FSE: 303) (OTCQB: CNTRF), a producer of functional wellness and CBD beverages, entered into a Settlement Agreement with Joseph E. Meehan, the former chief executive officer of the Company, and Redcliffe Gardens Capital Limited, a consulting corporation controlled by Meehan. Meehan resigned his role as chairman of the board, effective immediately, as part of the agreement. Read more here.
CannTrust Holdings Inc.
CannTrust Holdings Inc., a minority investor in Phoena Holdings Inc. (formerly CannTrust Equity Inc.), made a Division I Proposal pursuant to the Bankruptcy and Insolvency Act (Canada). Subject to satisfying certain conditions, CannTrust intends to address its remaining liabilities, dispose of its residual assets, distribute its shares in Phoena, and dissolve in advance of Nov. 30, 2022, or as soon as practicable after that date. Read more here.
As markets mature in the U.S., some companies are turning their focus to Germany. Canadian companies have faced tremendous competition causing many business models to break down. Too many licenses and plunging prices have forced several companies to merge or restructure. In the U.S., the California market is in disarray over outrageous taxes and a resurgent illicit market, while Colorado learns that having a first market advantage doesn’t mean it’s lasting.
New Jersey has undoubtedly given a boost to the lucky licensees that have been the first to sell adult-use cannabis. New York’s adult-use launch has been disappointing to say the least. That’s why some companies have zeroed in on Germany.
Market Start Date
Cantor Fitzgerald issued a report today looking at the German adult-use cannabis market and sizing it up. While the program isn’t even established yet, Analyst Pablo Zuanic believes sales could begin in early 2025. He wrote, “The actual start of sales may be more dependent on whether imports are allowed (a big if) or if only domestic production can supply the German rec market (Canada, the only G-7 rec market, does not allow imports). If imports are allowed (more likely from within the EU only, at first, at least), we think sales could begin as soon as early 2024E (assuming potential exporting countries enact rules that allow the export of rec cannabis).”
As the actual timing for the opening of the market remains a product of guesswork, the size of the market is equally hard to pin down. It’s hard to say how much cannabis the population will want to consume. Zuanic looked at the various U.S. states to try to gauge a number. If California clocks in at $130 per capita spending and Colorado comes in at $350, a conservative assumption would be $150 per capita for Germany. The analyst says that would imply a $3 billion market and if he bumps that up to $200 per capita, it could be a $17 billion market. A big caveat to these numbers is the currently existing medical marijuana in the country. That market, which started in 2017, has been slow to materialize, with only €300 million in sales. Besides Cantor, in 2018, Prohibition Partners had projected a €1Bn MMJ market by 2020 for Germany, and BDS Analytics predicted €800Mn by 2022. Both have been far off those targets leading Cantor to be more conservative.
German doctors have often only prescribed medical cannabis as a last resort. A separate option for cannabis consumers in the country has been the newly created wellness centers. These are typically associated with private prescribers, online pharmacies and out-of-pocket costs. It’s described as a ‘quasi-rec’ market giving medical marijuana access to more people willing to pay. However, it demonstrates the stigma that cannabis continues to face in the country as doctors are reluctant to jump on board without more studies to back up the prescriptions.
The companies that have targeted the German market are a mix of well known public players and some private companies. The publicly traded companies are:
Aurora Cannabis (NASDAQ: ACB)
Canopy Growth (NASDAQ: CGC)
Tilray (NASDAQ: TLRY)
Clever Leaves (NASDAQ: CLVR)
The privately owned companies include:
Little Green Pharma
Tilray – Tilray claims it is the market leader both in flower and full-spectrum extracts, and claims the best distribution reach. However, Cantor notes that several other sources question the notion that Tilray is the market leader in flower MMJ. Market data points to Tilray having a 15% market share, while the company suggests the actual number is closer to 20%. The report stated, “Tilray flower is sold to pharmacies at €8.59 per gram, above the market average estimated at €7. Tilray began domestic production last year (one of three licensees, together with Aurora and Demecan), and it also imports from its facilities in Portugal (where we were told by management it can produce up to 20 tons). Based on its current German presence, global scale, and proven expertise, we expect the company to be a relevant player in the future German rec market.”
Aurora Cannabis – Zuanic wrote that Aurora management says its number two in medical flower with 17% volume share and that Bedrocan is number one (but the Bedrocan product is distributed across various wholesalers, and not always captured by the Insight Health under the Bedrocan brand). The report said, “Aurora also holds one of the three licenses to produce med cannabis in Germany (combined, the three licenses amount to a 2.6-ton quota), and we were told by management that operations began in July 2022.” Cantor thinks Aurora could snag one of the adult-use licenses and become a key player.
Canopy Growth – Cantor says that Canopy Growth remains a top-five player in the German flower market, with consistent supply from its Canadian facilities, selling under its own brands(although it seems it will need to transfer its Spectrum brand to the new owners of C3). Zuanic wrote, “In our view, if Germany decides to allow only domestic production and imports from only within the EU, Canopy Growth will need to find local partners or build new capacity.”
Clever Leaves – The Cantor report said, “In our view, the company is more in an early-stage phase in Germany compared with its larger peers, but its five-pronged route to market in Germany gives it options depending on the framework that Germany ends up implementing for rec cannabis.” According to Cantor, Clever Leaves supplies two CBD-only extracts to Ethypharm (a small local pharma company); it supplies bulk cannabis extracts to FoliuMed and it ships high THC cannabis flower to wholesale/distributor Cansativa (in which it owns a 9% equity stake). Cantor also said Clever Leaves distributes its own medical flower brand Iqanna; and recently announced an agreement with importer/wholesaler Cantourage to sell a second high potency flower SKU under the Iqanna brand.
While it’s too soon to know who will be the winners or losers in the German market, Aurora and Tilray currently seem to be the best-positioned. Cantor also pointed out that Curaleaf recently acquired Four20 Pharma, one of the top five players. So, the Curaleaf competition can’t be measured just yet. Zuanic thinks as the U.S.legalization situation remains undetermined, some investors may want to shift their focus to Germany and put these names back on the radar.
Like the plot of an improbable fintech thriller, cannabis e-investment conglomerate JuicyFields has imploded into an apparent Ponzi scheme of massive proportions, leaving tens of thousands of online investors wondering who is responsible for the biggest swindle in cannabis.
Swedish attorney and CEO of PRIO Startup Ltd., Lars Olofsson, places partial blame on international banking systems, because several transactions generated by the JuicyFields platform should have triggered institutional systems that detect suspicious activity.
Financial regulatory agencies in in Germany and Spain also issued warnings about the company weeks before JuicyFields’ collapse in mid-July, when investors accounts were frozen.
“Several companies, organizations and individuals have facilitated this. An operation like this could never operate in a vacuum. It needs all kinds of suppliers who directly or indirectly facilitated or looked the other way,” Olofsson told Investor Times last week.
Recent developments indicate that suspended Australian fintech company iSignthis (ISX) and its subsidiary ISX Financial EU may be implicated in the scandal. Olofsson confirmed that the Australian bank received funds from JuicyFields.
By the end of July, Olofsson had been contacted by more than 300 victims, with an average investment of €30,000 each. He is one of several European attorneys listed on the JuicyFields’ website as taking cases of victims.
The scope of the scam is potentially enormous.
Fortune.com noted that JuicyFields may be the largest “crypto scam” of 2022, with investors out $273 million in bitcoin alone, though others speculate the actual amount will be in the billions. In Spain, attorney Emilia Zaballos said that her firm has received more than 6,000 emails in regard to the case.
Class action suits are beginning to take shape, though getting to the bottom of the rabbit hole will be complicated. There are dramatic theories regarding who may own the company and if they have absconded with the funds, or if the accounts were drained by hackers.
A revolving door of C-suite players, shady operators behind the JuicyFields website and alleged Russian mob characters left behind a confusing breadcrumb trail of addresses and registrations, in Amsterdam, Switzerland, Zurich and elsewhere – all of which lead to nowhere and no one.
Former JuicyFields executives basically have disappeared. Luxemburg-based publication Delano reported: “Identifying the companies involved – which may well be fictitious – locating their directors and tracing the flow of money will be a long-term task.”
Of no reassurance to JuicyFields’ victims, Olofsson added that he believes Russian organized crime involvement may be a strong possibility, though he has no conclusive evidence supporting that assertion.
Industry insiders and pundits said that JuicyFields’ business model and marketing tactics were suspicious from the start. Some pointed out that industry media on the topic was sparse, but piecemeal posts on social media hinted that all might not be quite right at the investment platform.
That didn’t stop international investors from signing up for promises of rapid returns – more than 50% in little more than 12 weeks – on per-plant investments with the JuicyFields cannabis growers. Clients were allowed to deposit up to €180,000 per account without background checks typically required for such investments.
The company invested heavily in marketing, becoming a splashy presence at industry trade shows where they plied potential customers with open bars and attractive spokesmodels.
At the International Cannabis Business Conference, held in Barcelona in March, JuicyFields was a conspicuous show sponsor, with two logo-ed Lamborghinis parked at the entrance to the show and at VIP events hosted by the company. At that time, accounts were still being opened, and investors were encouraged to sign up friends for financial rewards.
JuicyFields’ Timeline of Decline
By early June, the German Federal Financial Supervisory Authority, known as BaFin, issued a ban on investment in the company because it failed to file a required prospectus. Little more than a month later, BaFin levied a €1 million fine against the company for failing to withdraw cannabis for sale in Germany. JuicyFields responded, saying it was revamping its platform to comply with regulations.
By July 11, the company’s IT, customer support and payments “teams” announced they would strike the next day over disputes with management. The announcement triggered a panic among investors, who found themselves unable to withdraw funds from their accounts.
The next day, a Telegram account used by the company to communicate with clients was shut down, and contact information on the website was altered.
Recently appointed JuicyFields CEO Willie van der Merwe released a statement saying that the site had been shut down during “updating” in order to prevent hacking. It was the first of several confusing statements from various executives attached to the company.
On July 13, Communications Director Zvedza Lauric tweeted a video stating the website had been hacked and that the company was waiting to release funds. Statements on other social media said the situation would be resolved within 48 hours.
By July 14, van der Merwe resigned after less than two months as CEO, and company social media accounts started to shut down.
Three days later, former CEO Alan Glanse posted documents that indicated Paul Bergolts, Alex Vaimer and Alexi Kandinski were in control of the company. All are Russian citizens, spurring the Russian mob rumors.
On July 17, Brigit-Elisabeth Neumann, who claimed to have been CFO and a board member, posted a video and written statement claiming that changes to the website were made to “deceive” the platform’s e-growers. Her statement went on to say that she and a group of “directors” who had been listed on the site never had access to or anything to do with the JuicyFields platform.
Neumann indicated that she and these directors had formed JuicyFields AG and would file a complaint against the team at JuicyFields.io ,including Glanse, strategic partner Erika Misela and the Russian trio.
According to Spanish news outlet El Pais, JuicyFields sent out its last, confusing email to customers on July 19, which advised affected parties to “use the following email addresses to submit your story, speak your mind, send collateral for an emergency refund, or embark on a long road of endless conversations with our lawyers.”
The JuicyFields.io website has changed appearance several times since the collapse in July, and it is unclear who is operating it. The landing page now features a purple marijuana plant with Private Grow Operations Project” in a large white font and the JuicyFields logo in the upper left corner.
The page also features what seems to be an open letter for those wishing to file complaints, full of grammatical errors and links to various attorneys and victims’ groups. Cryptic screenshots of texts apparently aimed former executive Friedrich Graf von Luxberg (and his brother Stefan Ludwig), who have been implicated in the scam, also are included.
A link to refund instructions appears near the bottom the page and includes a statement saying that users that have submitted “required collateral” are already being paid from “remaining cash reserves.”
Clever Leaves (NASDAQ: CLVR) could become one of the world’s top five cannabinoid exporters by the end of this year, according to a new report by Cantor Fitzgerald analyst Pablo Zuanic. The findings come a week ahead of the company’s second-quarter earnings release and half a year since CEO Andres Fajardo was tapped to lead the company out of a desperate cash burn and into new, more profitable markets overseas.
Clever Leaves’ plan so far seems to be good on schedule. It has inked lucrative deals with players in overseas markets such as Portugal, Germany, Australia, Brazil, Colombia and Israel.
While the outlook is still a “show me” story, it said, the new distribution partnerships add value with the assumption that continued medical market growth in those overseas markets will work to Clever Leaves’ advantage long-term. The estimates do not account for recreational cannabis legalization in Germany or elsewhere.
“Still, while we are positive on the company’s top-line growth outlook, profitability and cash burn are key investment risks,” the report said. “In fact, although the cost base has been rationalized, capex lowered, and debt mostly paid down, cash burn remains an issue.”
Cantor Fitzgerald assigned Clever Leaves an “Overweight” rating and a 12-month price target of $4.50. The stock was lately selling at 94 cents, but its 52-week high was $12.40. Zuanic wrote, “From a purely trading perspective, positive news flow about regulatory changes, especially in Colombia and Germany, could favorably impact sentiment,” as a reason the price could jump.
“In relative terms, the stock offers better “pure-play” exposure to growth in overseas medical cannabis markets,” the report said, “and eventually to (recreational) legalization in those markets.”
With Clever Leaves focused on markets outside North America, the key for the company is to capture downstream margins. In general, these markets enjoy better economics due to higher barriers to entry such as EU certification and high start-up costs, as well as fewer licensed growers. Cantor estimates that retail prices in Europe’s medical markets, especially Germany, are three times those seen in Canada. U.S. prices in Israel and Australia are also well above the North American average. As part of its rescoped strategy, the company is now focused on exports to Australia, Germany, Brazil, and Israel.
“Yes, the company is also targeting the U.S., but we see that as more long-term optionality for CLVR’s cannabinoids exports,” the report said.
This year, the company used the bulk of the $23 million equity raise executed in the first quarter — in which the share count increased 45% — to pay down all the convertible debt, as well as borrowings related to the Herbal Brands deal. Additional shareholder dilution remains a risk, “in our view, given ongoing cash burn,” it said, though capex needs are now much lower and inventory levels are expected to come down.
“The main issue is for the company to scale up the top-line (profitably) and minimize cash burn,” the report said. “The company has less than $27 million left in an equity facility, and this could be tapped depending on the timing of overseas market growth.”
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