Investment Archives - Green Market Report

Joanne CachaperoAugust 18, 2022
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10min410

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.

Screenshot of JuicyFields' website, retrieved Aug. 17, 2022.
Screenshot of JuicyFields’ website, retrieved Aug. 17, 2022.

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.”


StaffJune 24, 2019
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5min240

Morgan Paxhia is a co-founder and Managing Partner of Poseidon, one of the longest running funds in the cannabis industry.

With over ten years experience in investing and finance, Morgan has developed a deep understanding of individual company analysis, portfolio construction, and risk mitigation. Since 2012, he has dedicated his investment focus primarily to the cannabis industry. Given the limited amount of information in this emerging vertical, the lack of institutional research, and relative industry immaturity, Morgan embraces an active approach of working closely with companies. He utilizes a “boots on the ground” methodology to better understand individual companies and the industry. Through his extensive travel across the US and Canada, reviewing hundreds of business plans and overseeing several existing cannabis investments, Morgan has developed Poseidon’s investment methodology tailored specific to the business of cannabis. Poseidon’s proprietary process is driven by the time spent in the industry and the considerable data collected over the last several years. He has created frameworks for analysis depending on sub-sector, company stage, and participation across the capital spectrum through our database of contacts, valuations, metrics, and other relevant factors.

Morgan started his investment career at UBS Financial Services working in a Wealth Management/ Investment Banking hybrid training program. The training brought a wide range of first hand experience working through several facets of the organization, including advisory teams managing assets for high net worth individuals and municipal bonds trading. Following UBS, Morgan transitioned to a Providence-based Registered Investment Advisor as an Investment Consultant. During that time, he worked under the partners of the firm doing fundamental portfolio management.

Morgan graduated from the University of Rhode Island with a B.S. in Applied Mathematics in 2005.

GMR Executive Spotlight Q&A –

Full birth name: Morgan C. Paxhia

Title: Co-Founder & Managing Partner

Company: Poseidon Investment Management

Years at current company: 6

Education profile: University of Rhode Island, BS in Applied Mathematics

Most successful professional accomplishment before cannabis: My professional accomplishment before Poseidon would go back to my entrance into the professional world of finance. I landed a job at UBS in one of their hybrid training programs. This program fast tracked my exposure to the world of finance as we worked through various parts of a large financial institution. My experience was especially memorable as I was on the municipal bond trading desk during the Fall of 2008, the very chaotic period of The Financial Crisis.

Company Mission: Poseidon dedicated its investment focus to the emerging cannabis industry with the launch of our first fund in January 2014. Investing in cannabis requires full time focus, and very active engagement. We are generally growth stage venture investors seeking legitimate companies that provide meaningful value in a highly fragmented, dynamic market.

Company’s most successful achievement: Our investors are our greatest achievement. We are industry leading investors because of their trust and support.

As a result, we have had the opportunity to build the longest running investment track record in cannabis, work with many great companies, and generate very strong returns.

Has the company raised any capital (yes or no):  Yes

If so, how much?: Our firm currently has over $140 million in assets under management between our investment strategies.

Any plans on raising capital in the future? Poseidon focuses on making great investments on behalf of our fantastic investors. We will continue to raise and deploy capital in the cannabis industry as long as we continue to have great investment opportunities.

Most important company 5 year goal: Poseidon will be over ten years old and cemented its place in history as a significant contributor to the global cannabis industry.


Debra BorchardtApril 12, 2019
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12min120

By Jeff Remsburg, Contributing Editor InvestorPlace.com Apr 8, 2019, 7:13 pm EDT

Where we stand with federal marijuana reform initiatives, and what that means for your marijuana investments today

With last Friday’s “landmark” bill, Congress is closer than ever to long-awaited reform measures that would, in effect, legalize marijuana.

“Landmark” is how Rep. Earl Blumenauer (D-OR) described the legislation introduced this past Friday. If passed, it would end the federal prohibition on marijuana.

The legislation is called the STATES Act (Strengthening the Tenth Amendment Through Entrusting States). In practical terms, it would allow each state or territory to decide its own policy on marijuana, without federal intervention.

(You can follow all the proposed legislation here)

It will still be a while before the bill gets a full House vote. Regardless, the momentum and growing support from an increasing number of politicians are what’s important for now. It’s part of a new wave of legalization that has already created massive stock winners. At this point, it’s undeniable — legal marijuana is one of the biggest investment opportunities of this generation.

So, given this federal milestone, in today’s Digest, let’s review federal marijuana reform efforts that have taken place over the last few months. Then, in light of where we stand today, let’s discuss which investments are likely to thrive in this environment.

***Major federal reform began with the passing of the 2018 Farm Bill this past December

The Farm Bill was major news for marijuana investors. To understand why, I’m going to turn to our resident marijuana expert, Matt McCall. Matt is one of the most respected, and successful, marijuana analysts in the business.

The bill legalized hemp — a cannabis derivative — for the first time in nearly a century, opening up what could be a $20+ billion industry in a relatively short amount of time. As hemp-derived cannabidiol (CBD) oil hits the mainstream, we’re looking at an industry with the potential to be 55 times larger in just five years … it has game-changing ramifications on the hemp industry …

Prior to that, hemp was classified as a Schedule 1 drug according to the Drug Enforcement Administration (DEA), and federal laws prohibited growing or selling it. A previous Farm Bill from 2014 allowed a few states to give out limited permits to grow hemp for specific uses, but it mostly remained illegal.

The DEA’s classification made no sense. Schedule 1 drugs are the most addictive and dangerous in the world and have zero medical benefits. We know that isn’t true with hemp. Can you believe that the DEA viewed hemp as more dangerous than cocaine, which is a Schedule 2 drug?

Given this hemp legalization, we’re now seeing CBD-infused products being sold in traditional outlets including Walgreens and CVS. Beyond that, CBD has already become so popular it’s making its way into products you may never have suspected — for instance, CBD dog treats.

This CBD-popularity dovetails into the second area of federal reform — the FDA.

***While the conversation is evolving, real reform from the FDA appears slow … but moving

While CBD made from hemp is now legal thanks to the 2018 Farm Bill, CBD made from marijuana is still illegal. That’s because marijuana remains a controlled substance.

The lack of formal guidance from the FDA has led to lots of confusion as to which CBD products are legal versus illegal, as well as marketing claims and general advertising. This has slowed CBD’s growth (even though its current growth is staggering despite these challenges).

During one of his last days as FDA commissioner, Scott Gottlieb appeared before a House appropriations subcommittee and explained the challenge. In essence, regulating CBD will require a unique model that may take years to complete.

“That’s the conundrum here,” he said. “We don’t have a really modern proxy for where this has happened.”

That’s why Gottlieb suggested that congressional action on CBD could lead to a faster resolution than paths through the FDA.

But in an effort to push the ball forward, the FDA will hold its first public hearings on whether to allow CBD to be legally used as a food-and-drink ingredient on May 31.

If you want to be a part of this conversation, the agency is asking for public comment. If you’d like to learn more and have your voice heard, click here for more information.

***Another key piece of federal reform is happening with the SAFE Banking Act

On March 28th, a congressional committee approved the Secure and Fair Enforcement (SAFE) Banking Act. The legislation is intended to increase marijuana businesses’ access to banks.

This is big because with marijuana still illegal under federal law, getting banks to accept deposits from marijuana-related companies is extremely difficult. That’s because any bank that does business with marijuana companies could be charged with “aiding and abetting” — which is a federal crime.

In order for the marijuana industry to make its next quantum leap, banks need to be in on the game. And last Thursday’s vote from the House Financial Services Committee is evidence that’s happening.

The vote is also significant since it was approved despite some resistance from Republicans. You see, when Republicans held the House majority, they blocked marijuana amendments from even being considered.

Even last week, top Republicans on the Financial Services Committee requested to delay the vote, given some unanswered questions. The vote went ahead and was passed despite this request, which is a reflection of the chamber’s new Democratic majority.

When the legislation will reach the floor is unclear. But if passed, federal banking regulators will not be able to punish financial institutions just because they service marijuana businesses that enjoy legal status under state or local law. That will be a watershed moment for the legalized marijuana industry.

***Coming full circle, given the status of these various federal reform efforts, where do we see the most impact on investments?

Marijuana is still illegal on the federal level. So, as you would expect, the investments seeing the biggest gains are those that have less risk of federal prosecution. CBD falls into this area, despite the current murkiness surrounding its FDA approval. Given this, many CBD stocks are exploding.

Matt’s own Elixinol is one example. Elixinol makes and distributes CBD supplements and skincare products. At the time of this writing, Matt’s subscribers are up over 175% since December.

So, CBD companies should be on your radar if you’re looking to begin a portfolio of marijuana investments.

A second marijuana investment area that has some insulation from federal repercussions is found in “picks and shovels” companies — in other words, companies that provide services to the marijuana industry, but don’t directly participate. For instance, a company that provides fertilizer and production equipment to a grower.

The example from Matt’s portfolio is Innovative Industrial Properties (IIPR). It’s a REIT which buys properties from medical marijuana growers, then leases the buildings back to the growers. At the time of this writing, Matt’s subscribers are up over 150% since August.

As to pure-play marijuana companies, such as those that sell marijuana directly to consumers, we expect they’ll thrive in the coming years after full federal legalization. But until that happens, we anticipate outperformance from these “safer” marijuana plays.

That said, if you’re looking for huge investment returns, the time to invest is usually before the crowd piles in. That means an investment in more direct marijuana companies today could pay off huge tomorrow.

If you’re looking for help identifying marijuana investments, Matt will be hosting his first-ever Cannabis Stock Summit where he will explain the area he’s most excited about right now. It’s based on a strategy that targets a specific type of marijuana company positioned to benefit from a unique market event. Click here to learn more.

In the meantime, we’ll continue to keep you up to speed as to the status of federal reform as 2019 unfolds.

 


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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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