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Top 5 Cannabis Scandals Of 2022

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Drama? Check. Intrigue? Check. These five events helped define the cannabis industry in 2022. How could 2023 possibly top this?

We always joke that time moves quickly in the cannabis industry. One year in cannabis is equal to five years in any other industry. It also feels like the cannabis industry, unlike more mature industries, has its fair share of scandals.

So Green Market Report took a look at the past 12 months and came up with the top five scandals in the cannabis industry for 2022.

MedMen/Ascend Wellness

This story started nicely enough. MedMen needed some money and decided to sell its New York assets to Ascend Wellness. A price was agreed upon, though it seemed a little low considering how promising the New York market looked at the beginning of 2022.

New York cannabis
Photo by Anton Petrus/Getty Images

Then the top management at MedMen changed, and they too thought the price was a bit cheap and tried to back out of the deal. After court battles that included accusations of political pandering, Ascend won.

But the victory dance didn’t last long. Ascend developed buyer’s remorse as the New York market began looking like a hot mess, so the company said thanks but no thanks.

MedMen was left with its New York assets and found itself stuck with a property that few desire even as it put them back on the shelf to sell. Wonder what would’ve happened if MedMen had just taken the original price and closed on the deal before the New York market unraveled for MSOs?

Parallel/Beau Wrigley

Hell hath no fury like a scorned investor. Parallel Cannabis, which used to be called Surterra Wellness, found itself in the crosshairs with some of its investors. The investors sued the company, saying that, according to their investment agreement, Parallel couldn’t take on more debt — but it did.

The investors also claimed that the company CEO, gum scion Beau Wrigley, wasn’t being truthful with them. Wrigley ultimately lost his job as a result of the lawsuits. But the challenge is ongoing, and Parallel defaulted on that debt.

Despite that, Floridians can still go into a Parallel cannabis dispensary and buy medical marijuana. Bills, schmills. Only suckers pay their debts, right?

High Times

No money, no problem. High Times owes its lenders $28 million, but that hasn’t stopped the company from going on an acquisition spree. It bought Moxie Holdings and a consumption lounge this year, and it paid for the deals despite defaulting on its debt.

High Times also owes $5 million in back rent for a lease agreement it got stuck with when it bought some dispensaries from Harvest Health.

The legacy publisher started the year by watching its latest CEO, Peter Horvath, walk out the door and named Paul Henderson as CEO. Henderson’s also president and interim CFO. Busy guy!

The company extended its stock offering even though it can’t sell any stock until it updates its financials with the SEC. If all that wasn’t enough, High Times found itself embroiled in a stock promotion scheme with a fraudulent newsletter writer based in Florida.

Maybe the name should be changed to Not-So-High Times.

marijuana money
Photo by Aleksandr_Kravtsov/Getty Images

Dutchie Ditches Founders

Dutchie co-founders Ross and Zach Lipson found themselves dumped by their own company via a board coup. The Lipsons were fighting for control of the company after some board members became unhappy with their leadership.

While the Lipsons went into the fight thinking they had majority voting power, the board ditched one of their own and changed the balance. It then ditched the Dutchie founders and put themselves in charge.

The brothers are suing, saying that the board didn’t have that power and that they should be reinstated. The board, which was made up of several investors, believe they are in the right and will bring better leadership to the company.

Lesson learned: Don’t piss off the investors.

Tip Jar Jokes

It looks so simple. A tip jar on the counter for the bud tender. A little thank you for the cannabis concierge, who likely gets paid less than a living wage. Only it turns out the workers weren’t getting the tips.

Various companies, including Curaleaf and Bud’s Goods & Provisions, found themselves in hot water when employees complained they didn’t get their tips. Massachusetts landed on the side of the employees, who will get some money back from the company. Curaleaf argued that the workers were told not to put out a tip jar, but they did it anyway.

Here’s a tip: Pay employees enough so that a tip jar doesn’t have to become a thing.

Source: https://thefreshtoast.com/cannabusiness/top-5-cannabis-scandals-of-2022/

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New Mexico cannabis operator fined, loses license for alleged BioTrack fraud

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New Mexico regulators fined a cannabis operator nearly $300,000 and revoked its license after the company allegedly created fake reports in the state’s traceability software.

The New Mexico Cannabis Control Division (CCD) accused marijuana manufacturer and retailer Golden Roots of 11 violations, according to Albuquerque Business First.

Golden Roots operates the The Cannabis Revolution Dispensary.

The majority of the violations are related to the Albuquerque company’s improper use of BioTrack, which has been New Mexico’s track-and-trace vendor since 2015.

The CCD alleges Golden Roots reported marijuana production only two months after it had received its vertically integrated license, according to Albuquerque Business First.

Because cannabis takes longer than two months to be cultivated, the CCD was suspicious of the report.

After inspecting the company’s premises, the CCD alleged Golden Roots reported cultivation, transportation and sales in BioTrack but wasn’t able to provide officers who inspected the site evidence that the operator was cultivating cannabis.

In April, the CCD revoked Golden Roots’ license and issued a $10,000 fine, according to the news outlet.

The company requested a hearing, which the regulator scheduled for Sept. 1.

At the hearing, the CCD testified that the company’s dried-cannabis weights in BioTrack were suspicious because they didn’t seem to accurately reflect how much weight marijuana loses as it dries.

Company employees also poorly accounted for why they were making adjustments in the system of up to 24 pounds of cannabis, making comments such as “bad” or “mistake” in the software, Albuquerque Business First reported.

Golden Roots was fined $298,972.05 – the amount regulators allege the company made selling products that weren’t properly accounted for in BioTrack.

The CCD has been cracking down on cannabis operators accused of selling products procured from out-of-state or not grown legally:

Golden Roots was the first alleged rulebreaker in New Mexico to be asked to pay a large fine.

Source: https://mjbizdaily.com/new-mexico-cannabis-operator-fined-loses-license-for-alleged-biotrack-fraud/

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Marijuana companies suing US attorney general in federal prohibition challenge

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Four marijuana companies, including a multistate operator, have filed a lawsuit against U.S. Attorney General Merrick Garland in which they allege the federal MJ prohibition under the Controlled Substances Act is no longer constitutional.

According to the complaint, filed Thursday in U.S. District Court in Massachusetts, retailer Canna Provisions, Treevit delivery service CEO Gyasi Sellers, cultivator Wiseacre Farm and MSO Verano Holdings Corp. are all harmed by “the federal government’s unconstitutional ban on cultivating, manufacturing, distributing, or possessing intrastate marijuana.”

Verano is headquartered in Chicago but has operations in Massachusetts; the other three operators are based in Massachusetts.

The lawsuit seeks a ruling that the “Controlled Substances Act is unconstitutional as applied to the intrastate cultivation, manufacture, possession, and distribution of marijuana pursuant to state law.”

The companies want the case to go before the U.S. Supreme Court.

They hired prominent law firm Boies Schiller Flexner to represent them.

The New York-based firm’s principal is David Boies, whose former clients include Microsoft, former presidential candidate Al Gore and Elizabeth Holmes’ disgraced startup Theranos.

Similar challenges to the federal Controlled Substances Act (CSA) have failed.

One such challenge led to a landmark Supreme Court decision in 2005.

In Gonzalez vs. Raich, the highest court in the United States ruled in a 6-3 decision that the commerce clause of the U.S. Constitution gave Congress the power to outlaw marijuana federally, even though state laws allow the cultivation and sale of cannabis.

In the 18 years since that ruling, 23 states and the District of Columbia have legalized adult-use marijuana and the federal government has allowed a multibillion-dollar cannabis industry to thrive.

Since both Congress and the U.S. Department of Justice, currently headed by Garland, have declined to intervene in state-licensed marijuana markets, the key facts that led to the Supreme Court’s 2005 ruling “no longer apply,” Boies said in a statement Thursday.

“The Supreme Court has since made clear that the federal government lacks the authority to regulate purely intrastate commerce,” Boies said.

“Moreover, the facts on which those precedents are based are no longer true.”

Verano President Darren Weiss said in a statement the company is “prepared to bring this case all the way to the Supreme Court in order to align federal law with how Congress has acted for years.”

While the Biden administration’s push to reschedule marijuana would help solve marijuana operators’ federal tax woes, neither rescheduling nor modest Congressional reforms such as the SAFER Banking Act “solve the fundamental issue,” Weiss added.

“The application of the CSA to lawful state-run cannabis business is an unconstitutional overreach on state sovereignty that has led to decades of harm, failed businesses, lost jobs, and unsafe working conditions.”

Source: https://mjbizdaily.com/marijuana-companies-suing-us-attorney-general-to-overturn-federal-prohibition/

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Alabama to make another attempt Dec. 1 to award medical cannabis licenses

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Alabama regulators are targeting Dec. 1 to award the first batch of medical cannabis business licenses after the agency’s first two attempts were scrapped because of scoring errors and litigation.

The first licenses will be awarded to individual cultivators, delivery providers, processors, dispensaries and state testing labs, according to the Alabama Medical Cannabis Commission (AMCC).

Then, on Dec. 12, the AMCC will award licenses for vertically integrated operations, a designation set primarily for multistate operators.

Licenses are expected to be handed out 28 days after they have been awarded, so MMJ production could begin in early January, according to the Alabama Daily News.

That means MMJ products could be available for patients around early March, an AMCC spokesperson told the media outlet.

Regulators initially awarded 21 business licenses in June, only to void them after applicants alleged inconsistencies with how the applications were scored.

Then, in August, the state awarded 24 different licenses – 19 went to June recipients – only to reverse themselves again and scratch those licenses after spurned applicants filed lawsuits.

A state judge dismissed a lawsuit filed by Chicago-based MSO Verano Holdings Corp., but another lawsuit is pending.

Source: https://mjbizdaily.com/alabama-plans-to-award-medical-cannabis-licenses-dec-1/

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