Anyone and or burner own, lease, rent or hire a plane? Why would he include that specifically in the complaint? Does anyone else see a fact series of events about to be disclosed as more than likely? Feds also use forfeiture laws for getting high on their enforcement. Pun intended. Hub and spoke...sorry, but if up to 75% of their biz was intentionally going by way to illicit the IC perp party won't stop at the burner dispo imo as the law may have contemplated as the final and only bad actor. I hope this is not another in the sad story book for the industry as alleged. Really effn bad if so.
Suit alleges that Glass House propped up its balance sheet with sales to the black market. California-based Glass House Brands Inc. (NEO: GLAS.A.U) (OTCQX: GLASF) is “one of the largest, if not the largest, black marketers of cannabis in the State of California, if not the country,” and has been shipping cannabis across state lines on airplanes, according to a new lawsuit filed by one of the company’s retail competitors.
The suit, filed by Long Beach-based 562 Discount Med Inc., which does business as retailer Catalyst, contends that Glass House Brands has been capitalizing on the illicit cannabis trade in California, and in doing so is undercutting the legal market and those trying to operate by the book.
Glass House relies on both legal distributors and also so-called “burner distros,” an industry term for licensed distributors that channel legally produced cannabis to the underground market nationwide, the suit alleges. The method allows Glass House to sell marijuana to both the legal and illegal markets, effectively propping up its balance sheet, the suit asserts.
“By specifically choosing to deal with Burner Distros and others to channel its cannabis to the black market, GHB is supporting a flourishing black market that pays no taxes – a market that permits GHB to sell ‘excess capacity’ that it could not otherwise sell in the legal market without substantially affecting the legal price of cannabis – and by doing so has been able to sell a veritable mountain of illegal cannabis at high margins,” the suit claims.
“This in turn has allowed them to ‘cook the books,’ to make its operations look better than they actually are, to obtain substantial investment and/or financing, and to grow in competitive strength and market power – something legal cultivators are unable to do,” the suit claims. “That in turn permits unlicensed dispensaries to sell GHB’s cannabis at prices that legal dispensaries such as Catalyst cannot match, leading to lower sales and profits.”
The suit further alleges that publicly available information can be used to prove Glass House’s culpability and charged that in the fourth quarter of 2022 alone that “upwards of 75% of GHB’s Q4 2022 sales were outside the legal market.”
Selling into the underground market, the suit alleges, is the only viable way that Glass House could justify opening a 5.5 million-square-foot cultivation facility last year, with plans to ramp up production by 62% this year.
“The dual channel structure it has employed is a huge ‘win-win’ for GHB, but a huge loss for Catalyst and other legal operators who lose sales to illegal dispensaries and are required to actually pay the mandated taxes that are not paid in black market transactions,” the suit claims.
“Enough is enough,” the suit claims. “Via this action, Catalyst seeks to put an end to GHB’s illegal, fraudulent and unfair business practices, and hopefully help bring about what actually was envisioned when California first legalized cannabis – a regulated market where black marketeers do not reign supreme.”
The suit was filed in Los Angeles County Superior Court on June 6 and has not yet been scheduled for any hearings. It requests a preliminary and permanent injunction against Glass House.
Catalyst CEO Elliot Lewis took Glass House to task on social media last month and made many of the same allegations in a video.
Representatives for Glass House did not immediately respond to a request for comment Monday.
Glass House Brands posted a $36.2 million net loss in 2022.
Catalyst has tried taking on the issue of burner distros in the past with a lawsuit against the state in 2021, and though the case was dismissed, the new suit against Glass House refers to it as currently on appeal.
Yep, I used to own Mercer Park, Now I own Glass House which is fine with me. Not too happy the way the price has dropped recently, good thing it's a small holding. If things drop much more I'll be buying more.
GH GROUP, INC. AND MERCER PARK BRAND ACQUISITION CORP. COMPLETE DE-SPAC TRANSACTION, CREATING THE LARGEST CANNABIS BRAND-BUILDING PLATFORM IN CALIFORNIA
Creates a Highly Expansive, Fully Integrated Cannabis Business in California, the World's Largest Cannabis Market
Long-term Cultivation Expansion to 6 Million ft2 of State-of-the-Art Greenhouse Represents by Far the Largest Capacity of Any Cannabis Operator in the U.S.
Retail Footprint Expected to Reach 23 Operational Dispensaries by H1 2022, More Than Double the Next Largest Retail Operator
Current Brand Portfolio Includes Glass House Farms – the #2 Ranked Flower Brand in California (YE2020 per BDS Analytics), as well as Forbidden Flowers and Mama Sue
Glass House is one of the fastest-growing cannabis brands in California, the world’s largest market for legal marijuana. The vertically integrated company operates approximately 500,000 square feet of cultivation greenhouses in Santa Barbara County, making it the largest producer of cannabis in California and the second-highest selling flower brand in the state, according to data from BDS Analytics. Glass House’s portfolio also includes manufacturing and distribution capacity as well as Forbidden Flowers, Bella Thorne’s brand targeted at Millennial and Gen-Z women, and Mama Sue from activist Sue Taylor, a company focusing on cannabis tinctures for a more mature segment of the market.
Pre-rolls from Bella Thorne's cannabis brand Forbidden Flowers.
PHOTO COURTESY OF GLASS HOUSE BRANDS
“With one of the strongest retail and wholesale networks in our industry combined with best-in-class cultivation processes and our scaled and highly efficient cost structure, we are exceptionally well-positioned to capitalize on the growing statewide and national consumer packaged goods opportunity,” Glass House chairman and CEO Kyle Kazan said in a statement from the company last month. “We look forward to leveraging our leadership position in California to introduce high-quality, sustainably grown, craft cannabis to the market to support the health and enjoyment of our consumers, as well as our environment and our community.”