Glass House Brands is “one of the largest” illegal cannabis dealers in California, according to a lawsuit

Glass House Brands Inc. (NEO: GLAS.AU) (OTCQX: GLASF) is based in California “one of the largest, if not the largest, black marketers of cannabis in the state of California, if not the country,” and has had its cannabis shipped across state lines on airplanes, according to the lawsuit. A new lawsuit filed by one of the company’s competitors in the retail field.

The lawsuit filed by Long Beach-based 562 Discount Med Inc., which operates as Catalyst retailer, contends that Glass House Brands has been profiting from California’s illicit cannabis trade and, in doing so, is undermining the legal market and those trying to do so. To work with the book.

The lawsuit alleges that Glass House relies on both legal distributors and also so-called “burner distributors,” an industry term for licensed distributors who funnel legally produced cannabis into the underground market across the country. The lawsuit asserts that this method allows Glass House to sell marijuana to both legal and illegal markets, effectively shoring up its balance sheet.

“By choosing to engage with Burner Distros and others specifically to direct its cannabis to the black market, GHB supports a thriving black market that pays no taxes – a market that allows GHB to sell ‘excess capacity’ that it could not otherwise sell.” . legal market without significantly impacting the legal price of cannabis — and by doing so, it was able to sell a veritable mountain of illegal cannabis at high margins,” the lawsuit alleges.

“This in turn allowed them to ‘falsify records’, to make their operations appear better than they actually are, obtain significant investment and/or financing, and grow in competitive strength and market power – something that legal practitioners cannot achieve,” it claims. lawsuit. “This in turn allows unlicensed dispensaries to sell GHB cannabis at prices that legal dispensaries like Catalyst cannot match, resulting in lower sales and profits.”

Anti-greenhouse catalyst

The lawsuit also claims that publicly available information could be used to prove Glass House’s liability, and charges that in the fourth quarter of 2022 alone, “over 75% of GHB’s sales in the fourth quarter of 2022 were outside the legal market.”

The lawsuit alleges that selling into the underground market is the only viable way Glass House can justify opening a 5.5 million-square-foot cultivation facility last year, with plans to increase production by 62% this year.

“The dual-channel structure it used is a huge win for GHB, but a huge loss for Catalyst and other legal operators who lose sales to illegal dispensaries and are required to pay mandatory taxes that are not paid in black market transactions,” the lawsuit claims.

“That’s enough,” the lawsuit claims. “With this action, Catalyst seeks to put an end to the illegal, fraudulent and unfair business practices of GHB, and we hope it will help achieve what was already envisioned when California first legalized cannabis – a regulated market where black market traders do not prevail.”

The lawsuit was filed in Los Angeles County Superior Court on June 6 and no hearings have been scheduled yet. It requests a preliminary and permanent injunction against Glass House.

Catalyst CEO Elliott Lewis took Glass House to task on social media last month and made many of the same claims in a video.

Representatives for Glass House did not immediately respond to a request for comment Monday.

Glass House Brands reported a net loss of $36.2 million in 2022.

Catalyst has tried to address the issue of burner distributions in the past with a lawsuit against the state in 2021, and although the case was dismissed, the new suit against Glass House marks it as currently on appeal.

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