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Michigan companies enter receivership as part-owner faces mounting legal troubles

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This story was republished with permission from Crain’s Detroit.

Jackson-based marijuana processor Choice Labs and its parent company, Au Gres-based cultivator Glorious Cannabis Co., entered into court-sponsored receivership last week as investigations and lawsuits pile up against one of their owners.

The receivership is a legal move by the companies and its Massachusetts-based lender Needham Bank to protect themselves amid a federal investigation into Pennsylvania-based private equity operator Daryl Heller. Heller, under his Heller Capital equity group, is the lead investor of Glorious, according to the bank’s court filing. Heller Capital also has a minority stake in Choice Labs.

The FBI raided Heller’s Lancaster, Pa., offices in December as he is accused by investors of running a potential Ponzi scheme with a separate ATM network business.

In the complaint, filed Feb. 7 in circuit court in Jackson County, the bank said Heller’s actions constitute default under the loan agreements with Choice and Glorious and their affiliates.

“Heller has recently become the target of multiple lawsuits and investigations in various jurisdictions alleged breaches of contract, fraud, and financial misconduct with respect to his other businesses,” the bank’s complaint reads. “As a result of (Heller’s) actions, the borrowers have found themselves subject to multiple claims already, and neither the borrowers nor the bank knows what else (Heller) may have done, or not done, that may result in additional claims or litigation.”

As of Feb. 6, the companies owed the bank roughly $51.2 million, loans that provided an unconditional personal guaranty by Heller.

Attorneys for Choice and Glorious declined to comment. Wes Lutz, CEO of Choice Labs, was not immediately available to comment.

Choice Labs produces the popular cannabis brands CannabisPM gummies, Crude Boys flower and Drip vapes and operates a processing facility on a 10-acre lot as well as a dispensary in Jackson. Glorious cultivates and processes marijuana primarily for pre-rolled joints.

Needham Bank loaned Glorious $44.87 million in October 2023 for it to acquire Choice Labs, including a $38.82 million commercial real estate loan and a $6.05 million term loan, according to Jackson County court documents. The loans were used to secure the mortgages for Choice Labs operations at 4202 Ann Arbor Road, 4499 Phelps Drive and 3331 Page Ave. in Jackson.

Glorious also borrowed $10.3 million in 2022 to open a facility in Uxbridge, Mass.

On Jan. 31, Needham notified Choice, Glorious and affiliates they were in default of their loan agreements due to Heller’s actions. On Feb. 6, the parties agreed to a forbearance agreement that made the outstanding $51.2 million due immediately and to enter receivership, giving up control of their assets.

Mounting financial entanglements

The receivership action stems a lawsuit filed last August by more than 2,700 investors in Heller’s Lancaster, Pa.-based ATM business, Paramount Management Group, alleging that Heller and his company stopped making payments in March. Many of the investors are reportedly members of the Amish and Mennonite communities, according to reporting from Lancaster Online.

The investors suspected fraud after Paramount stopped making investor payments in April, even though Paramount had previously reported margins exceeding 23%. In 2022, Paramount reported net income of more than $65 million on revenue of nearly $278 million, according to the investors’ lawsuit.

During an investigation by investors, the plaintiffs’ expert witness testified in court in December that nearly 18,000 of the list of 28,000 ATMs purportedly owned by Paramount did not exist or were owned by other companies, Lancaster Online reported. So far, Paramount and Heller haven’t turned over the serial numbers or the location of the ATMs in its network, which reportedly includes all of the ATMs at Pennsylvania Turnpike service plazas across the state.

A settlement in the lawsuit called for Paramount to pay investors $138 million in back payments and turn over ownership of its ATM network, according to court records. Heller was found in contempt of court last month and ordered to pay an additional $2 million to the investors.

Meanwhile, federal agents raided Heller’s Lancaster offices on Dec. 5, according to a Lancaster Online report.

Heller also has an outstanding $5 million lien filed by the IRS, another lawsuit settlement that requires monthly payments of $300,000, a $3.35 million judgment to Orrstown Bank, a $1.8 million civil judgment to Traditions Bank and another $600,000 civil judgment to Univest Bank and Trust.

Heller filed for personal bankruptcy in New Jersey on Tuesday.

And Choice Labs and Glorious are now roped into a lawsuit against Heller in Pennsylvania, alleging proceeds from its loans were to be routed to another investor. FC Capital Holdings, doing business as Fundcanna, filed a lawsuit in September and is seeking its own receiver over Choice in California.

The bank’s complaint alleges Heller provided a security interest of Choice to FC Capital in exchange for a $3 million loan Heller funneled to his private equity group.

The piling lawsuits led Needham to seek receivership with fears its collateral could be stripped by other debtors.

“Borrowers are not implicated in (Heller’s) alleged misdeeds, but the bank is reasonably and seriously concerned about the potential material adverse and other effects on the collateral and concerned the full extent of (Heller’s) misdeeds is yet to come to light — and those legal proceedings themselves constitute events of default,” Needham said in a court filing.

Cannabis companies in receivership

Marijuana companies cannot avail themselves of financial obligations in bankruptcy court. Marijuana remains a Schedule 1 narcotic under the federal Controlled Substances Act, leaving marijuana businesses without the benefit of protection under U.S. bankruptcy code.

The receivership of Choice and Glorious represents the second major receiver-overseen case in Michigan’s marijuana industry.

Dimondale-based Skymint, operating under the parent company of Green Peak Innovations Inc., entered receivership in March 2023 following a lawsuit from investors that said it owed more than $127 million to Canadian investment firm Tropics LP.

The lawsuit alleged Skymint was burning through $3 million in cash per month and generated only $110 million in revenue in 2022 — $153 million below its forecast of $263 million in sales for the year. A second lawsuit was filed concurrently in Oakland County Circuit Court by New York-based cannabis investment firm Merida Capital Holdings and its affiliates against Green Peak and its executives alleging misrepresentation of financials and mismanagement.

Tropics LP, under a new entity called Skymint Acquisition Co., acquired the retail assets of Skymint for $109.4 million in an auction under receivership. No other bidders reached Tropics’ bid. However, that deal has yet to close as other lawsuits continue to play out and would need to be settled before Tropics can take over. The rest of its assets were sold off in separate auctions.



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Nebraska medical cannabis regulations stall in legislative committee

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A Nebraska legislative committee voted 5-3 against advancing a bill designed to implement and regulate the state’s medical cannabis program, leaving legislators and advocates searching for alternative paths forward, according to the Nebraska Examiner.

The General Affairs Committee rejected Legislative Bill 677, sponsored by State Sen. Ben Hansen of Blair, during a Thursday vote where committee members declined to offer amendments to the legislation, the publication reported.

“I don’t want to shut all the doors right now, but some doors are closing, and they’re closing fast, and so we have to act,” Hansen told reporters after the vote, according to the Examiner.

Nebraska voters approved medical cannabis in November 2024, with residents legally permitted to possess up to 5 ounces with a healthcare practitioner’s recommendation since mid-December. However, the regulatory commission created by the ballot initiative lacks effective power and funding to regulate the industry.

Hansen described his legislation as “a must” for 2025 to prevent a “Wild West” scenario in the state’s cannabis market. The bill would have expanded regulatory structure through the Nebraska Medical Cannabis Commission and extended deadlines for regulations and licensing to allow more time for implementation, the Examiner noted.

Committee disagreements centered on proposed restrictions. A committee amendment would have prohibited smoking cannabis and the sale of flower or bud products while limiting qualified healthcare practitioners to physicians, osteopathic physicians, physician assistants or nurse practitioners who had treated patients for at least six months.

The amendment also would have limited qualifying conditions to 15 specific ailments including cancer, epilepsy, HIV/AIDS, and chronic pain lasting longer than six months.

State Sen. Bob Andersen of Sarpy County opposed allowing vaping due to concerns about youth drug use, while committee chair Rick Holdcroft suggested selling cannabis flower would be “a gateway toward recreational marijuana,” a claim Hansen “heavily disputed,” according to the Examiner.

Hansen now faces a difficult path forward, requiring at least 25 votes to pull the bill from committee and then needing 33 senators to advance it across three rounds of debate, regardless of filibuster attempts.

Crista Eggers, executive director of Nebraskans for Medical Marijuana, remained optimistic despite the setback.

“This will not be the end,” Eggers said, according to the outlet. “Giving up has never been an option. Being silenced has never been an option. It’s not over. It’s not done.”

The legislative impasse is further complicated by ongoing litigation. Former state senator John Kuehn has filed two lawsuits challenging the voter-approved provisions, with one appeal pending before the Nebraska Supreme Court. The state’s Attorney General is also trying to do something about the hemp question, akin to other states across the country.



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One of Las Vegas’ cannabis lounges closes its doors

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Nevada’s cannabis lounge experiment faces some expected growing pains, with one of just two state-licensed venues closing its doors after barely a year in business, according to the Las Vegas Weekly.

“The regulatory framework, compliance costs and product limitations just don’t support a sustainable business model,” said Thrive Cannabis managing partner Mitch Britten, who plans to convert the space into an event venue until regulations loosen up.

The closure leaves Planet 13’s Dazed Consumption Lounge as the only operational state-regulated cannabis lounge in Nevada. Dazed manager Blake Anderson estimates the venue attracts around 250 customers daily, primarily tourists. One other establishment, Sky High Lounge, has operated since 2019 on sovereign Las Vegas Paiute Tribe land exempt from state regulations.

Even with Nevada regulators conditionally approving 21 more lounge licenses, potential owners are struggling to meet the $200,000 liquid assets requirement – particularly social equity applicants from communities hit hardest by prohibition.

Recreational marijuana has been legal statewide since 2017, but public consumption remains prohibited. That’s created an obvious disconnect for the millions of tourists who visit Las Vegas annually but have nowhere legal to use the products they purchase. The state recorded roughly $829 million in taxable sales during the 2024 fiscal year.

“It always comes down to money, and it’s difficult to get a space if you can’t afford to buy a building. On top of that, getting insurance and finding a landowner who’s willing to lease to a cannabis business is a challenge in and of itself,” said Christopher LaPorte, whose consulting firm Reset Las Vegas helped launch Smoke and Mirrors, told Las Vegas Weekly.

Many think the key to future success lies in legislative changes that would allow lounges to integrate with food service and entertainment – playing to Las Vegas’s strengths as a hospitality innovator. In the meantime, the industry will continue to adapt and push forward.

“Things take time,” LaPorte said. “There’s a culture that we have to continue to embrace and a lot of education that we still have to do. But at the end of the day, tourists need a place to smoke, and that’s what these places are.”



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Psyence Group consolidates its shares

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Psyence Group Inc. (CSE: PSYG) told investors that it will be consolidating all of its issued and outstanding share capital on the basis of every 15 existing common shares into one new common share effective April 23, 2025 with a record date of April 23, 2025. As a result of the consolidation, the issued and outstanding shares will be reduced to approximately 9,387,695 on the effective date.

This is the second time a Psyence company has consolidated shares recently. In November, its Nasdaq-listed associate, Psyence Biomedical Ltd. (Nasdaq: PBM), implemented a 1-for-75 share consolidation as the psychedelics company worked to maintain its Nasdaq listing.

Psyence Group reported earnings in February when the company delivered a net loss of C$3 million and was reporting as a going concern. At the end of 2024, the company said it had not yet achieved profitable operations, has accumulated losses of C$48,982,320 since its inception.

Total assets at the end of 2024 were C$11,944,478 and comprised predominantly of: cash and cash equivalents of C$10,611,113, other receivables of C$159,808, investment in PsyLabs of C$1,071,981 and prepaids of C$68,243.

Still, the company is pushing ahead. Psyence told investors that it has historically secured financing through share issuances and convertible debentures, and it continues to explore funding opportunities to support its operations and strategic initiatives. “Based on these actions and
management’s expectations regarding future funding and operational developments, the company believes it will have sufficient resources to meet its obligations as they become due for at least the next twelve months,” it said in its last financial filing.

The company said it believes that the consolidation will position it with greater flexibility for the development of its business and the growth of the company.

 



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