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Legal Action Against Tilray: Investor Alleges False Claims On Inventory

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Benzinga report 6 March

 

An investor is publicly suing Tilray Brands Inc , the Canadian pharmaceutical and cannabis company and one of the most popular cannabis stocks out there.

The Lawsuit: Allegations

Michael Hudson, who filed the lawsuit on March 1 in the Southern District of New York, accusing Tilray of “breaches of fiduciary duties, unjust enrichment, and waste of corporate assets, and violations of the Securities Exchange Act of 1934,” per the suit, which states the first category of false statements relates to the value of Tilray’s inventory and its gross margins, and the second category of false statements relates to the entrance into, and the value of the Company’s agreement with Authentic Brands Group (ABG).

The plaintiff claimed the Authentic Brands deal was made to prop up the stock price and was actually not as good as Brendan Kennedy (founder of Privateer, the origin of Tilray, a privately-owned Canadian-based business) claimed it to be. Hudson said that in the two quarters after its IPO on NASDAQ, “Tilray’s gross margins had fallen from 55% to 31%.”

However, “to allay stockholders’ concerns, there is evidence that, under the direction of defendant Kennedy, Tilray recognized more than $40 million of unsellable marijuana plant waste as valuable inventory and subtracted the $40 million from Tilray’s cost of sales. This had the effect of improving Tilray’s margins and making it seem far more profitable and promising than it really was,” reads the legal document.

Furthermore, Tilray inflated its inventory’s value by $68 million per the lawsuit. The company’s reported inventory “grew from $16.2 million at the end of 2018, to $48.7 million after the first quarter of 2019, to $75.3 million halfway through 2019, and ultimately $111.5 million at the end of the third quarter of 2019,” according to the Green Market Report.
A spokesperson for Tilray told Law360 the complaint “is substantially similar to the other derivative complaints filed in the [Southern District of New York] and in the District of Delaware, which are stayed pending the outcome of the securities class action motion to dismiss process.” Moreover, the company believes that the underlying claims of these actions are without merit and plans to defend them.

Read more

https://www.benzinga.com/markets/cannabis/23/03/31224886/legal-action-against-tilray-investor-alleges-false-claims-on-inventory



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The Oregonian: Naked Oregon man wounded by exploding weed pen, lawsuit claims

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Thanks to Vince Sliwoski for tipping us off to this only in Oregon story !

A man who was getting baked while bare of any clothes was seriously injured when his weed pen exploded, a lawsuit filed Friday claims.

Gustavo Mendes now seeks $230,000 from the manufacturer of the malfunctioning marijuana vaporizer and the Eugene pot shop where he bought it, according to allegations in the Lane County Circuit Court suit.

The incident happened Feb. 13, 2023 as the 28-year-old was standing in his bathroom “in a state of undress,” according to the lawsuit.

Mendes took a puff or two and realized the pen was superheating in his hands, the lawsuit says; in a flash, it exploded — spraying burning chemicals onto his eyes, torso and below his waist.

The subsequent fire on the bathroom counter and floor cost $20,000 to repair, while Mendes’ medical bills at a Springfield hospital and Gresham eye care center topped $3,500, the suit says.

After previously earning $68,000 a year as a welder, Mendes is now sensitive to light and must apply eye drops regularly, necessitating a change in careers, according to his attorney.

He had purchased the pen, branded under the name Quantum Alchemy, three days prior at Hwy 99 Cannabis Co. Both the retailer and manufacturer are named as defendants in court papers.

Quantum Alchemy’s website has expired and an email inquiry bounced back.

https://www.oregonlive.com/marijuana/2025/02/naked-oregon-man-wounded-by-exploding-weed-pen-lawsuit-claims.html

 

Quantam has been getting recall notices as far back as 2022 as this OLCC alert testifies.

nr120222-Cannabis-Product-Recall-Pesticide-Bobsled-QuantumAlchemy



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EWeb Page / SEC Docs – SEC Charges Acreage Holdings, Inc. For Accounting Violations

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ADMINISTRATIVE PROCEEDING
File No. 3-22389

January 10, 2025 – The Securities and Exchange Commission today announced settled charges against Acreage Holdings, Inc. for violating the books and records provision of the federal securities laws when it created false records regarding a transfer of approximately $4 million that was temporarily moved into the company’s bank account a few days before the end of Acreage’s 2019 fiscal year.

According to the SEC’s order, Acreage caused an affiliated entity to transfer approximately $4.2 million into Acreage’s bank account on December 26, 2019, with the express understanding that Acreage would return the full amount at the beginning of the new year, which it did on January 3, 2020.  Acreage then allegedly created journal entries and other records that mischaracterized the round-trip transfer, first as a repayment of debt owed by the affiliate and later as a short-term loan to Acreage.  The SEC’s order further finds that after certain employees’ concerns about the round-trip nature of the transaction were escalated to a member of Acreage’s board of directors, Acreage recorded an additional journal entry that effectively reversed the transaction.

The SEC’s order also finds that during the audit of Acreage’s fiscal year 2019 financial statements, Acreage created and provided written documents to the accounting firm conducting the audit that misrepresented and omitted material facts about the round-trip cash transfer.  As a result, the SEC’s order finds that Acreage violated Section 13(b)(2)(A) of the Securities Exchange Act of 1934 by failing to make and keep books, records, and accounts that accurately and fairly reflected the round-trip cash transfer.

Without admitting or denying the findings in the SEC’s order, Acreage agreed to cease and desist from committing or causing violations or future violations of Section 13(b)(2)(A), and to pay a civil penalty of $225,000.

The SEC’s investigation was conducted by Kiran Patel, Nandy Celamy, Russel Feldman and George N. Stepaniuk, and was supervised by Thomas P. Smith, Jr., all of the New York Regional Office.



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Homberg Leaves Dentons For New Post At Gunnercooke

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Peter Homberg writes on Linked In Today

After more than 12 exciting years at Dentons, I’m delighted to share that I have joined the international law firm gunnercooke.

I’m excited to offer my clients truly exceptional service, leveraging gunnercooke’s flexibility, innovation, and collaborative culture to support them closely through their legal challenges, while also shaping and expanding my practice in a direction I’m passionate about.

I look forward to the many exciting projects and cases to come, please reach out if you’d like to know more.

 



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