according to the report of Crain’s in DetroitMichigan-based cannabis processor Choice Labs will leave receivership under new ownership in early February, ending a year-long restructuring process plagued by fraud allegations, donor withdrawals and internal financial instability.

Choice Labs, headquartered in Jackson and known for its Crude Boys and Choice Chews brands, will be spun off from paychecks controlled by private lender Chicago Atlantic. The company acquired $52 million in debt from Glorious Cannabis parent Choice Labs last year for an undisclosed amount, replacing Massachusetts-based Needham Bank as the company’s lead lender.

Chicago Atlantic then became the court-supervised horse tenderer in Jackson County. The company declined to comment to Crain’s Detroit. Choice Labs and Glorious Cannabis, an Au Gres-based grower, entered receivership last February as a legal mechanism intended to protect the companies and their donors from fallout related to a federal investigation into minority owner Daryl Heller.

Heller, through his Heller Capital equity group, owned a 20 percent stake in Glorious Cannabis and Choice Labs, according to attorneys representing Choice Labs. In December 2024, the FBI raided Heller’s offices in Lancaster, Pennsylvania, after allegations that he was operating a fraudulent scheme through an online ATM business.

Crain’s Detroit reports that it stemmed from a lawsuit filed by more than 2,700 investors in Heller’s ATM company, Paramount Management Group, who alleged that payments had stopped. Many of these investors were members of the Amish and Mennonite communities.

Heller was indicted on fraud charges in September. Federal investigators say he collected approximately $770 million from investors while they did not own many of the ATMs he controlled, effectively operating a Ponzi-style scheme. Authorities say he owes approximately $402 million to investors and faces up to 100 years in prison.

Although the receivership was initiated by Needham Bank as a protective measure, the companies were already in need of restructuring, receiver Jacques Santucci, president of Maine-based Opus Consulting, told Crain’s Detroit. “The company had to be restructured no matter what,” Santucci said. “It was performance in the market, but the balance sheet still needed work.”

Santucci pointed to the 2022 merger between Glorious Cannabis and Choice Labs as a major source of instability, citing limited integration and the departure of key leadership, including founder and CEO Wes Lutz, early in the recession. During the process, new management was put in place, marketing was revamped and new products were introduced to stabilize operations and preserve asset value in a difficult market.

In July, Chicago Atlantic, which has an active portfolio of cannabis loans and properties, including an investment in Michigan-based Common Citizen, acquired Needham Bank’s note and stepped forward as a horse bidder for the companies’ assets. These include Glorious Cannabis’ 50,000-square-foot cultivation facility in Au Gres, Choice Labs’ processing campus in Jackson, and a dispensary located in the same city.

According to the receiver’s legal counsel, nearly 1,000 potential buyers were contacted during the auction process that began in November, but no bidders surpassed Chicago Atlantic’s debt position. Chicago Atlantic is working to transfer the assets to a new entity, pending final approval from the Jackson County Circuit Court. The company is expected to retain approximately 90 percent of its current workforce, totaling approximately 450 employees.

“The facilities are not being abandoned,” Santucci said. “The business remains viable.”