The California-based cannabis delivery service and marketplace Eaze is the target of a lawsuit filed by the former owners of Green Dragon, a Florida and Colorado-based cannabis company. The suit alleges that Eaze defrauded investors, is “close to insolvency” and is operating unlawfully.
According to WeedWeek, the former owners of Green Dragon are seeking unspecified damages for an alleged breach of contract. They also accuse Eaze’s board of intentionally hiding its financial condition before the companies’ merger in 2021.
Allegations Made by Green Dragon Against Eaze
The three former owners of Green Dragon – Cory Leder, Andrew Levine, and Alexander Levine – allege that Eaze is “essentially ‘renting’ multiple cannabis licenses and operating their own business at the licensed premises” in violation of California law.
They also accuse James Henry Clark, the billionaire founder of Netscape, and his business partner Thomas Jermoluk of having a shell company that owns at least 35% of Eaze’s stock – details which the delivery operator had not disclosed.
Furthermore, they allege that Eaze and its business partners misled Green Dragon’s founders about the financial health of Eaze.
The former owners also claim that they sold Green Dragon for a 30% ownership stake in Eaze and two seats on the company’s board but were fired from their roles in February.
The lawsuit also states that Eaze failed to pay Green Dragon’s shareholders any of the merger consideration due to them. The former owners are now seeking damages for this alleged breach of contract.
Eaze has refuted all claims made in the lawsuit, with CEO Cory Azzalino telling SFGate that the company is “in a healthy financial position” and is operating lawfully. He also confirmed that Clark and Jermoluk are investors but said they do not sit on the board.
However, despite Eaze’s denial, the lawsuit comes at a time of turmoil for the company, which was previously the subject of negative headlines in 2021 when a former CEO pleaded guilty to one count of conspiracy to commit bank fraud.
Implications of The Lawsuit?
If the allegations made by former Green Dragon owners are found to be accurate, it could have widespread implications for both companies. For Eaze, a potential finding of fraudulent activities or insolvency could damage its reputation in the cannabis industry and lead to hefty fines.
For Green Dragon, a potential finding of breach of contract would mean that its former owners are unlikely to get the compensation they seek and could impact their future business dealings in the industry.
The lawsuit also serves as another example of a large company using predatory tactics in business dealings with smaller entities – an issue that has been increasingly highlighted in recent years.
It is yet to be seen how this case will play out, but regardless of the outcome, it serves as a reminder of the importance of business transparency and ethical practices in any industry.
The lawsuit between the cannabis delivery service Eaze and the former owners of Green Dragon highlights the need for transparency and ethical practices in business dealings. The lawsuit alleges that Eaze engaged in fraudulent activities, operated unlawfully, and misled investors.
While these claims are yet to be proven true, it serves as a reminder that predatory tactics should not be tolerated in any industry. This case will be a litmus test for the cannabis industry, and its outcome could have lasting implications for both parties involved.
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