Baltimore Cannabis Company Files $4.5 Million Lawsuit Against Its Canadian Management Company
BALTIMORE COUNTY - A lawsuit filed on June 20 in the U.S. District Court by LMS Wellness, the Baltimore County-based operator of "Health for Life White Marsh," accuses a Canadian firm and its subsidiary of misappropriating over $4.5 million through unlawful transfers.
The complaint includes a Racketeer Influenced and Corrupt Organization (RICO) Act claim, implicating three other Maryland cannabis companies in the alleged scheme. The suit aims to recover over $4.5 million for conversion, RICO, and unjust enrichment.
The Baltimore Business Journal reports that following the Health for Life White Marsh opening in 2018, iAnthus acquired MPX (the Canadian pharmaceutical firm) and its subsidiaries for $1.6 billion in February 2019. iAnthus later struggled financially, ultimately defaulting on $157 million in debt in 2020.
During this period, iAnthus' general counsel, Andrew Ryan, allegedly informed Huber that they would need more funds to continue operations with Health for Life White Marsh, raising the initial promissory note from $1.46 million to $3 million.
The lawsuit states that LMS employees noticed significant monetary transfers from LMS's account to several other dispensaries owned via iAnthus's corporate structure in 2020. Following a two-year legal battle, an arbitrator ruled in August 2022 that LMS could audit its own financial records. The completed audit allegedly revealed transfers exceeding $5.6 million from LMS's account to Greenmarket, Budding Rose, and Rosebud since 2019.
The complaint alleges that these transfers adversely affected LMS's ability to repay the promissory note, which could have been paid off by August 2020. According to the case, as of August 2022, LMS had overpaid by at least $4.5 million on the promissory note.
A statement provided by iAnthus to the Business Journal denies these claims. According to the Business Journal, iAnthus claims that the suit is an attempt by LMS managing member Bill Huber to negate an arbitrator's order related to the transfer of LMS based on priorly signed option agreements.
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