Marijuana Company Sued in Brooklyn Federal Court, Accused of Lying to Investors
In a proposed class action suit, Phillip Kim of the Rosen Law Firm wrote that Trulieve Cannabis Corp. deceived its investors about its marijuana growing procedures and insider involvement in real estate sales.
January 02, 2020 at 06:25 PM
3 minute read
A marijuana company based in Florida was sued for securities violations this week in the Eastern District of New York.
In a proposed class action suit, Phillip Kim of The Rosen Law Firm wrote that Trulieve Cannabis Corp. deceived its investors about its marijuana growing procedures and insider involvement in real estate sales.
The suit is filed on behalf of people who invested in Trulieve during a 15-month period ending Dec. 17, which is the day Grizzly Research published a report detailing its concerns with Trulieve. Grizzly is an organization dedicated to performing due diligence on publicly traded companies, according to its website.
The suit, which was filed Monday, repeats some of the accusations in the Grizzly report. Grizzly determined that Trulieve was growing marijuana in "low quality hoop houses" rather than indoor facilities, Kim wrote.
A summary of Grizzly's report noted that Grizzly used drones and other methods to learn that Trulieve was mostly using hoop houses "prone to infestation and weather damage." Marijuana produced in those conditions is unlikely to keep up in the market amid increasing competition, investigators found.
Grizzly also found that Trulieve was involved in a real estate transaction with the husband of the company's CEO, which led to unusual financial activity, according to the suit.
Altogether, Trulieve's "wrongful acts and omissions" led investors to lose money, including a significant decline in the company's stock price when the Grizzly report was released, Kim wrote.
"Defendants acted with scienter in that they knew that the public documents and statements issued or disseminated in the name of Trulieve were materially false and misleading," he wrote.
In the filing, Kim did not say how much money the plaintiffs might be owed, but he estimated that the number of plaintiffs could be in the thousands.
Trulieve had not filed a response to the suit by 5 p.m. Thursday. Kim and Trulieve representatives did not immediately respond to requests for comment Thursday.
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