California marijuana multistate operator Moxie sued the billionaire family backing insolvent Green Growth Brands, claiming fraud in connection with a $310 million merger deal in 2019 that was scrapped.
Moxie, as MXY Holdings, filed the suit this week in Delaware’s Chancery Court against the Ohio-based marijuana and CBD company’s founder, Joseph Schottenstein, his family members and others, Law360 reported.
The suit claims the defendants fraudulently misrepresented their intentions, persuaded Moxie to loan $5 million to Green Growth Brands, then scrapped the merger deal several months later without repaying the loan or a $10 million stock termination fee.
The defendants “enriched themselves by siphoning off Moxie’s labor, resources, and goodwill – all the while stifling Moxie’s ability to engage in competitive business activities and carry out its strategic growth plans,” according to the complaint obtained by Law360.
Schottenstein and the other defendants didn’t immediately respond to a Law360 request for comment.
The Schottenstein family is one of the richest families in the United States, deriving its wealth from grocery stores and stakes in the clothing and shoe industries.
Green Growth once had marijuana operations in Florida and Nevada.
The company also owned a chain of shopping mall kiosks focusing on CBD-infused personal care and beauty products and had wholesale agreements with Greg Norman, Seventh Sense and Green Lily, according to regulatory filings.
MJBizDaily reported that then-Green Growth CEO Peter Horvath cited the changing cannabis industry’s environment for terminating the deal with Moxie and that GGB had agreed to repay a $5 million “advance” and reimburse Moxie $4 million in deal fees by July 1, 2020.
But by May 2020, Green Growth had filed for insolvency protection in Canada.
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The court filings said that the company had:
- Always been cash-flow negative.
- Faced liquidity issues since early 2019.
- More than $100 million in debt.
Green Growth lost $66 million on revenue of $33.8 million during its last six months of 2019, according to regulatory filings.