A civil lawsuit that alleged securities fraud by the Denver marijuana tech firm CannaRegs has been voluntarily withdrawn, bringing a two-year legal battle to a close.
The company – which was acquired for $10 million in 2020 by Chicago-based digital marketer Fyllo – was taken to court by a pair of early investors, who alleged that CannaRegs founder Amanda Ostrowitz encouraged them to sell their stakes in the business while concealing her acquisition plans with Fyllo.
The investors, Lester Firstenberger and Sathya Rajavelu, were also executives at CannaRegs, an internet-based service that keeps tabs on regulatory changes affecting the cannabis industry.
The pair claimed in their suit – which was filed in 2020 – that Ostrowitz convinced them to sell their nearly 12% stake for $178,000 when she knew that Fyllo was willing to pay for a much higher valuation.
The Fyllo acquisition closed for $10 million, and Firstenberger and Rajavelu argued they were entitled to damages of more than $1 million.
But the case was withdrawn on June 27, according to court records, and Ostrowitz shared a statement with MJBizDaily she said was attributable to all parties involved in the suit.
“Since the filing of this lawsuit, discovery has revealed that Plaintiffs were mistaken in their belief that discussions pertaining to the sale of Regs Technology had preceded their divestment,” the statement reads. “In light of this, Plaintiffs have in good faith decided to dismiss the lawsuit.”
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Ostrowitz wrote in an email that she was “thrilled the day has finally come” that the case is over with.
She added that her takeaway from the suit is that “if you are entrepreneur in the United States, you will eventually get sued for something, even if you play by all the rules.”