Investors Sue Parallel, Beau Wrigley Calling It A Ponzi Scheme

At the beginning of March, a complaint was filed in the New York County Supreme Court and the Southern District of Florida. Then almost immediately the court documents were heavily redacted. It seems some investors of privately-owned Surterra Wellness, now known as Parallel are pretty angry about what happened to their investment dollars. While some portions remain unclear, there is still a lot that can be gleaned from the complaint and allegations. Both cases suggest that Wrigley loaded up Parallel with excessive debt and misrepresented the health of the cannabis company. The complaint alleges that his goal was to get the company taken public through the Ceres Acquisition Corp SPAC and then exiting with a profit.

The Players

Parallel is a cannabis company formerly known as Surterra Wellness and has been building its market share in Florida among other states. According to Florida’s OMMU, Surterra’s market share in flower the medical-only state has ranged between 9% and 5.9% over the past year. SH Parent is the parent company of Parallel/Surterra. 

William “Beau” Wrigley, Jr. is the chewing gum company heir and had been the CEO of Wm. Wrigley Jr. Company until its 2008 sale to Mars Inc. for $23 billion. He is the Chairman and CEO of WWJR Enterprises and has controlled PE Fund during all relevant times. Wrigley had initially invested in the company in 2017 and assumed day-to-day operations as Chairman and CEO in late 2018. Wrigley resigned as CEO effective November 19, 2021, after disclosure of the defaults under the Note Purchase Agreement. James Whitcomb is the current CEO of the company and is named in the Florida case. 

The Florida Case

The Florida case lists the plaintiffs as Tradeinvest Asset Management Company (BVI) Ltd., First  Ocean Enterprises SA,  and  Techview Investments Ltd. and the defendants as Wrigley, Jr., James “Jay” Holmes, James Whitcomb, SH Parent Inc.  d/b/a Parallel, Surterra Holdings Inc., Green  Health Endeavors (another Wrigley family fund), PE Fund LP, and Robert “Jake”  Bergmann. That case alleges that Wrigley convinced the plaintiffs to invest in a Simple Agreement for Future Equity or SAFE. A SAFE is a relatively new type of security in which an investor’s cash investment generally converts to equity in the issuing company under conditions specified in the SAFE. They are often issued to provide a company with bridge financing until it can complete an additional capital raise or a sale of the company, and will often convert to equity upon the occurrence of that future, specified event.  They say they sent the money to the company on September 27, 2021. Although much is redacted, it does allege that the investors were misled and had they been told the truth would likely not have made the SAFE investment. 

While it’s difficult to truly know what is in the complaint, it seems to infer that Parallel was aware that the Ceres SPAC deal was in trouble while it was convincing the SAFE investors to send the money. The case notes that “On October 1, 2021, the company sent an e-mail, on behalf of Wrigley, to the company’s investors explaining that the Company was no longer pursuing the SPAC transaction. Among other things, he noted that the Company would “focus on alternative financing avenues to pursue a vast array of growth opportunities,” and that, the Company had ”just raised and closed a significant initial equity financing through the private markets,” referring to the SAFE.” In other words, Parallel would have likely known on September 27, that the Ceres deal was in trouble since the company announced just days later that it was over.

The complaint alleges that once the Ceres deal fell through that Wrigley and Parallel tried to tell investors that the deal fell through because the company was worth more and that “cannabis industry players were lighting up their phones.

The investors say in the complaint they finally got access to company documents in December and learned the details were inconsistent with what they were told for the SAFE investment. The case says, “The practice  of raising funds under false pretenses, is the essence of a Ponzi scheme.”

The New York Case

This case involves John and Ultima Morgan, TGHI II LLC, Prime Overseas Investments and Enterprises Ltd., and Techview Investments Ltd. and they are alleging that Surterra Holdings Inc. dba Parallel, SH Parent Inc., PE Fund LP, WWJr. Enterprises Inc., William “Beau” Wrigley, Jr., SAF Group, and GLAS Americas LLC allowed Wrigley to falsely build up the company in order for it to be taken over by a Special Purpose Acquisition Company, and then he could cash out. The plaintiffs all hold Senior Notes in the company.

PE Fund is an investment vehicle within Wrigley’s family office empire. It is directly or indirectly controlled by Wrigley and is under common ownership with other Wrigley-controlled entities. WWJR Enterprises is the general partner of PE Fund. WWJR Enterprises is named for Wrigley’s initials and is controlled by Wrigley. SAF is a global alternative investment manager based in Canada and owns a junior note. 

Excessive Debts

The complaint alleges that ever since Wrigley took over the leadership of the company, it has incurred substantial debts. The amount of Parallel’s debt is redacted in the court documents.  The case states, “The Company’s current capital structure consists of multiple tranches of debts with different priorities.” The case also alleges that Wrigley inappropriately placed himself on both sides of the debt negotiations. The investors complain that Wrigley “repeatedly botched his own projections, ultimately ruining the company’s credibility and chance of going public.”

Street Insider has posted a copy of the Parallel deck associated with the Ceres SPAC deal and it came with some pretty lofty projections. The projected 2021 net revenue was $447 million. The presentation said that the company had $348 million in debt. The company also said in the presentation that it had a net loss of $140 million in 2020. Growjo.com estimates Parallel’s annual revenue at $65 million a year, but since the company is private this number can’t be verified. 

The court document goes on to say, “ On February 22, 2021, the company had announced that it planned to go public by merging with Ceres Acquisition Corp., a special purpose acquisition corporation or SPAC. After numerous failed efforts to keep the deal alive, on September 30, 2021, the deal was called off due to investors’ concerns in “Parallel’s ability to deliver on lofty financial projections it provided in February.”

The case also suggests that Holmes, PE Fund, and Wrigley were negotiating terms of the company’s debt that would benefit them and described as terms that would “Make a loan shark jealous.”

The lawyers in the group did not respond to a request for comment.