Adam Jackson
A Maryland-based cannabis dispensary, LMS Wellness Benefit LLC, has accused iAnthus Capital Holdings Inc. (CSE: IAN) (OTCPK: ITHUF) of a scheme to divert at least $4.5 million from its funds into iAnthus’ other business interests, according to a lawsuit filed in federal court this week.
In the civil RICO suit, LMS claims that a management firm it had hired, S8 Management LLC, which shares several executives and directors with iAnthus, made unauthorized money transfers from LMS’s account to the failing subsidiaries of iAnthus, Law360 reported.
Desperate For Cash
“iAnthus stole from LMS because it is desperate for cash,” LMS alleged in its lawsuit. It points out that iAnthus has experienced a dramatic drop in its stock value over recent years, and the Toronto-based company has publicly expressed doubt about its ability to remain operational.
The complaint alleges that iAnthus has funneled much of LMS’ money into three of its Maryland companies — Greenmart of Maryland LLC, Budding Rose Inc., and Rosebud Organics Inc., all struggling entities that iAnthus had purchased to secure state cannabis permits. The lawsuit accuses iAnthus of attempting to conceal these actions by creating a false impression of indebtedness from LMS to iAnthus.
According to corporate disclosures issued in March, iAnthus reported a net loss of $449 million in 2022. The suit also alleges that iAnthus’ subsidiaries cannot cover a $55 million tax bill and the corporation is shouldering $1.25 billion in debt.
The lawsuit alleges that iAnthus’ financial woes stem from its aggressive strategy of acquiring cannabis dispensaries in Maryland to corner the market, only to be left in financial disarray due to poor management and ill-advised investments in these dispensaries.
In contrast, LMS claims to have been generating decent profits during this time.
The suit claims iAnthus unlawfully benefited at the cost of LMS and is pursuing threefold damages under the Racketeer Influenced and Corrupt Organizations Act.
The complaint alleges that S8 authorized the transfer of LMS’ money to iAnthus’ three struggling companies between February 2019 and August 2022, during which time Randy Maslow served as interim CEO of iAnthus and president of S8 — after iAnthus’ former chief executive, Hadley Ford, resigned amid shareholder concerns about an undisclosed personal loan from Green Gotham.
Debt Disagreement
The suit alleges that iAnthus used S8 to send LMS’ funds to the Maryland companies and then had S8 create counterfeit documents indicating that LMS was in debt to iAnthus’ Baltimore-based subsidiary, CGX Life Sciences Inc.
The case states, “In fact, LMS does not owe iAnthus and S8 any money on that note — just the opposite. Not only has any debt that LMS owed to iAnthus and S8 been fully repaid, but through August 2022, in light of all the money it has stolen, iAnthus owes LMS more than $4 million.”
The lawsuit suggests that iAnthus had S8 falsely claim LMS was not profitable to create a scenario where CGX could purchase LMS, thereby helping iAnthus to “cover its tracks.”
