Canopy Claims U.S. Hemp Grower Treated $12 Million Advance Like a ‘Free Bank Account’
Canopy Growth (TSX: WEED) (NYSE: CGC) has filed a lawsuit against its U.S. hemp partner Go Farm Hemp for allegedly lying about its hemp growing ability and mismanaging the $12 million advance which should have gone towards the hemp farming operation.
Also included in the suit are claims that Go Farm misled Canopy in an attempt to cheat the company out of money as only 275 of the 1,115 acres of farm area were viable.
Canopy goes on to accuse Go Farm Hemp of running a hemp seed scheme and fraudulently funnelling money from the $12 million advance into personal bank accounts as well as making outlandish purchases such as a house in Panama.
As stated in the complaint, Canopy believes Go Farm used part of the advance to produce hemp seeds to resell them. At one point, Go Farm even approached Canopy with an offer to sell the company seeds. Canopy declined the offer as it did not need the seeds.
The two company’s had a deal in place to farm hemp in New York, Kentucky, Colorado and North Carolina but it seems things didn’t go to plan with both sides resorting to legal action.
Go Farm was the first to take legal action against Canopy after filing a $1.9 million federal lawsuit claiming Canopy failed to make certain previously agreed-upon payments.
As per the company’s agreement, Canopy had the right to hold back the final two of five payments until the final crop yield was counted. Go Farm claimed Canopy stopped paying after making the first two payments. Go Farms says Canopy refused to make the third payment under the agreement which totalled roughly $1.9 million, the exact amount Go Farm is suing for.
Allegedly, Canopy began to grow suspicious and after reaching out with questions about the operation, Go Farm went silent. Canopy claims Go Farm was unable to produce any receipts to back up its use of the funds.
Midsummer of this year, Canopy went to inspect the crops and was shocked at what they found. According to Canopy, they found hundreds of unplanted acres and the land that had hemp growing was overgrown with weeds. The company claimed it was difficult to find a single hemp plant amongst the weeds.
“Defendants concealed from Canopy Growth the dismal output of the farms in each location, and falsely blamed acts of God including hail, grasshoppers and biblical rain. Defendants neither had the ability nor the intent to ever fulfill the terms of the agreements.”
Both lawsuits were filed in the U.S. District Court for the Western District of New York.
Canopy Growth has retained Thomas Worger, Laura Leigh Geist and Kelly Lloyd Lankford of Dentons to represent the company.
Go Farm Hemp has hired Andrea Schillaci and Amber E. Storr of Hurwitz & Fine PC.
- Canopy Growth USA LLC v. Go Farm Hemp LLC et al., case number 6:19-cv-06747
- Go Farm Hemp LLC v. Canopy Growth USA LLC, case number 1:19-cv-01370
There are two sides to every story and so far both parties claim very different accounts. Neither party has yet to comment publically on the lawsuits.
We’ll continue to follow the story and provide updates as they become available.
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