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The Justice Department is investigating marijuana-related businesses that allegedly took coronavirus relief loans in violation of federal rules, with third-party actors leveraging a whistleblower policy that allows them to take a portion of settlement money if they report on the cannabis companies.
Multiple sources in the cannabis legal space confirmed the trend with Marijuana Moment this week, though they declined to identify active clients involved in the litigation. This evidently involves both direct cannabis businesses that are involved in the production or sale of marijuana as well as ancillary companies that are not plant-touching.
One public case that DOJ disclosed last month involved a holding company of the Bob Marley namesake cannabis company Marley Natural.
A company that specializes in facilitating whistleblower complaints for alleged Paycheck Protection Program (PPP) violations, Sidesolve, successfully reported the cannabis business Docklight Brands to DOJ for receiving the funds in contravention of a federal Small Business Administration (SBA) policy prohibiting companies from taking the loans if they work with cannabis or indirectly service the industry.
“Because federal law prohibits the distribution and sale of marijuana, financial transactions involving a marijuana-related business would generally involve funds derived from illegal activity,” SBA said in 2020. “Therefore, businesses that derive revenue from marijuana-related activities or that support the end-use of marijuana may be ineligible for SBA financial assistance.”
Sources who requested anonymity say there are up to 100 active cases, with the Justice Department sending letters notifying businesses that are directly or indirectly associated with the state-legal marijuana industry that they are being reviewed for possible violations under the False Claims Act (FCA).
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