Montana: The Perils Of Being A Hemp Company & Contracting With Shell Companies

Great piece in the  Independent Record

Here’s the introduction…


Three years ago in northeast Montana the oil wells pumping in the Bakken field were surrounded by the budding production of another kind of oil — CBD oil.

It wasn’t known at the time that the boom-bust cycle of crude oil would be mirrored in the emerging CBD market, and what was once thought to be a future commodity is now a pariah for area farmers who gave it a shot.

Beau and Amber Anderson were among those farmers. They saw industrial hemp as a way to put their family farm on the cutting edge of something new. They knew the recently legalized crop was key to producing over-the-counter remedies and an FDA-approved pharmaceutical to treat seizures. It helped that the Andersons had been looking for a new crop to rotate through their 3,500-acre operation spanning the frontier between Montana and North Dakota near Bainville.

So in 2018, they planted hemp for the first time on the Montana side of the farm due to North Dakota laws limiting the crop. Sweetening the deal was the contract they signed with a CBD oil company guaranteeing a return on each acre planted so long as they met certain production goals. After negotiating a contract with the help of a lawyer, the Andersons — and 22 other farms in the area — thought they had a sure thing.

Under the contract with Utah-based USA Biofuels, the farmers would get up to $600 an acre if they grew hemp and delivered 25% of an acceptable harvest, or about 250 pounds of raw hemp per acre. USA Biofuels was a shell company for a Canadian-based company called Vitality, LLC, that eventually became owned by a now-insolvent Canadian CBD producer called Eureka93.

Eureka93 defaulted on the contract, which led to a Roosevelt county jury awarding a $65.5 million judgement for breach of contract and punitive damages against all three companies, an associated company and some of their owners. The verdict is believed to be among the largest in the state’s history.


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