Weedmap’s Under subpoena and Federal  investigation

We have been writing for some time about Weedmaps making millions by giving illegal operations a home and safe haven to sell their unregulated items at discount prices. Thus, in the face of massive fines, Weedmaps, this past January, finally capitulated and pledged to drop ads for illegal vendors from its online directory.  As discussed in our last newsletter, Weedmaps agreed to modify their policy, which new policy seems to have more holes in it than a kitchen colander.  

Now, criminal prosecutors in the U.S. attorney’s office, Eastern District of California, have ordered the Ghost Management Group LLC, which owns Weedmaps, to produce documents related to the cannabis businesses listed on Weedmaps, records related to its ordering service as well as related to its own staff, investors and accounting.  The subpoena seems quite thorough, says a former U.S. attorney and appears to represents the early stages of the probe.  A critical part of the concerns a set of records that were related to the company’s services which enables online cannabis purchases.   According to the  subpoena, it also covers documents related to its ordering service as well as to its own staff, investors and accounting.

What is fascinating is that the demand for documents includes but is not limited to communications and payments to local, state and federal employees, as well as elected officials and any candidates for those offices.  The subpoena also ventures outside of weedmaps to Terra Tech and CannaCraft.  Terra Tech changed its name to Onyx Group Holdings after a recent merger. CannaCraft, one of California’s largest distributors, was also among the 30 companies about which prosecutors sought records.

Also of note, the  subpoena has requested from Weedmaps documents related to agricultural chemicals and pesticides such as pyrethrins and hyroxycarbouran. U.S. Attorney McGregor Scott of California’s Eastern District of California has made eradicating and prosecuting illegal growing sites, which often use toxins without permission, an enforcement priority.

Matt Kumin, local SF attorney, opines that the government is trying to determine whether these companies have with California state cannabis regulation.  Attorney Matt Kumin stated that “To successfully prosecute a company under federal law, federal prosecutors must show the cannabis entity is not in compliance with California regulations,”  Attorney Kumin stated that “This fits what happened in Colorado shortly after legalization… The feds came in and made a point of going after companies that appeared to be violating state regulations in fundamental ways.”

Not surprisingly, Weedmaps has little to say but “Given our role as the largest technology company in the cannabis sector, from time to time, Weedmaps receives requests for information from government agencies. We cooperate with these requests as we do with all lawful inquiries. Our corporate policy is not to comment to the media about any specific legal matters or inquiries with respect to the company or any of its customers.”   One can only think, where there is smoke, there may be fire.


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