Hashish tech platform and supply large Eaze Options is dealing with a brand new authorized problem to its enterprise mannequin, this time from a Canadian competitor that additionally runs a supply platform in California.
Toronto-based DionyMed filed go well with towards Eaze in San Francisco County Superior Court docket, alleging the California firm makes use of wire and financial institution fraud to course of credit score and debit card funds from clients shopping for marijuana by way of its on-line platform.
The lawsuit was filed on behalf of DionyMed’s California subsidiary, Herban Industries, which runs a competing supply platform referred to as Chill.
An Eaze spokeswoman dismissed the allegations as “false” and an try by DionyMed to spice up its personal enterprise and inventory worth.
The lawsuit claims that Eaze makes use of unfair enterprise practices that give it an edge over opponents reminiscent of Chill by illegally processing credit score and debit card funds by way of European-based shell firms.
“Eaze conspires to disguise the cannabis transactions as transactions for canine toys, dive gear, carbonated drinks, drone parts, and face lotions, amongst different issues, to acquire approval for these transactions,” the lawsuit alleges.
“To perpetrate these frauds, Eaze created or partnered with Cyprus- and U.Okay.-based shell firms that purport to promote these seemingly innocuous merchandise however in truth exist solely or primarily for the aim of misrepresenting the character of the underlying transactions.”
The go well with asks for an injunction to power Eaze to stop all such exercise however doesn’t request any financial damages.
The lawsuit follows an announcement in March that one other DionyMed California subsidiary, Hometown Coronary heart, broke ties with Eaze as a result of it couldn’t confirm that its “bank card fee processing methodology met regulatory compliance necessities.”
Eaze denies allegations
In an emailed assertion to Marijuana Enterprise Every day, Eaze spokeswoman Elizabeth Ashford referred to as the go well with “a thinly veiled try by publicly traded Canadian firm DionyMed to achieve a bonus by way of litigation, prop up their failing inventory worth and publicize their new supply platform.
“The allegations are false, and their makes an attempt to cover their true motives are apparent”.
Ashford additionally pointed to earlier firm statements that Eaze doesn’t course of digital funds. That’s the duty of the licensed MJ distributors for whom Eaze is facilitating gross sales by way of its web site and smartphone app, she mentioned.
San Francisco lawyer Katy Younger, who focuses on enterprise disputes, mentioned the case may show “harmful” for the business at massive.
Even when Eaze is harmless of the costs levied by DionyMed, she famous, a few of its retail companions could possibly be responsible, and this lawsuit may expose that.
“There’s going to be wide-reaching repercussions, the place numerous companies’ data that aren’t concerned within the combat between Eaze and DionyMed, they’re all going to get dragged in,” Younger mentioned.
“It’s fairly simple to think about a state of affairs the place one of many dispensaries that’s on Eaze’s platform, perhaps they’ve had their checking account revoked a number of instances, they usually might have discovered a workaround which may not completely be on the up and up.
“Now that enterprise goes to get dragged into this lawsuit by way of the invention course of.”
Younger believes such litigation may set a dangerous authorized precedent involving the “nasty underbelly” of how the business does enterprise.
“Everyone knows within the cannabis business you must get your arms a little bit soiled,” she mentioned, “and the second we begin blowing one another up in lawsuits for the assorted ways in which entrepreneurs have found out how you can do enterprise, that’s how the business begins to cannibalize itself.”
Eaze can also be nonetheless battling a lawsuit filed final Could wherein a buyer alleged the corporate violated federal regulation by spamming her and others with unsolicited telephone textual content commercials.
John Schroyer might be reached at [email protected]