The owners of a Denver marijuana business pleaded guilty Friday to drug and racketeering charges and will spend a year in prison in what city officials called the first local prosecution of a legal pot enterprise in the U.S.

A yearlong investigation of Sweet Leaf’s sales practices centred on a practice known as “looping,” where a customer purchases the maximum amount of marijuana that Colorado law permits and repeatedly returns to the same retailer to purchase more on the same day. Prosecutors believe people using the strategy at Sweet Leaf locations purchased more than 2 tons of marijuana intended for sale on the black market.

The case is unique in that Denver authorities charged a pot business in one of 10 states plus Washington, D.C., that broadly allow marijuana use by adults and a commercial market to supply cannabis products. The majority of such businesses “are reputable and responsible and strive to obey our marijuana laws,” Denver District Attorney Beth McCann said in a statement.

“Sweet Leaf is an exception,” she said.

Under a plea agreement, Matthew Aiken, Christian Johnson and Anthony Sauro will serve one year in prison followed by a year of parole tied to the drug charge and a year of probation for the racketeering charge.

Aiken, 40, was sentenced immediately, and courtroom deputies placed him in handcuffs following the hearing. Johnson, 50, and Sauro, 33, will be sentenced in several weeks.

They and their attorneys left the courtroom without speaking to reporters.

Senior Deputy District Attorney Kenneth Boyd said investigators found evidence that Sweet Leaf’s owners knew about and encouraged the illegal sales. Employees would even contact buyers known as “loopers” to notify them of medical marijuana deliveries to dispensaries, he said.

“Once the practice was authorized by ownership, it was pushed at the highest levels,” Boyd said. “It was sell, sell, sell. This was about greed and making money, and that came from the top.”

Denver police began investigating the chain of dispensaries in 2016 after a neighbour of one Sweet Leaf location complained about repeat customers visiting the dispensary day after day.

Investigators scrutinized Sweet Leaf’s sales practices by using data collected by state regulators and material collected during December 2017 raids of several company properties. Several months earlier, the company’s owners told Marijuana Business Magazine that they had 350 employees and $60 million in revenue.

Boyd said the 12 low-level employees arrested during the raids have since reached plea agreements contingent on community service. Two former managers received 30-day jail sentences in November as part of a plea agreement that required them to co-operate with investigators.

Boyd said Denver prosecutors still are pursuing cases against 10 people accused of using looping to buy excess marijuana at Sweet Leaf locations.

The investigation prompted Colorado regulators last year to clarify rules limiting how much marijuana an individual customer can buy in one day.

Attorneys for the company’s owners had argued that the rules only limited the amount of product a customer could buy during a single sales transaction. City and state regulators rejected that argument, and Denver revoked all 26 of the company’s city-issued licenses after the police investigation began.

Colorado regulators later reached a settlement requiring the owners to surrender all of their state-issued business licenses. The deal also bans the owners from working in Colorado’s marijuana industry for 15 years.