Cannabis company Skymint, and others battle in receivership
Skymint, which primarily operates under the parent company of Green Peak Innovations Inc., remains in receivership.
Lawyers entangled in the court-ordered receivership of Lansing marijuana giant Skymint continue to battle over the company's finances.
The alleged trouble stems from Skymint's $78 million acquisition of Birmingham-based competitor 3Fifteen Cannabis in April 2022.
Skymint, which primarily operates under the parent company of Green Peak Innovations Inc., owes more than $127 million to Canadian investment firm Tropics LP tied to the acquisition. Tropics has since come on as the primary funder of operations as Skymint works through receivership. But the minority lender in the acquisition, New York-based cannabis investment firm Merida Capital Holdings and a majority shareholder in 3Fifteen, is challenging whether its stores should be involved in the receivership at all.
Its lawyers have sought on several occasions to disjoin the company from the court-order receivership, despite the acquisition closing more than a year ago.
In the days prior to Skymint entering receivership, 3Fifteen Cannabis retook control of several stores acquired by Skymint, including dispensaries in Hamtramck, Grand Rapids, Camden and two in Battle Creek, according to court records.
But the circuit court judge in Ingham County ordered 3Fifteen to cede control back to Skymint, according to court records, as well as return control of bank accounts with nearly $500,000 in funds to Skymint.
Lawyers for Skymint and the receiver argued in a court hearing last week that 3Fifteen had not returned the bank accounts and should be held in contempt of court. 3Fifteen's lawyers argued the order should be reversed and control of those stores and accounts should remain in 3Fifteen's control.
"(The March 29 order) … required a return to the status quo, required return of money that was improperly taken, and so if you were to enter a stay of that March 29 order, it would reignite the chaos and the smash-and-grab tactics that we sought this court's intervention and protection for," David Dragich, partner at The Dragich Law Firm PLLC and attorney for the receiver in the case, argued in the hearing to the judge.
According to arguments in the hearing, 3Fifteen had used more than $600,000 from the accounts in question at Live Life Credit Union to pay leases and payments linked to the acquisition.
"What we want from the stay pending appeal is these locations to be shut down," Max Newman, partner at law firm Butzel Long and attorney for 3Fifteen, argued in the hearing. "Smash-and-grab is what the other side is doing, and particularly how we see Tropics and Skymint. These operations under Skymint's management, and I'd call it mismanagement, are losing hundreds of thousands of dollars a month …"
3Fifteen and Merida accused Skymint's former CEO Jeff Radway of several misdeeds, including using the company as his personal piggy bank in several extramarital affairs. Radway left the company on an "indefinite leave of absence" on April 7, according to an email to employees from Jeff Donahue, Skymint's executive vice president and general counsel, that was obtained by Crain's.
The Ingham County judge, however, did not buy into 3Fifteen's claims that it should be separated from the receivership or authorize an appeal in another court and refused to reverse the March 29 order, according to the transcript from the May 3 hearing.
"The March 29 order restored the status quo and, again, 3Ffiteen isn't asking for a stay that would just stop this case from proceeding, they're asking to reverse parts of the March 29 order," Judge Joyce Draganchuk said in the hearing. "So I think in balancing harms, there would be greater harm in granting the stay than in not … in my view, businesses should not be thrown into upheaval and the order appointing a receiver and the March 29 order stabilizes the businesses and allows them to continue in smooth operations."
And with that, the judge denied 3Fifteen's request. The judge also denied 3Fifteen's request to enter arbitration over the purchase agreement with Skymint.
The plaintiff and defendant lawyers also argued over the $600,000 in funds 3Fifteen took from accounts to pay itself and expenses for the operations it believes it controls.
3Fifteen's attorneys argued those expenses needed to be paid and the receiver would have done it anyway. The receiver's attorney disagreed.
"It's like robbing a convenience store and saying, 'Well, we paid the wages of the employee because we gave the guy a $100 on the way out the door,'" Dragich said. "You don't get to make that decision. You've taken the money from the receivership estate and all we're asking for, again, is that those funds be returned and they be returned promptly."
3Fifteen's lawyer, Newman, argued the use of those funds was done because the order appointing a receiver was "ambiguous, vague, overwrought, verbose."
Judge Draganchuck reminded Newman her signature was on that order.
"I know but it's got typographical errors in it, misuse of apostrophes, literally repetition of the same phrase twice in a row that suggests that nobody proofread that order and the reason nobody proofread that order is, quite frankly, it's unreadable," Newman replied.
The judge ordered 3Fifteen to repay the more than $600,000 to Skymint, including the repayment of $375,000 within 24 hours of the May 3 hearing and the remainder by May 17.
The judge, however, declined to hold 3Fifteen in contempt of court over the ordeal.
The future of Skymint remains unclear.
Tropics, which first sued Skymint resulting in the court-ordered receiver, is now funding operations as the receiver looks to stabilize finances. In that lawsuit, Tropics alleged Skymint was burning through $3 million in cash per month and generated only $110 million in revenue in 2022, $153 million below its forecast of $263 million in sales for the year.
Skymint, like many others in the Michigan marijuana industry, was crushed by fast-falling recreational marijuana prices in the state.
The price collapse is largely due to product oversupply — recreational marijuana retail prices have plummeted from $512.05 per ounce of flower in January 2020 to just $86.87 per ounce of flower in March — effectively eliminating margins for many businesses.
At least five other marijuana businesses in the state are under court-ordered receivership.
