Handshake Deals Are Not. Your. Friend.
by Jihee Ahn
Investment and Securities Litigation article preview from harrisbricken.com
We’ve been monitoring and reporting on the growing trend of investment and securities fraud litigation in the cannabis industry, and this week brings yet another case.
In Murray v. Camp, et al., Murray is suing three Washington entities and their principals for breach of contract, unjust enrichment, fraud, and violation of the Securities Act of Washington. Murray alleges that in 2016, he traveled from his home state of Texas to Washington to meet with the defendants about investing in their marijuana businesses. At that meeting, the parties orally agreed Murray would provide a $50,000 loan to facilitate development of the defendants’ operations, and in return, Murray would be paid “above and beyond” that amount. The parties then executed two operating agreements – with one company assigning a 25% interest to Murray, and another company assigning a 6% interest. Based on those agreements, Murray provided the $50,000.
Of course, Murray claims everything then went sideways for him. In addition to the typically alleged facts that he was never actually added as a member of either company or given distributions at any time, he discovered two other key facts of fraud that most of our readership probably already recognized when I mentioned he was a resident of Texas above. First, Washington does not permit non-residents to own any percentage of its licensed marijuana businesses. Second, and relatedly, Washington does not permit non-residents to obtain any percentage of a licensed marijuana business’ profits. The entire agreement, Murray claims, was a fraud and scam because the defendants knew all this, misrepresented or withheld these facts, and took his money anyway.
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