Curaleaf announced the closure of its operations in California, Colorado, and Oregon amidst two state investigations into their Russian oligarch ties.
They are a vertically integrated cannabis corporation that is a Multi-State Operator (MSO) doing business in several states, including New Jersey.
Curaleaf claimed it was “part of its continued effort to streamline its business.”
They also plan to consolidate cultivation and processing operations in Massachusetts to a single facility. In addition, Curaleaf reduced its labor force by 10%.
“The company acknowledges the difficult operating environment in these investment states,” their press release said.
Curaleaf was already having problems last year and began cutting before announcing it.
“These adjustments were necessary for the future success and profitability of the business,” they alleged.
Curaleaf claimed the decisions were “made as a result of recent legislative decisions, price compression. And lack of enforcement of the illicit market.”
“Today’s announcement reflects a decision that we did not arrive at lightly,” said Curaleaf CEO Matt Darin. “The current price compression caused by a lack of meaningful enforcement of the illicit market prevent us from generating an acceptable return on our investments.”
Many large MSOs think the “illicit market” or legacy operators are crooks, and the feeling is largely mutual.
No one likes someone cheating at their favorite game.
“We remain excited about our future growth prospects both domestically and internationally. And now can devote greater resources to tangible growth opportunities in emerging markets such as Europe,” they claimed.
When you don’t have the support of the long-term cannabis community and no loyal base versus other businesses, this is bound to happen.
The inability for licensed cannabis companies to deduct their business expenses when filing taxes is due to Section 280-E of the IRS Tax Code, which limits their profit margins. A wide range of cannabis organizations and advocates, including small business minority owners, have called for reform, which has failed to materialize in Congress.
The State of Connecticut has begun investigating Curaleaf’s ties to Russian oligarchs amidst the United States backing Ukraine amidst the violent Russian invasion.
They noted the company’s close ties to oligarch Roman Abramovich who is close to Russia’s dictatorial President Vladimir Putin.
Connecticut officials said Curaleaf received undisclosed loans from Abramovich.
The U.S. leveled sanctions against Russian oligarchs whose actions are blessed by Putin. They did so in the wake of the Russian invasion of Ukraine.
Curaleaf denied their wrongdoing.
Like in New Jersey, they were among the large MSOs already operating in Connecticut and were able to reap the rewards of the opening of their adult-use cannabis market. They bought a company that was already operating there to establish themselves, a common practice.
CT Insider reported that they said, “Curaleaf and its primary shareholders do not owe outstanding funds to Mr. Abromovich, nor to any person sanctioned in the US, UK, or EU.”
“The largest amount ever owed to either entity by Curaleaf was $120 million, and all shareholder loans to Boris Jordan and Andrei Blokh were repaid years ago,” their spokesperson said.
Massachusetts Examines Curaleaf
Along with Connecticut, the Commonwealth of Massachusetts is investigating Curaleaf.
According to grassroots journalist Grant Ellis Smith, the Massachusetts Cannabis Control Commission (CCC) is closely reviewing its operations.
They are examining their ties to Abramovich.
Ellis also uncovered that the CCC is investigating Curaleaf for operating an unlicensed THC lab in Newtown, MA.
The MSO seems to have picked up some legacy operator practices. They seem to have been doing some product testing in a shady fashion.
Curaleaf might also be using radiation to clear their cannabis of mold.