In a 72-page grievance filed Tuesday in San Francisco County Superior Courtroom, plaintiff Herban Industries claims that Eaze arrange a system “designed to hide the true nature” of cannabis purchases so as to enable prospects to pay with credit score or debit playing cards. The flexibility to just accept playing cards gave Eaze an incredible benefit over opponents, says Herban, which filed the swimsuit underneath California’s unfair competitors regulation.
“Eaze’s speedy development and dominant place are a results of the market benefit it has gained by flouting legal legal guidelines prohibiting wire and financial institution fraud,” the lawsuit alleges. “To extend gross sales on its platform, Eaze enabled the choice to finish cannabis purchases by credit score and debit card, though credit score and debit card corporations prohibit using their services for cannabis– and marijuana-related transactions.”
To keep away from the exercise being flagged as cannabis-related, the swimsuit claims, “Eaze conspires to disguise the cannabis transactions as transactions for canine toys, dive gear, carbonated drinks, drone elements, and face lotions, amongst different issues.”
The plaintiff within the lawsuit, Herban Industries, is an Oakland, CA–primarily based cannabis firm owned by DionyMed, a multistate cannabis model headquartered in Toronto. The corporate is asking the court docket to cease Eaze from persevering with the alleged follow.
In an announcement to Leafly, Eaze denied the claims and advised that the lawsuit was motivated by a need by DionyMed to disrupt Eaze’s enterprise and achieve a aggressive benefit of its personal.
“This lawsuit is a thinly-veiled try by publicly traded Canadian firm [DionyMed] to achieve a bonus by means of litigation, prop up their failing inventory worth, and publicize their new supply platform,” mentioned Elizabeth Ashford, Eaze’s senior director of company communications. “The allegations are false and their makes an attempt to cover their true motives are apparent.”
A Messy Breakup
DionyMed and Eaze was companions, however the two broke ties earlier this 12 months when DionyMed determined to cease utilizing Eaze to satisfy supply orders. DionyMed “couldn’t verify that the processing process [used by Eaze] meets California regulatory necessities,” journalist Debra Borchardt reported in April, famous that the corporate mentioned it was going to put money into its personal supply service, referred to as Chill.
Eaze replied on the time by stressing that it doesn’t course of funds.
“As a expertise platform that allows licensed cannabis retailers to satisfy on-demand supply to shoppers, Eaze doesn’t course of funds,” the corporate mentioned. “We imagine we and our licensed retail companions are compliant with all CA laws.”
In its grievance filed this week, plaintiff Herban Industries claims Eaze used shell corporations and different strategies to forestall third-party fee processors from recognizing that the transactions had been cannabis-related:
Eaze has directed and coordinated a scheme to ship proceeds for credit score and debit card transactions on the Eaze Platform for cannabis out of the US, convert them into euros, and return them to United States banks in international forex in a fashion designed to hide the true nature of the underlying transactions. Senior Eaze personnel had been and are straight concerned with this course of, and facilitated it in quite a few methods, together with by conveying communications and instructions […], transmitting the credit score and debit card settlement statements to the dispensaries that mirrored the forex conversions and settlement dates, pressuring the dispensaries to proceed accepting the credit score and debit card funds regardless of their objections primarily based on guarantees Eaze had made to its processor, and directing the dispensaries to create invoices to match the funds.
Eaze’s spokesperson declined additional public remark.