Hashish Securities Litigation: Proceed with Warning Earlier than Investing in Worldwide Hashish

Cannabis Securities Litigation: Proceed with Caution Before Investing in International Cannabis

In addition to a solid cannabis practice, our law firm works with companies around the world on legal issues related to dispute resolution, customs, trade, employment, foreign direct investment, manufacturing, technology, intellectual property and entertainment. A few years ago these areas of activity rarely overlapped; that is no longer the case.

Our international and cannabis business lawyers now regularly advise individuals and companies looking to succeed in the global cannabis market. At the end of this blog post, I’ve just linked a few recent posts that discussed various aspects of this industry.

Meanwhile, Fred Rocafort and Jonathan Bench are receiving awards for their Global Law and Business podcast, which was recently named one of the Top 25 Podcasts in International Law in 2021. And Adrian Cisneros Aguilar, our senior lawyer in Mexico and Latin America, says now is the time to invest in cannabis in Mexico.

Of course, the rise of global cannabis has opened up numerous investment and partnership opportunities for businesses and individuals. Equally natural is the increase in litigation involving cannabis, which has an international flavor. This post concerns a lawsuit against cannabis and Malaysia, as well as a recent decision to proceed with a class action lawsuit for securities fraud. The case is Alde-Binet Tchatchou v India Globalization Company, No. PWG-18-3396. (Email me if you’d like a copy of the decision.)

The facts are known to anyone who works with cannabis. The plaintiffs claim that the IGC tried to exploit a “hot market trend” – namely the “hemp / CBD infused energy drink space”. What is not so well known is the international aspect. The plaintiffs alleged that the IGC did this by working with a Malaysia-based manufacturer to encourage entry into a marijuana-based product business. Due to the various press releases and announcements, IGC’s inventory has increased sixfold.

Sounds like an interesting opportunity right? However, the production of CBD-based beverages was and is illegal in Malaysia. This fact was not communicated to the investors (!) And was only disclosed when a MarketWatch report was published, in which numerous “red flags” around the Intergovernmental Conference were identified. The release of this report resulted in a sharp decline in the share price of IGC, a delisting of IGD from the US NYSE stock exchange and ultimately an interruption in trading.

Two class action lawsuits ensued in which false or misleading statements were made in violation of Section 10 (b) of the Stock Exchange Act and Rule 10b-5. Aside from the reasoning behind the complaints, the problem for the plaintiffs is whether there is anything to recover. I bet most investors will see little or nothing of their money returned.

Before you or your company jump on the “hot new trend” of international cannabis, consult an international business lawyer with cannabis experience. In the meantime, check the following: