Cannabis board appoints top agency staffers

ALBANY — In their first meeting, the five members of New York’s new Cannabis News Control Board tried to make up for lost time.

Among several moves Tuesday, they voted unanimously to confirm Jason Starr as the Office of Cannabis Management’s (OCM) first chief equity officer, along with 21 other unnamed hires for senior agency positions. Starr is an attorney with experience in civil rights and social justice policy, having worked for the New York Civil Liberties Union, the governor’s office and the Human Rights Campaign.

Board chairwoman Tremaine Wright also announced a series of changes to the medical cannabis program — effective immediately. They include permitting the sale of whole flower; allowing any medical provider who can prescribe controlled substances to certify patients; increasing the disbursement of medical cannabis to a 60-day supply; and permanently waiving the $50 registration fee for patient certification.

The measures are among a suite of changes to the state’s medical cannabis program that several state legislators behind the bill said they had intended to take effect when the legislation was signed into law on March 31.

The Marijuana Regulation and Taxation Act (MRTA) — the law that defines the board’s role — had set a deadline of six months for medical cannabis patients to be able to grow marijuana plants at home. The deadline was not met, but Wright said she expects it to be an agenda item at one of the upcoming board meetings.

“Due to the delay in appointing the full cannabis control board, we have missed the first deadline,” she said. “We are very committed to drafting these regulations and issuing them for public comment.”

In his update to the board, OCM head Christopher Alexander, a cannabis policy expert and former staffer at the Drug Policy Alliance who was a lead drafter of the MRTA legislation, also acknowledged that the new institutions were starting from behind.

“The MRTA was signed into law on March 31. But we were not able to begin the work of establishing New York’s cannabis market until Sept. 22, when the full cannabis control board was appointed,” Alexander said. “As such, we have a six-month delay to make up.”

Alexander said the delay increased the urgency of adding staff to his agency beyond the chief equity officer, starting with 21 “potential hires” whose profiles he distributed to board members prior to the meeting.

The package was passed unanimously and without discussion. It was followed by laughter and a cheer from the participants, and an emphatic comment by Wright: “We have staff.”

An OCM spokesman did not immediately respond to the Times Union’s request to review the list of new staff members.

Before Wright advanced the staffing selections to a vote, Reuben McDaniel III — one of the two most recent additions to the board, appointed Sept. 22 — noted the multitude of interviewees he saw cycling through the cannabis regulators’ offices in the past two weeks.

“When Gov. Hochul appointed me to be in this position, one of the things she said is we need to move fast,” he said. “And to move fast, we need good staff.”

The majority of board members and staff who were on the video conference are former legislators or state officials, or have worked closely with senators. Few have worked in the executive branch or in the operations of the state’s pre-existing medical cannabis and hemp programs, which now fall under the control of the OCM and the board.

Axel Bernabe is an exception: He served as assistant counsel to former Gov. Andrew Cuomo for health, and has been a player since the early stages of legalization. Starr, the newly confirmed chief equity officer, also held an assistant counsel position in Cuomo’s administration for nearly three years, and left in 2019 for a role as director of litigation at the Human Rights Campaign, a civil rights organization until recently led by Cuomo’s former chief counsel, Alphonso David.

Wright ended the meeting by announcing that once staffing is under way, the OCM’s priority will be a public education program covering everything from prevention of drugged driving to information for prospective license holders.

“That is our first move out the door, to make sure that New Yorkers know exactly what’s in front of them and how they can participate in this industry,” she said.

Feds Say Flashy Cannabis Execs Used a Phony CEO, Blew Investors’ Cash

A pair of cannabis industry executives defrauded investors of at least $4 million, according to a federal grand jury indictment unsealed Tuesday, which claims the two trotted out a phony CEO who didn’t actually make any business decisions, manipulated the company’s stock price for their own benefit, fraudulently inflated the firm’s financials, and blew a six-figure sum on a luxury vehicle rather than the IPO roadshow for which it was originally intended.

Vitaly Fargesen and Igor Palatnik of CanaFarma Corp., a publicly traded New Jersey-based outfit that describes itself as a “fully integrated, multi-faceted Hemp products brand company,” are now facing multiple counts of securities fraud and wire fraud for their alleged misdeeds. Fargesen, 52, is listed on the company’s website as the firm’s senior vice president of strategic planning. Palatnik, 47, is listed as CanaFarma’s senior vice president of product acquisition. However, Fargesen and Palatnik in fact “exercise[d] secret control” of CanaFarma, the indictment states, accusing the two of hiding their real roles behind a “purported CEO” who was subservient to them.

In a statement released Tuesday, U.S. Attorney Audrey Strauss said, “Vitaly Fargesen and Igor Palatnik presented themselves as entrepreneurs developing a new business for an emerging industry. But, as alleged, Fargesen and Palatnik were just using the trappings of a start-up to run an old-time scam: lying to investors to take money for themselves.”

The Securities and Exchange Commission on Tuesday also filed a complaint against CanaFarma, charging Fargesen and Palatnik with violating antifraud provisions of federal securities law.

The duo is accused of serious wrongdoing that echoes somewhat another case now making news. Last week, Ozy Media collapsed after the startup was exposed for, among other things, allegedly having a company co-founder impersonate a YouTube exec during a due diligence call with Goldman Sachs, lying about a pending deal with Google, and leading producers, guests, and others to believe that an Ozy television show being produced would air on A&E and not Ozy’s YouTube page, where it eventually appeared. On Tuesday, a fund management company that invested more than $2 million in Ozy’s business sued the company for what it called “fraudulent, deceptive and illegal conduct.”

CanaFarma’s alleged scheme began around October 2018, when Fargesen and Palatnik began the process of acquiring a dormant Canadian shell company through a straw purchaser, the indictment explains. A couple of months later, they approached two people identified in court filings as “Co-conspirator 1”(CC-1) and “Co-conspirator 2,” (CC-2), “with the idea of founding a company based on hemp-derived products,” the filing says. Fargesen and Palatnik told CC-1 and CC-2 that they had access to overseas investors who had agreed to provide “millions of dollars” to get the business up and running.

In March 2019, the team launched CanaFarma Corp. And although Fargesen and Palatnik held modest titles, they “maintained complete control over CanaFarma, including all investor fundraising, all company funds, and all corporate decisions,” according to the indictment. That same month, Fargesen and Palatnik “hired the Purported CEO,” who served “as the face of CanaFarma,” but “reported directly to” them, it says. The so-called CEO “did not have access to the company’s bank accounts or a seat on the Board of Directors,” and executed Fargesen and Palatnik’s wishes, according to the filing.

CanaFarma’s first product was a hemp-infused CBD chewing gum called Yooforic, followed by hemp-based CBD tinctures and skin creams. CanaFarma didn’t manufacture Yooforic, but marketed it under the CanaFarma label as part of a licensing deal, says the indictment. In April 2019, Fargesen and Palatnik started negotiations with a commercial partner to grow hemp and build a processing plant. The partner company leased a farm in Dutchess County, New York to make good on the deal, harvesting 128,000 lbs. of hemp. But CanaFarma allegedly stiffed the grower, funneling $2 million to another, unnamed hemp grower instead. (A package of Yooforic appeared in a music video for Jamaican rapper Sean Paul’s 2019 song, “When it Comes to You.”)

It was around this time that CanaFarma began to solicit investors in a private placement round, raising some $14 million through June 2020. Investor presentations were sent out by the “purported CEO,” at the direction of Fargesen and Palatnik, according to the indictment. But the materials were riddled with false and misleading statements, say prosecutors: That the company’s “strong management team” was instead led by a CEO who had no say in CanaFarma’s operations. That CanaFarma did not grow and produce its own products, as the company claimed, but relabeled goods made by others. And that CanaFarma misled investors about the size of its marketing budget, inflating the real figure by at least $1.4 million, “which was secretly misappropriated by Fargesen, Palatnik, CC-1, and CC-2,” states the indictment.

But they didn’t stop there, prosecutors claim. Fargesen and Palatnik allegedly used the marketing budget to pay overseas affiliates to prop up CanaFarma’s stock price. They then used false invoices to account for millions in nonexistent expenditures that instead went into their own bank accounts. In early 2020, Fargesen and Palatnik allegedly used funds they said would be financing pre-IPO meetings with various investment banks on personal expenses instead, including “an approximately $100,000 down payment on a luxury vehicle.”

In June 2020, CanaFarma announced plans to “use its expertise in Cannabinoids” to develop its own version of hydroxychloroquine, the drug pushed relentlessly by former President Donald Trump during the COVID pandemic that did not actually work against COVID.

As of Tuesday afternoon, Palatnik does not have a lawyer listed in court records. However, Fargesen’s attorney, Jeffrey Lichtman—whose client list has featured boldfaced names including notorious drug lord El Chapo, Mafia scion John Gotti Jr., and cult leader Keith Raniere—said he thinks prosecutors have missed the mark.

“This indictment comes at the end of a multi-year investigation and contains allegations from two rogue employees who, as soon as the investigation began, ran to the government and began cooperating solely to save their own skins,” Lichtman told The Daily Beast. “As we have told the government, we do not believe any crime was committed other than the plundering of the business by the two rogue employees.”

If convicted on all counts, Fargesen and Palatnik each face a maximum of up to 65 years in prison.

Justin Bieber breaks into cannabis market with ‘Peaches’ joints

Martha Stewart on new business venture

It’s Justin Bieber’s latest joint venture.

The Canadian singer is breaking into the cannabis space, teaming up with a company to peddle pre-rolled joints that he’s calling “Peaches,” a nod to one of his most successful recent songs.

The Los Angeles-based recreational-pot company Palms Premium announced its partnership with Bieber on Monday on Instagram, calling the product a “limited edition line” that will be available in California, Nevada, Massachusetts and Florida.

Palms specializes in pre-rolled joints, according to its Web site, which advertises seven-joint packs for $32 available at dozens of stores across California and Nevada.

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“I’m a fan of Palms and what they are doing by making cannabis approachable and helping to destigmatize it –- especially for the many people who find it helpful for their mental health,” Bieber told Bloomberg in an e-mailed statement.

Bieber hasn’t been shy about his pot use before. Earlier this year, Bieber stopped by Wonderbrett’s new flagship cannabis store in LA where he spent more than $1,000 worth on weed products, Page Six previously reported.

A representative for Palms did not return The Post’s request for information about the financial terms of the partnership.

At least some of the proceeds from the sale of the “Peaches” joints will go toward nonprofits including the Last Prisoner Project, which involves criminal-justice-reform advocacy regarding cannabis, and Veterans Walk and Talk, which advocates for the outdoors, psychedelic therapy and cannabis among military veterans.

“Our goal is to make cannabis more approachable and help destigmatize its use,” Palms said on Instagram.

Bieber — known as a savvy investor in ventures ranging from Spotify to his own perfume line — is the latest celebrity to wade into the burgeoning legal-marijuana sector in the US.

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While marijuana remains illegal at the federal level, with industry insiders saying the US is unlikely to see legalization on the national level anytime soon, a wave of state legalization efforts has opened up opportunities for entrepreneurs.

Earlier this year, New York became the latest state to legalize marijuana, and Gov. Kathy Hochul’s administration has pledged to make quick progress on laying out a regulatory framework to get the industry established.

The first-ever meeting of New York’s Cannabis Control Board meeting is slated for Tuesday.

With New York’s addition, pot has now been legalized for adult recreational use in 18 states, according to the Drug Policy Alliance, and for medical use in more than 30 states.

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Rapper Jay-Z has been among celebrities most active in the cannabis space. Earlier this year, the Brooklyn-born rapper started a $10 million investment fund to help minority marijuana entrepreneurs break into the booming business.

He’s also chief visionary officer of the Parent Co., which sells branded cannabis products.

Martha Stewart has also entered the space, serving as an adviser to Canada-based Canopy Growth while starting her own lines of products, including cannabis-infused dog chews

This story first appeared on the New York Post.