Lawsuit Dropped For Denver Cannabis Tech Company Accused Of Securities Fraud

After a two-year of legal battle, a civil lawsuit alleging securities fraud by CannaRegs, a Denver cannabis tech company, was voluntarily dropped.

CannaRegs, acquired for $10 million in 2020 by Chicago-based digital marketer Fyllo, was sued by investors that same year.

The investors, Lester Firstenberger and Sathya Rajavelu were also executives at CannaRegs - an Internet-based service that monitors regulatory changes affecting the cannabis industry.

The investors alleged that Amanda Ostrowitz, CannaRegs founder, encouraged them to sell their stakes in the business while concealing her acquisition plans with Fyllo.

In the lawsuit, filed in 2020, the investors alleged that Ostrowitz convinced them to sell their nearly 12% stake for $178,000 "when he knew Fyllo was willing to pay for a much higher valuation."

The Fyllo takeover closed for $10 million and Firstenberger and Rajavelu argued that they were entitled to more than $1 million in damages.

“Since the filing of this lawsuit, a discovery has revealed that Plaintiffs were mistaken in believing that discussions related to the sale of Regs Technology had preceded its divestiture,” Ostrowitz said.

"In light of this, the plaintiffs have decided in good faith to dismiss the lawsuit. I am excited that the day has finally come and that the case is over," Ostrowitz wrote in an email per MJBiz.

“If you are an entrepreneur in the United States, you will eventually be sued for something, even if you play by all the rules,” she added. 

Image by Benzinga