Nitin Khanna is striking back in a widening legal fight with Boris Jordan, the executive chairman of Curaleaf Holdings, one of the country’s biggest licensed cannabis sellers.
Responding to a January lawsuit that accused him of securities fraud, the Oregon tech and cannabis entrepreneur joined in a $515 million counterclaim against Jordan and other investors in Sentia Wellness, the failed Portland CBD venture that Khanna led.
Khanna rejects the investors’ accusations that he misled them about Sentia’s prospects — and lodges his own allegations involving a second, far more successful Khanna company that Jordan backed through an investment fund called Measure 8.
Khanna accuses Jordan of using tactics that “echo those used by Russian oligarchs, with whom Curaleaf has documented ties,” as he allegedly schemed to reduce the price Curaleaf paid to acquire Cura Partners without diminishing his own stake.
Cura Partners, the Portland-based maker of the Select line of cannabis products, was acquired by Curaleaf in early 2020 in a stock deal worth $390 million at the time, down from an original price tag of nearly $1 billion.
“Mr. Jordan sat on every side of the transaction as buyer (executive chairman of Curaleaf), director of the selling company (Cura Partners), and investor into the selling company (founding partner of Measure 8),” the counterclaim alleges. “He used his position to enrich himself at the expense of Cura Partners and its shareholders.”
Standalone lawsuit
A standalone $150 million complaint in the name of Sentia Wellness, also filed this week in Multnomah County Circuit Court, alleges Jordan similarly worked against the interests of Sentia shareholders to enrich himself.
“Defendants’ conflicts and self-dealing caused Sentia to forego deals worth approximately $150 million and almost $120 million and choose one worth approximately $2 million,” the suit declares.
Asked for comment, Curaleaf declined to go into detail about pending litigation, but broadly rejected the claims.
“We believe the allegations and the suits to be baseless, and clearly a desperate attempt to distract stakeholders from Mr. Khanna’s well documented personal and business challenges,” the company said in an emailed statement.
It also brushed aside the provocative but glancing mention of Russia ties, as it has before.
Russia’s invasion of Ukraine sparked discussion of Jordan’s long history of business dealings in Russia, and the connections of Andrei Blokh, a major Curaleaf shareholder who holds dual American-Russian citizenship.
“Curaleaf has addressed the false allegations against the company and its executive chairman, who is an American citizen, international businessman and respected pioneer and advocate for the cannabis industry,” Curaleaf said. “Curaleaf is an American company, and an undisputed industry leader that employs over 5,000 people in the U.S. and Europe. The company has no operations or business interests in Russia.”
January suit
In the $60 million January lawsuit, Sentia investors alleged that Khanna and his cohorts lured them into making what amounted to $74 million in unsecured loans with inflated, false and misleading claims about the company’s status and prospects.
Sentia had been spun out from Cura Partners as Curaleaf moved to acquire the THC side of the Portland business, one of the legal cannabis world’s first big success stories with its Select vape products.
After a series of stumbles, Sentia last summer unloaded its Social CBD brand to a California company and faded from the scene.
Khanna blames the company’s initial troubles on a November 2019 declaration by the Food and Drug Administration that threw the use and safety of CBD into doubt, and the subsequent pandemic.
The new Sentia suit claims company management, led by Khanna, was prepared to work through the uncertainty. But two key investors who had spots on Sentia’s board, Jordan and Sunny Puri of the hedge fund Anson, allegedly leveraged their investment agreements to essentially take control of the company.
“They directed management to preserve cash, cut costs, ignore revenues, and focus on selling the company,” the suit alleges.
Among the claims: “Mr. Jordan personally benefitted from this structure because he arranged for his firm, Curaleaf, to purchase Sentia’s manufacturing equipment for pennies on the dollar.”
The suit claims the investors rejected acquisition opportunities that would have paid Sentia handsomely in stock because the deals “would not put any cash in their pockets as creditors.”
Their actions amounted to a breach of fiduciary duty, the Sentia suit claims, and it was likewise with Cura Partners, the separate counterclaim charges.
Curaleaf’s May 2019 deal for the company originally called for Cura Partners shareholders to receive 95 million shares of Curaleaf stock. But a vape health crisis later that year damaged Cura Partners, and the deal was renegotiated.
First the payout was reduced to 65 million shares, though Cura Partners could get back the other 30 million shares if Select sales hit certain levels, according to the counterclaim. But Jordan allegedly pushed the payout down to 55 million shares, while maneuvering to get 1.2 million additional shares for Measure 8. Puri, also an investor in Cura Partners, likewise allegedly extracted more favorable terms for the Anson fund.
Running short of cash and struggling to get regulatory approval of the deal, Cura Partners had no choice but to accept the offer, the suit alleges.
“Cura Partners relied on the Curaleaf acquisition for its very survival,” the suit says. “Without the acquisition, it would have gone bankrupt.”
Working against Select
Jordan’s maneuvering didn’t end with the closing of the Curaleaf-Cura Partners deal in early 2020, Khanna, with his business partner and brother, Karan Khanna, alleges in the counterclaim: They claim Jordan sabotaged Select sales to ensure it didn’t achieve the targets that would cost Curaleaf — and Jordan, the company’s largest shareholder — more shares.
“For example,” the suit claims, “at Mr. Jordan’s direction, Curaleaf executives cancelled the launch of new products which had substantial pre-orders, cancelled months of work to acquire licenses in new states, redirected product slated for the Select brand to Curaleaf products, and required new sales to be channeled through a distributor (a company in which, unsurprisingly, Mr. Jordan was an investor).”
Nitin Khanna, in a statement, charged that Jordan’s “management of Curaleaf and his extensive conflicts of interest continue to put Curaleaf at risk.”
“The problematic behavior includes possible breaches of fiduciary duty and predatory investing behavior, notably in the cases of Cura Partners and Sentia Wellness, which puts the company in a negative spotlight,” he went on.
Khanna himself has faced difficult moments in the spotlight in the years since he and his brother founded and then in 2007 sold the tech startup Saber Corp. for $400 million.
He was CEO of Cura Partners until May 2018, when the company abruptly announced he was stepping down. Cura said the move had long been in the works, but acknowledged that it came as “personal allegations ... that arose several years before the company was founded have become a distraction for the company’s mission.”
In 2014, Khanna had settled a lawsuit relating to an alleged sexual assault. He was never charged in the case and admitted no wrongdoing.
Just before the Curaleaf acquisition, Cura paid $110,000 in penalties to Oregon cannabis regulators after it admitted to unintentionally mislabeling thousands of vape products. And last August, Cura’s former owners agreed to a $500,000 settlement in a class-action suit related to that case.