According to reporting from Crain's Detroit, Michigan based cannabis processor Choice Labs is set to exit receivership in early February under new ownership, bringing to a close a year long restructuring process triggered by fraud allegations, lender withdrawal, and internal financial instability.
Choice Labs, headquartered in Jackson and known for its Crude Boys and Choice Chews brands, will emerge from receivership under the control of private lender Chicago Atlantic. The firm acquired the roughly 52 million dollar debt of Choice Labs' parent company, Glorious Cannabis, last year for an undisclosed sum, replacing Massachusetts based Needham Bank as the company's primary lender.
Chicago Atlantic then became the stalking horse bidder in the court supervised receivership process in Jackson County. The firm declined to comment to Crain's Detroit. Choice Labs and Glorious Cannabis, a cultivator based in Au Gres, entered receivership in February last year as a legal mechanism intended to protect the companies and their lender from fallout linked to a federal investigation involving minority owner Daryl Heller.
Heller, through his Heller Capital equity group, held a 20 percent stake in both Glorious Cannabis and Choice Labs, according to attorneys representing Choice Labs. In December 2024, the FBI raided Heller's offices in Lancaster, Pennsylvania, following allegations that he was operating a fraudulent scheme through a separate ATM network business.
As reported by Crain's Detroit, the receivership stemmed from a lawsuit filed by more than 2,700 investors in Heller's ATM company, Paramount Management Group, who alleged that payments had stopped. Many of those investors were reportedly members of Amish and Mennonite communities.
Heller was indicted on fraud charges in September. Federal investigators allege he raised approximately 770 million dollars from investors while not owning many of the ATMs he claimed to control, effectively operating a Ponzi style scheme. Authorities estimate he owes investors roughly 402 million dollars and faces a potential sentence of up to 100 years in prison.
While the receivership was initiated at the request of Needham Bank as a protective step, the companies were already in need of restructuring, receiver Jacques Santucci, president of Maine based Opus Consulting, told Crain's Detroit. "The company needed to be restructured no matter what," Santucci said. "It was performing in the market, but the balance sheet still needed work."
Santucci pointed to the 2022 merger between Glorious Cannabis and Choice Labs as a major source of instability, citing limited integration and the departure of senior leadership, including founder and CEO Wes Lutz, at the start of receivership. During the process, new management was installed, marketing was reworked, and new products were introduced to stabilize operations and preserve asset value in a difficult market.
In July, Chicago Atlantic, which has an active cannabis lending and ownership portfolio including an investment in Michigan based Common Citizen, acquired Needham Bank's note and moved forward as stalking horse bidder for the companies' assets. These include Glorious Cannabis' 50,000 square foot cultivation facility in Au Gres, Choice Labs' processing campus in Jackson, and a dispensary located in the same city.
According to legal counsel for the receiver, nearly 1,000 potential buyers were contacted during the auction process, which began in November, but no competing bid exceeded Chicago Atlantic's debt position. Chicago Atlantic is now working to transfer the assets into a new entity, pending final approval from the Jackson County Circuit Court. The company is expected to retain approximately 90 percent of the current workforce, totaling around 450 employees.
"The facilities are not being abandoned," Santucci said. "The business remains viable."
