Dubbed the "Uber of weed" in 2016, the Eaze delivery app was a hot commodity with $13 million funding, as reported by Forbes, "the highest-funded start-up in the history of the cannabis industry, as well as the fastest-growing one."
Now, the company's former CEO Jim Patterson is about to be charged in New York with bank fraud that occurred while he led Eaze from 2017-2019.
Keith McCarty founded Eaze in 2014. He previously worked at Yammer where he met Jim Patterson. The two teamed up for a while at Eaze, but by the end of 2016 McCarty surprisingly stepped down and was replaced by Patterson as CEO.
At the time, Eaze issued the statement: “Jim has a proven track record of building innovative technology products and has an acute understanding of the cannabis industry. His management background and technology expertise make him uniquely positioned to lead Eaze during a period of rapid industry growth. As our company expands, Jim has the experience to lead us through our next chapter, and we cannot wait to see where he takes us next.”
During the next two years, Eaze began to rack up big numbers thanks to the new adult-use market in California. But behind the scenes, Patterson and at least two other people allegedly began to commit bank fraud - in this case, "by tricking banks into processing $100 million worth of cannabis credit card payments," according to Manhattan federal prosecutors, as reported by Law360.
In October 2019, Patterson was removed as CEO and replaced by Rogelio Choy. This happened the same day 35 other staffers were laid off. Choy said about Patterson: "I want to thank Jim for leading us through the formative years and the dawn of legal cannabis in California."
Eaze had been embroiled in a law suit with rival Herban Industries who claimed Eaze had "gained an unfair advantage through an illegal payment processing scheme that routed transactions through European shell companies."
Eaze's efforts to have the suit dismissed failed in September, but by January the parties agreed to mediation.
Now comes the New York case, in which Eaze has yet to be directly charged. Patterson will join two other defendents, Ruben Weigand and Hamid Akhavan, who are "accused of conspiracy to commit bank fraud in a 'transaction laundering scheme,'" when he's formally charged on February 19.
Patterson is expected to plead guilty. The trial begins March 1.