Folium Biosciences Colorado: Stock hiking, cutting corners, sidestepping regulatory requirements & strong arm tactics
Folium Biosciences, based in Colorado, is one of the US’s largest privately owned CBD processing companies. As the demand for CBD has risen from many sectors of the US & international economy over the last 36 months, so, it seems, has the desire to process business without the normal checks and balances.
After a CLR story published last month about owner , Kashif Shan, further irregularities and questions about Folium’s products and operational management have come to light.
CannTrust was a wake up for the regulated Canadian market will Folium be the same for the USA as 2019 draws to a close. Colorado has long been regarded one of the the US’s better state markets for efficient compliance and good regulatory management by state and local authorities.
We ask, after the following revelations detailed below, if in the first 2020 sitting, CO legislators have to go back to the drawing board and effect a stricter regulatory and compliance regime than the state currently has in play.
Teri Buhl reports
Formulating Folium Finance: Australis Stock Hiked after Misleading Folium Announcement
Colorado based Folium Biosciences, run by Kashif Shan, teamed up with Scott Dowty of publicly traded Australis ($AUSAF), to announce the launch of Folium Finance, April 2019.
Australis is a U.S. based spin off of Canadian marijuana grower, Aurora, with a strategy focused on investing in and acquiring cannabis related companies in the U.S.
A press release issued by Folium April 3, 2019 said Dowty had served as a strategic advisor to create Folium Finance, a collection of financial products and services designed as a new means for cannabis start-ups to get banking services from non-traditional banks. Except, according to two senior Folium employees involved in the transaction Australis at no time had anything at all to do with the creation of Folium Finance.
The press release was issued by Folium, not Australis, but contained within it, this quote from Australis.
“Our growing relationship with Folium Biosciences provides Australis and our brands access to the true global leader in the CBD space,” said Scott Dowty, CEO of Australis. “We firmly believe Folium Finance’s impressive and complete suite of financial service solutions is the industry game-changer.”
Australis stock price which had been trading around $.70 jumped to $1 $USD over two weeks after the press announcement. The sole purpose of the April press release was to announce the launch of Folium Finance.
Australis is listed on the Canadian Stock Exchange and was up-listed to the OTCQB earlier this year to trade on a U.S. based trading system called OTC Markets . The stock currently trades around 40 cents $USD.
Folium Finance was the brain child of Florida lawyer, Craig Brand, who had moved to Colorado to become the General Counsel of Folium Bioscience.
Attorney Brand had an equity interest in a Loveland, Colorado hemp farm, called Space Cowboys before he became Folium’s general counsel. Brand also runs his own law practice that covers criminal and civil litigation under the business name, The Brand Law Firm with the Cannabis practice called Ganja Law. According to people who have worked at Folium it was Brand, with the help of a former business development executive Dale Takio that ushered through the approval of Folium Finance by teaming up with a company called CannaSecure Alliance Partner. When John Schilhab, the head of CannaSecure, was contacted by Cannabis Law Report he said he has never met Scott Dowty and “didn’t know the man.”
Dowty has refused to respond to multiple emails about the alleged misleading press release or what his exact role was at Folium Finance. When Folium was asked about the press release a local Colorado Springs lawyer responded on behalf of the company threatening legal action if CLR wrote anything about Australis and Mr. Dowty’s relationship with Folium it could be considered putting the company in false light . The law firm also wouldn’t answer any detailed questions about Dowty or his CFO Michael Carlotti‘s exact role at Folium Finance. The attorney, Justin Bailey of Sanders Law , did respond by email saying the transaction was private and as a result “the details CLR were seeking were protected by company confidentiality rules”.
According to two former Folium employees internal rumblings at the company this past spring were that Kashif Shan had stock or discounted warrants in Australis and the press release Folium wrote was used in the hopes of moving the stock price up. Cannabis Law Report has not been able to verify if Shan holds any stock or equity in Australis and Shan has refused to respond to any emails or calls for comment with regard to inquiries about Australis.
CLR has previously reported on Shan being accused in a lawsuit of financial misconduct involving moving money out of Folium into family bank accounts and not paying investors promised dividends or employees their equity. Since then Folium and Shan have been sued by two more former staffers at Folium in Colorado state court over alleged lies about equity ownership to induce top employees to work at Folium. The individuals suing Folium and Kashif Shan are: Dale Takio, Juanita Ramos, & Brandon Young.
Folium indicates it employs around 200 people and is a vertically integrated cannabis company meaning they own, both, the farms that supply hemp and the processing facility to create what they label as THC-free wholesale CBD. This means the company sells CDB oil and other related products to retailers who then label and brand as their own products.
A local press story (* the story is factually wrong because they report Diamond A owns Folium) has reported that a farm growing crops and hemp called Diamond A Farms out of La Junta and Rocky Ford, Co is the owner of Folium Biosciences. Folium sales people interviewed by CLR believed Diamond A is owned by Folium and were even asked to tell potential wholesale customers the Diamond A farm locations were Folium farms when clients came to visit the facilities. Folium’s website has a section talking about “our farms” but doesn’t list what the name of the farms are or provide links to their locations.
A records search in the Colorado government database shows the required industrial hemp grower certificate is registered to Diamond A Farms. Colorado corporate registration records do not list an owner of Diamond A Farms only an agent named , Deborah L Bayles, who is a partner of local law firm out of Greenwood Village, Co called Stinson Leonard Street LLP.
A subsequent search in the U.S. government federal vendors database that list companies approved to bid for government contracts shows Diamond A Farms is actually registered as a minority owned business with a Dianne Chavez as the owner. A minority owned business has to have a minority person (a women in this case) own at least 51% of the company to qualify for this status. Dianne Chavez is the wife of Phillip Chavez who was listed as the original owner of Diamond A Farms before Folium showed up to grow hemp.
Bill von Gremp, a California M&A deal broker, who worked on the sale of a specialized hemp with a unique CBD to THC ratio from a Canadian company to Folium for their proposed Canada processing plant in Medicine Hat told CLR,
“Folium told us they wanted out of the grower business.
We tried to sell them the farm but Folium only wanted to buy the grown product.”
Von Gremp agreed to negotiate with Folium on behalf of the Canadian company, including dealing with Kashif Shan, after he was introduced to the company by NBA hall of famer Rick Barry von Gremp said the deal isn’t expected to go through now and he had concerns about Folium’s promise to share a percentage of profits which was part of the deal negotiations.
Part of Folium’s ongoing pitch and advertising to wholesale clients is that the company has a propriety processing method that removes all the THC from the hemp.
Cutting Corners, Sidestepping Regulatory Requirements
According to over half a dozen former Folium employees, interviewed by CLR, mis-truths are simply party of the company’s corporate culture.
This includes buying hot hemp, meaning cannabis with THC above the Federal mandated minimum % , from a California grower in August 2018 when Colorado hemp supply was unavailable to Folium because of strained relationships with local growers who had experienced slow or non-payment for goods by Folium, according to two former Folium employees.
According to two former Folium sales people involved in the California transaction Kashif Shan (aka Kash) asked a Folium sales employee to locate and negotiate purchase of some out of state (CO) hemp. Folium would be unable to meet sales commitments if they could not get access to hemp stock .
The Folium salesperson who has asked to not be named for fear of retribution said he / she helped broker the deal via a women named Kristyne Croce who was a hemp broker he / she met at a hemp/cbd Las Vegas conference called Super Zoo earlier that year. When reached by phone Kristyne Croce admitted to CLR that she brokered hemp for Folium but said she did not believe she brokered hot product. Croce said the transaction was private and would not explain further details about the deal.
This salesperson was told by Croce at the conference the product to be purchased had already been tested at the Oregon farm and had the legal limit (.3%) of THC to be considered hemp. When the product arrived at the processing plant in CO, and Folium subsequently tested it, the flower came up as “way above” the legal THC limit; meaning the company had just purchased adult use cannabis and transported it across state borders . Folium subsequently cancelled the check that secured the deposit for the payment telling the Oregon farm they would be unable to use the product.
But then, according to two former Folium sales employees familiar with the deal, the cannabis was used anyway to process CBD oil and subsequently sold.
Folium Biosciences is a Colorado headquartered company specializing in the cultivation, extraction, and manufacturing of hemp-derived bulk CBD ingredients and finished products. We are the largest known fully vertical cannabinoid extractor and producer in North America, shipping wholesale CBD products including: Broad Spectrum hemp oil (with 0.0% THC), water-soluble CBD powder, water-soluble CBD liquid, nano CBD, and finished goods throughout the United States and much of the world. Our emphasis on research, product development and clinical science is reflected in our state-of-the-art extraction processes and advanced formulations, resulting in multiple pending patents.
Folium’s General Counsel, Craig Brand, told Cannabis Law Report this story just wasn’t true. But according to the former sales person who helped broker the deal and another sales person who heard the conversation, a member of the legal team was very aware of the processing and acceptance of the “hot product” and told the sales person he’d take care of the non-payment issue and to stop communication with the farm that grew the hot product.
After Cannabis Law Report published our first story on the alleged problems at Folium , a former graphic designer at the company, based out of the Colorado Springs office came forward to inform CLR that they, as a designer employed at the company, had been asked to doctor Certificate of Analysis reports by Folium management.
These reports / forms known as COA’s are used by Colorado CBD processors to prove to retail clients that the CBD is the percentage level the company says it is and that the THC level is the required zero %.
The former employee, said he / she was unaware of how the doctored reports were used after they were passed onto his / her superiors.
According to multiple Folium staff who spoke with CLR the person who requested the changed CAO reports was Jenna Lubenicki V.P. of operations. Lubencicki, when reached on her cell phone denied the accusation and demanded to know the name of the whistleblowers.
A current wholesale client, Holistic Hounds, in Berkley California, was contacted by Cannabis Law Report and said they had never had any THC level problems with Folium because they did their own third party testing once the wholesale product was received.
Additionally a former NBA hall of famer who also acts as a brand ambassador for Folium, Rick Barry, told Cannabis Law report when reached on the phone that he has “never had any problems with Folium’s products”. Barry did not confirm if he had done any third party testing on the product, on his own.
But, a former Folium sales person, Jean Paule Fekete , said he knew of at least one client that did third party testing and the CBD level on product received from Folium was much lower than the level she had been promised. As a result Folium eventually returned the client’s money after multiple complaints.
Former Folium employees have also informed CLR that fudged CBD or THC levels were the least of their worries when it came to the company’s day to day operations.
Instead, their real concern was Folium’s management’s lack of willingness to follow the necessary regulatory requirements to create safe process and disposal of chemicals used to create CBD products.
CLR has learnt Folium has already suffered two explosions at their processing plant which included a 911 being called on the night of July 23, 2017, according to an internal company email chain obtained by CLR that included Kashif Shan. One explosion involved an oven, the other a refrigerator, according to counsel Craig Brand.
According to an email obtained by Cannabis Law Report from the July 2017 event, Folium staff were informed that the incident would create a delay in the availability of their product because 20 kilos had been contaminated but the email didn’t inform staff of the severity of the explosion. The email did promise Folium would work on safety conditions for staff.
In July 2017 an email from a member of the Fire Protection Engineer team of the Colorado Springs Fire department, Steven Smith, sent to Folium showed serious concern was expressed by the CO Fire Dept because they had been informed Folium was housing 3000-5000 gallons of ethanol without the required permits.
Two former Folium employees involved in operational matters at the company told CLR they were asked on more than one occasion to rent trucks and move the ethanol to a friend’s house when the fire inspectors or OHSA came through the Colorado Springs plant.
This, we have learned, happened regularly throughout 2017 and 2018. Additionally a former driver for the company said he / she was asked to move dangerous chemicals, without relevant paperwork, by Folium executive, Brad Jones, but had eventually refused to comply with requests because the company was not licensed to transport chemicals.
The driver also added that Folium’s Rocky Ford location was used to house the chemicals the company wanted to hide from inspectors.
In an exit letter obtained by CLR one employee wrote to Folium executives in 2018 highlighting the company’s modus operandi for transporting regulated chemicals
“I’ve been instructed on many occasions to move thousands of gallons of ethanol in rented trucks, off site, in preparation for Colorado Springs Hazmat/Fire and OSHA inspections.”
A review of the Colorado OSHA website that tracks inspections, complaints and violations within the state’s regulated cannabis sector show that Folium has been fined a number of times over the last three years.
In 2018 the fines were listed as ‘serious’ and involved problems with chemicals among other safety issues in the processing facility. This summer (2019) the Colorado division of OSHA had to go to federal court and get a warrant to enter the facility after attorney Craig Brand denied their entrance on a surprise inspection, according to the warrant application. The warrant listed over a dozen serious concerns that related to employee safety. David Nelson, a manager at OSHA, wrote in the warrant,
“Employees are exposed to chemical and fire hazards due to inadequate storage, handling, use, and clean-up of flammable liquids, such as hexane.”
Attorney Brand told Cannabis Law Report he didn’t allow the OSHA inspection because he wasn’t on the premises at the time and was surprised they wanted to review an area that held what he called “our propriety equipment”.
OSHA subsequently obtained warrant approval and entered the facility over a week later. As recently as September 30, 2019 Folium has settled fines that OSHA listed as serious concerning the control of hazardous energy and other safety issues.
Folium CEO, Kashif Shan would not answer any questions about the OSHA inspection or the fines when approached by CLR.
Attorney Brand is no longer with the company and said he was not aware of the September 2019 fines.
Strong Arm Tactics to Silence Whistleblowers and Competitors
“Intimidation” is the word used by former employees when talking about how Kashif Shan operates the company.
Over a half a dozen former Folium staff interviewed by Cannabis Law Report said false internal charges, from being accused of taking a range of illegal drugs at work, threatening other employees during arguments, and sharing trade craft with competitors, were made up about them when Folium management wished to move them out of the company’s employ after they made specific complaints about operational matters.
This approach to HR management was seen as an avenue for Folium, as a company, to avoid unemployment tax payments. It is also alleged that Folium attempted to make some staff, leaving the company at their own will, sign NDA’s with a promise of only a few weeks extra payout. As a result Cannabis Law Report is not currently in a position to name former Folium employees interviewed for this profile.
Additionally, we have learnt, when the Folium’s former head of sales, Ryan Lewis, left the company to launch his own bulk business sales CBD company called Global Canabanoids in January 2018. There was, we learn, an aggressive pursuit by Folium management to gather “dirt” or information about Lewis to build a lawsuit, according to an email written by attorney Craig Brand and obtained by CLR. Lewis did subsequently file an arbitration claim against the Folium but it was settled out of court and the settlement was not made public. Internal documents obtained by CLR show Lewis had been given 7 percent equity in Folium when he came on as a new employee.
Ryan Lewis, Chief Business Developer of Global Cannabinoids, talks about the emerging markets for CBD and hemp-derived products.Global Cannabinoids is a high volume producer and distributor of bulk and wholesale phytocannabinoid-rich (PCR) industrial hemp—naturally high in CBD, CBG, CBC, CBN, CBDA, and terpenes.
But Kashif Shan’s negative reaction about Lewis leaving and taking Folium clients with him went much further, much much further. The following allegations investigated by Colorado Springs Police read more like a Scorsese movie plot line than the machinations of a CBD processing plant and white labelling outfit.
According to three individuals who either worked at the company or were employed on a consulting basis, they all confirm that they heard first hand from a Folium executive of an attempt in the summer of 2018 to hire a person and pay a six figure sum to kill Mr Lewis.
Cannabis Law Report has spoken with a lawyer who had verified that the Colorado Springs Police department investigated the case but no charges were brought.
It’s unclear if anyone at Folium was ever able to actually hire a person to undertake the murder for hire or if the offer was made in the heat of the moment anger and not intended to be carried out. Kashif Shan would not respond for comment about the alleged murder for hire offer. Former Folium counsel, Craig Brand, told CLR that the claim was “ridiculous”. Henry Baskerville Ryan Lewis’ lawyer called the Colorado Springs Police Department when he heard about the murder for hire plot and asked if the CO Springs Police Department were investigating. The officer said yes but would not comment to Baskerville on who they were investigating.
Cannabis Law Report also learns that Shan told a cannabis podcast in a rare interview in January 2019 that prior to Folium he was a tech entrepreneur in San Francesco.
But CLR has not yet discovered after months of relevant research the name of this technology company. Also we have been unable to locate where this “tech”company was based and what work he and they undertook.
A separate USA court records search shows that Shan was president of a real estate services company prior to the 2008 financial crisis in San Jose, California. The company, Aidan West Financial Group, and Shan filed for personal bankruptcy as a result of the financial crisis. Court records show the trustee for the company had to file a claim of fraudulently transference against the company saying Shan allegedly moved assets out of the company prior to the bankruptcy. The claim was eventually settled.
Editor’s note: In the reporting and research for this story Teri Buhl was repeatedly threatened over the last two months when trying to reach current Folium employees to get their response for comment about accusation or their misconduct saying they would report her to the local police for asking questions. Buhl ignored their threats.
This week Buhl was served with a lawsuit (prior to story publication) claiming defamation for calling Folium staff for comment and conducting journalistic research. Law360 – a US trade publication for Lawyers wrote about the attempt to silence Buhl before the publication of this story
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I’m a professional financial investigative journalist who has written for the Greenwich Time, Hearst CT Newspapers, Forbes Magazine, Fortune.com, The Atlantic.com, New York Magazine, New York Post, Trader Monthly, Housingwire, ML-Implode, The Business Insider, Long Island Business News, Dealbreaker, New York Observer, Bitcoin Magazine, DealFlow Media, SIRF.org and more. For the last five years I have been a contributing reporter for Market Nexus Media who publishes a financial trade publication called Growth Capital Investor.
I earned my breaking/investigative news chops reporting during the financial crisis in 2008 for the Sunday edition of the New York Post. I was one of the first to report on the missteps at IndyMac that lead to government investigations and lawsuits against the banks founders. Caught hedge funds like Carrington Capital abusing investors without disclosing conflicts of interest with senior RMBS bond holders; they were sued by Wilbur Ross for Civil RICO. I exposed Bear Stearns misleading their own investors and monoline insurers on the quality of the loans in their mortgage-backed securities, which led to a fraud lawsuit against JP Morgan/Bear Stearns and the $13 billion settlement with the DOJ in 2013. Since 2010 multiple Wall Street firms, that my reporting warned about first, have been [JP Morgan, SpongeTech, Security Savings Bank, SAC Capital, Palm Beach Capital Management, New Stream Capital, NIR Group/Cory Ribotsky, Bear Stearns RMBS Traders, Mike Perry IndyMac CEO, Steven Muehler and the Nanocap MarketPlace, Barry Honig and The Frost Group] investigated or charged for financial violations by the FBI/SEC/State AG or shut down by bank regulators.
The Huffington Post named me the number three most dangerous financial journalist for being willing to challenge the establishment and inform readers best. I’m working on trade-marking “Smashmouth Journalism”
Read More About Teri’s Work At: https://www.teribuhl.com/about/