New York State has paused sales of millions of dollars of top-selling cannabis vapes and pre-rolled joints amid an investigation into whether they were made with legally approved ingredients produced in the state, according to documents obtained by The New York Times.
In a series of orders issued on April 23, the Office of Cannabis Management, which oversees businesses that grow and sell cannabis in the state, directed dispensaries to remove from their shelves mostly vapes and pre-rolled joints from the companies Stiiizy and mfused, among other products.
The orders offered a window into the cannabis agency’s investigation of companies accused of pumping weed from unlicensed growers into licensed dispensaries, which is illegal. The Times obtained two of the documents through a public records request and another order from two people with whom they were shared.
The strategy of using unlicensed growers, known as “inversion,” undercuts promises that legalization offers consumers a safe supply of cannabis products that can be traced back to local farms. It is a federal crime to transport marijuana across state lines, so legal weed has to be grown and sold in the same state through licensed businesses.
According to the orders, investigators were questioning the origin of cannabis oil that was used to fill the vapes and the accuracy of lab tests that certified all of the mfused varieties as safe. Stiiizy, based in Los Angeles, and mfused, based in Seattle, are two of the biggest cannabis brands in America.
Their vapes were among the 10 best sellers in New York in April, according to Headset, a data firm that crunches cannabis sales numbers. The quarantined products, which are being held in factory warehouses and dispensary vaults, have a retail value exceeding $10 million, according to batch records and retail pricing.
If investigators find evidence of inversion, the products could be seized and destroyed in a recall. In the most severe case, regulators could revoke the license of the processing company that made the vapes and ban the brands from New York. If the investigation finds no wrongdoing, the products could be released for sale.
In a statement, mfused said that it stood by the integrity of its products, while Stiiizy said it was confident the investigation would find no evidence of inversion on its part. Kaycha Labs, a state-licensed laboratory that did the testing for mfused, did not respond to an email seeking comment.
The brands each have contracts with Omnium Health, a state-licensed processing company that makes their vapes in New York. Omnium records reviewed by inspectors with the Office of Cannabis Management, or O.C.M., in connection with an audit on April 7 indicated that the vapes were filled with oil that had been extracted at a site associated with Omnium that hadn’t been approved for processing of the oil, the order said. Officials barred Omnium from using the oil until it could prove it was extracted legally.
An order served on a different processor, Adonis Distribution in Gloversville, N.Y., also froze sales of some pre-rolled joints infused with terpenes, the compounds that give cannabis its smell and flavor, that were not properly logged.
In a statement, Omnium said the situation boiled down to a clerical error.
“The confusion arose from the address listed on the document being Omnium’s corporate address rather than the actual site of extraction,” the company said. “It was confirmed that all extraction occurred at an approved location, which was inspected by the O.C.M. and verified to have proper extraction equipment on site.”
The O.C.M. said in a statement that its investigation was still active, adding that Omnium had submitted a plan for correcting the issues outlined in the orders. The quarantine remained in effect on Thursday.
Thousands of the vapes have already been sold to consumers, particularly around April 20, the date of the unofficial annual celebration of cannabis that is typically the biggest sales day for retailers.
In an email to retailers on April 23, Omnium said the quarantine order also applied to products under the brands Animal, Bodega Boyz, Muha Meds, Smoke and To The Moon.
The quarantine has left the state’s licensed dispensaries in a lurch.
Brandon Carter, a co-owner of Trends in Long Island City, Queens, said that dispensaries place larger orders ahead of April 20, expecting to conduct more sales on the day and as the weather warms. The quarantine has forced them to hold onto weed they can’t sell to customers who are looking for it, he said.
“That’s a lot of extra inventory that people have to sit on that we can’t make any money on,” he said.
At The Flowery on the Upper West Side of Manhattan, a chunk of shelf space that housed mfused’s product display sat empty last Sunday. The brand had been a best seller. Lenox Hill Cannabis on the Upper East Side said the quarantine affected about 15 percent of the store’s inventory.
Wei Hu, a co-owner of Lenox Hill Cannabis, said his store put in a big order for Stiiizy’s vapes and pre-rolled joints after they were released in New York in February. He said he expected the brand to sell well because it was already popular on the West Coast and in the street market. Half the order was sold by the time the quarantine went into effect, he said, but the other half is stashed in a vault.
Customers “are asking for Stiiizy,” he said. “They’re wondering why it’s not on the menu.”
Ashley Southall writes about cannabis legalization in New York.
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