A $69 million lawsuit was filed on Tuesday against Reno, Nevada based DTEC Ventures by the former owners of Owensboro based industrial hemp processor Bluegrass BioExtracts.
The lawsuit was filed in Jefferson County Business Court by Louisville-based law firm Bingham Greenebaum Doll LLP on behalf of former BBE owners Gerald Edds and Bruce Peters. The suit claims that DTEC, after taking ownership of BBE, located at 931 Wing Ave, “unequivocally failed to honor their obligations under the Purchase Agreement and the Royalty Agreement,” according to the suit.
While the suit lays out a detailed depiction of alleged misdeeds on the part of DTEC, the business history and participation of two of the company's members in the contested sale of BBE, BBE Managing Director Nathan Yates and DTEC Managing Partner Daniel Chartraw, potentially highlight much larger issues than "failing to honor obligations."
According to FBI archives, on Aug. 29, 2013, Chartraw, formerly of El Dorado County, Califonia, was sentenced by United States District Judge Morrison C. England to four years and nine months in prison stemming from Chartraw's guilty plea to wire fraud on Jan. 24. 2013.
"Between January 1, 2007 and November 31, 2011," according to the archives. "Chartraw defrauded many investors through false representations regarding a variety of investments, including: investments in mines, mining and refinery equipment, oil commodities, precious metals concentrate, and multi-million-dollar certificates of deposit. In one instance, Chartraw stole $1 million by fraudulently posing as an owner and manager of a company selling “dore” bars, which Chartraw claimed contained precious metals. Chartraw arranged for an investor to tour the company and managed to limit the investor’s interaction with the company’s true owners and prevent discovery of the scheme. When the investor placed $1 million into an escrow account for the purchase of the dore bars, Chartraw used a forged letter to get the escrow company to send the money to accounts he and others controlled."
An example highlighted in the total 18 counts of wire fraud is described in California court documents as "The Dairy Financing Fraud." This particular "scheme to defraud" as described in court documents, took place in Oct. 2009.
According to California court documents, Chartraw "fraudulently" obtained $200,000 from an investor referred to as W.V.B., an owner and operator of dairies who was in the process of raising financing for the development of new dairy properties to be sold to citizens of the Netherlands.
Chartraw offered to fund W.V.B. with $250 million from a bank that Chartraw claimed he controlled, but required that W.V.B first wire him $200,000 as an advanced fee. W.V.B. acquiesced and sent Chartraw the money which Chartraw, as he did with all money he acquired, according to court records, "used for his own personal expenses."
According to California court documents, Chartraw, through "shell companies" Geneva Capital Solutions, Grande Armi LLC, Geneva Prestige Global Group LLC and Geneva Partners LLC, collected $2.4 million from investors. Aside from his sentence, he was ordered to pay $2.8 million in restitution.
New York-based Yates, who, according to his LinkedIn page, has a law degree from Vanderbilt University, was ultimately appointed as BBE’s managing director when DTEC took over operation of the company.
Like Chartraw, Yates has a history of questionable business practices, according to Bloomberg Businessweek, that began when his startup company, We Roam, later rebranded as WY_CO, allegedly left customers and his own employees stranded in South America after the business shut down. We Roam pitched the prospect of traveling the world while working remotely to young professionals.
According to Yates' LinkedIn page, where he is listed as managing director of BBE, managing director of limited liability company Paul Surf; a New York based surf brand, chief operating officer of Attilah; a Cannabidiol (CBD) marketing and consulting company; WY_CO (formerly We Roam), "grossed $2 million in total revenue in its first year."
Ultimately, it would be Yates and his partner Joseph W. Gomez that would bring Chartraw into the lives of Edds and Peters.
BBE was founded in 2018 by Edds and Peters, who opened the 60,000-square-foot industrial hemp processing facility in 2019. In January 2019, according to the suit, the duo, to mitigate growing management obligations, entered into a management service agreement with limited liability company Omny Management, run by Gomez and Yates. That company, according to the suit, was not registered to do business in Kentucky.
According to court filings, under Edds’ and Peters’ agreement with the management company, Omny was meant to provide “significant roles” in the management of BBE through selling, pricing, distributing and marketing BBE’s products, in addition to the hiring and management of personnel, drafting commercial agreements and representing BBE at industry events. The main focus of the agreement was that Omny would find additional capital needed to carry out the plans of Edds and Peters.
In June 2019, prior to becoming the managing director of BBE, Yates, along with Gomez, introduced the Edds and Peters to DTEC, an entity Edds and Peters believe is owned by Edward Vrab, Todd Owen, Christopher Martin and Leonard Chartraw, according to the suit.
DTEC, according to Nevada-register.com, was incorporated on May 15, 2019, just weeks before the original owners of BBE were made aware of DTEC and their interest in BBE.
According to the suit, Yates and Gomez informed Edds and Peters that they had worked with DTEC in the past and that the company was interested in purchasing BBE and that, “money was not an option.” Gomez informed Edds and Peters that he had no vested interest in DTEC, which, according to the suit, proved to be false.
Gomez, under the Management Agreement with Omny, consulted with DTEC on its purchase of BBE. After purportedly negotiating with DTEC, in September 2019, Gomez and Yates presented the Edds and Peters with a $75 million all asset purchase agreement for BBE, according to the suit.
According to court filings, on Oct. 31, 2019, Edds, Peters and their partners executed a purchase agreement with DTECH requiring that DTECH transfer $35 million to the founders and members of BBE on Dec. 2, 2019.
On Nov. 7, 2019, according to the suit, the original deal went awry when Edds, under the direction of Gomez, was asked to “immediately” fly to California to meet with DTEC members on Nov. 8. Upon arrival, Edds was not met by the owners of DTEC, but a proxy, Chartraw’s son Daniel Chartraw. While not being listed in corporate filings with the Nevada Secretary of State, Daniel Chartraw identified himself as the managing partner of DTEC, according to the suit.
Edds would later realize that the Daniel Chartraw he met in California in November, through observing a video on Chartraw's Facebook page filmed during his incarceration, was the same Daniel Chartraw convicted of wire fraud, according to Edds.
According to the suit, Chartraw, “through performing his due diligence,” informed and convinced Edds that the price of BBE was falling and time was of the essence to “close the transaction.” Chartraw also informed Edds that under the company’s “regulatory guidelines,” DTEC could not provide any advance money for the purchase of BBE. Edds was told that if he did not accept the terms of the new “take it or leave it,” agreement immediately, DTEC would walk away from the transaction, according to the suit.
The suit states that Edds was informed by Gomez and Yates that he should take the deal immediately or risk the survival of BBE. Ultimately the founders and fellow members accepted, not having been informed by Gomez that he was an investor in DTEC or that he and Yates would be appointed as members of BBE once the sale was complete. Edds, Peters and fellow members, at the advice of Gomez and Yates, entered into the agreement.
The suit states that the new royalty agreement required DTEC to immediately create an escrow account and deposit a minimum of $1 million by Jan. 15, $33 million by March 2 and $35 million by May 1. The agreement also stated that DTEC would maintain or preserve the existence of BBE’s operations; pay BBE’s liabilities; maintain the assets and collateral of the business; and honor all existing contracts and agreements of BBE pertaining to the purchase of hemp for the 2019 crop year and comply with the terms therein of each such contract.
Pursuant to the Purchase Agreement, BBE’s assets, including cash accounts in excess of $220,000, were transferred to DTEC in conjunction with the stipulation that all of the equipment and "collateral" stay on site per an agreed upon security agreement between both parties, according to the lawsuit.
None of these parameters were met, according to the suit, and as of Jan. 16, BBE, under the control of DTEC, Gomez and Yates, laid off the majority of BBE’s workforce, ceased operations and has "upon information and belief" been in the process of selling off all collateral property of BBE.
Ultimately, Edds, Peters and the original members of BBE are seeking no less than $69 million in damages, with a 10% default rate until fully paid, a trial by jury as well as all damages pertaining to DTEC defaulting on its agreement.
Yates did not respond to interview requests and Chartraw could not be reached for comment. Visits to the company's offices yielded no results and phone calls to former employees were not returned. Edds declined to comment further due to pending litigation.