Former Bluegrass BioExtracts owner Gerald Edds, on behalf of his partners, filed a $69 million lawsuit Tuesday against Reno, Nevada-based limited liability company DTECH Ventures.
The suit, filed in Jefferson County Business Court by Louisville-based law firm Bingham Greenebaum Doll LLP, claims that DTECH, after taking ownership of Owensboro-based BBE, an industrial hemp processing facility at 931 Wing Ave., “unequivocally failed to honor their obligations under the Purchase Agreement and the Royalty Agreement.”
According to court documents obtained by the Messenger-Inquirer, the suit alleges that DTECH failed to pay Edds, business partner Bruce Peters as well as other “members” listed in the suit, a “single penny,” of the selling agreement and instead began, after acquiring all of BBE’s equity interests from “Members,” to “divert BBE’s assets, including cash and equipment” in violation of the agreed-upon purchase agreement, according to the complaint.
Two months after the agreement was made, DTECH shut down operations at BBE and failed to honor BBE’s contracts with contractors, suppliers and failed to pay existing employees, according to the lawsuit.
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 Edds and Peters, to mitigate growing management obligations, entered into a management service agreement with limited liability company Omny Management, run by Joseph W. Gomez and Nathan D. Yates. That company, according to the suit, was not registered to do business in Kentucky.
New York-based Yates, who was ultimately appointed as BBE’s managing director, found himself in hot water in 2018 after his company, We Roam, a start-up offering young professionals the opportunity to work remotely while in an international jet-setting adventure over the course of a year, allegedly left customers and his own employees stranded in South America, according to Bloomberg Businessweek.
According to court filings, under Edds’ and Peters’ agreement with the management company, Omni 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 Omni would find additional capital needed to carry out the plans of Edds and Peters.
According to the suit, in June 2019, Yates and Gomez introduced Edds and Peters to DTECH owners Edward Vrab, Todd Owen, Christopher Martin and Leonard Chartraw. Yates and Gomez informed Edds and Peters that they had worked with DTECH 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 DTECH, which, according to the suit, proved to be false.
Gomez consulted with DTECH on the purchase of BBE in accordance with Omni’s agreement with Edds and Peters. In Sept. 2019, Gomez and Yates presented Edds and Peters with a $75 million all asset purchase agreement for BBE from DTECH, according to the suit.
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 dream deal went awry when Edds, under the direction of Gomez, was asked to “immediately” fly to California to meet with DTECH members on Nov. 8. Upon arrival, Edds was not met by the owners of DTECH, 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 DTECH.
According to the suit, Chartraw claimed that “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,” DTECH 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, DTECH would walk away from the transaction.
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 DTECH or that he and Yates would be appointed as members of BBE once the sale was complete.
Ultimately Edds, Peters, David and Rebecca Eggers, Rick and Julie Hobgood, Eric and Abby Edds, Adam and Elizabeth Becker, William and Nancy Harrison, Ed and Cindy Sheriff, Steve and Janella Fulkerson, Jerry and Linda Maggard, and Charles Jr. and Bobbi Mann, at the advice of Gomez and Yates, entered into the agreement.
The suit states that the new royalty agreement required DTECH 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 DTECH would carry out such acts as 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.
According to the lawsuit, none of these parameters were met, and as of Jan. 16, BBE, under the control of DTECH, Gomez and Yates, laid off the majority of BBE’s workforce, ceased operations and has 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 DTECH defaulting on its agreement.
Yates did not respond to interview requests and Edds declined to comment due to pending litigation.
Jacob Mulliken, 270-228-2837, firstname.lastname@example.org