Inside the Omnium scandal rocking New York’s cannabis industry

An alleged product inversion scheme crafted in Long Island by cannabis extractor and processor Omnium Canna has sparked a cascade of challenges for other businesses in New York’s evolving billion-dollar cannabis market. 

The domino-effect is widespread and could be lengthy, as the state’s Office of Cannabis Management (OCM) on October 20 ordered a statewide recall on an unknown amount of products tied to Omnium and several in-house and affiliated brands.

Some retailers are clearing their shelves of products in question, placing them in quarantine, as affiliated brands initiate damage control in the aftermath of the scandal. And some brands tied to Omnium have seen sales crater the last few months and have yet to recover.  

Meanwhile Omnium has until November 3 to respond to OCM charges claiming the company leased its facility to unlicensed brands to produce, sell and/or distribute unregulated cannabis products to retailers, which then sold them to consumers.

The illegal backdoor channel, known as inversion, prompted OCM to seek the revocation of Omnium’s processor and distributor licenses, as well as civil penalties and the destruction of “unlawfully produced cannabis products.”

Omnium did not respond to Cultivated inquiries and attempts to reach co-founder Howard Hoffman were unsuccessful. Longtime industry lobbyist Joe Rossi told Cultivated that inversion — a known secret in the cannabis space — is an existential challenge for the industry and its most serious public health issue. 

“This is racketeering, it's trafficking and it's unfair to the New York State processor that's playing by the rules, following the letter of the law,” said Rossi, chief strategist for Green Standard Alliance, a consumer advocacy group that issued a white paper last month on the safety concerns of inversion and its threat to erode consumer confidence in regulated markets.    

While questions around the product recall and further investigations remain unanswered, Cultivated has learned of several new developments tied to the scandal, including:

OCM, which has been criticized by license holders for its lack of transparency and guidance amid the turmoil, declined to respond to specific questions from Cultivated related to the recall and other potential investigations.

Instead they issued this blanket statement to media outlets and asked Cultivated to publish it entirely. 

“The Office of Cannabis Management’s top priority remains ensuring that every product sold in New York’s legal market is safe, tested, traceable, and produced according to regulatory structures. There are no known health or safety concerns associated with the recalled cannabis products at this time. This recall is a precautionary regulatory action tied to licensee compliance violations — not to product quality or contamination issues,” the statement reads.

The OCM said Omnium had to formally respond by November 3, and that the agency will “take any additional actions” needed to protect consumers.

Oregon-based Grön, which makes and sells infused edibles, is disputing claims in a recent New York Times article that it engaged in an improper deal with Omnium, an alleged arrangement first inferred by OCM. 

Despite several attempts from its attorneys and phone calls into OCM, there has been no communication with the regulatory agency as of this writing, President Draper Bender said.

“They haven't notified us whatsoever,” Bender told Cultivated in an interview last week.

The brand entered the New York market in April 2024 under a white labeling agreement with Omnium, Bender said.

In the interim, Grön representatives have been contacting more than 200 dispensaries, pleading with them to keep their products on the shelves.   

“Some of our retail partners have been understanding, but a vast majority of them have not,” Bender said. The company is threatening legal action against OCM and other state regulators if the situation remains unresolved.

“We have the paper trail to prove that we've been in compliance,” Bender added. “If they don't back down, we will move with swift action to ensure that this immediately gets some sort of temporary restraining order because this recall will affect our business in a way that is detrimental.”

Other brands tied to using Omnium’s facility have fared worse since New York regulators ordered the processor in late April to quarantine 284 different products, including 200 from a collaboration with Los Angeles-based Stiiizy and Mfused, a cannabis and vape technology company based in Scottsdale, Arizona, according to its LinkedIn page. 

The Travel Agency, which operates four stores in the state, embargoed all products tied to Omnium and its partners following the April order, according to co-founder and CEO Paul Yau.

Some brands haven’t returned.

“It does really hurt those brands when they're off the shelves for a period of time when consumers are looking for those products,” Yau told Cultivated. “And if those brands and products are unavailable, consumers go to other brands, and then it's challenging to win them back.”

Some brands, like Grön, turn and dosist have made a comeback. “But Stiiizy and Mfused haven't returned to our shelves as yet,” Yau said.

Sales data from Seattle-based Headset, which provides market insights and supply chain software, appears to validate a similar conclusion.

“The brands that got quarantined or were fully or partially reliant on Omnium completely had the floor fall out from under them around mid-April,” Headset analyst Mitchell Laferia told Cultivated. “Through September many of the affected brands have yet to even gain back half of their previous weekly sales volume, indicating that brands are still feeling the disruptive effects months later.”

Stiiizy severed all ties with Omnium and now operates independently at a licensed facility in Sidney, New York, according to a statement. MFused did not respond to Cultivated inquiries via email and through social media channels.    

The Omnium fallout has also extended to vendors.   

In February StupidDope, a New York-based full service agency, put Hoffman and Omnium on blast, publishing a notice on its website that the parties, along with Omnium’s WaaHoo brand and other affiliates — including a cannabis dispensary on the Shinnecock Nation on Long Island — owed over $200,000 in unpaid invoices. 

The work, according to StupidDope CEO and founder Shane Breen, included:

Breen told Cultivated his firm was paid roughly $30,000 for services, with the last payment in mid-2023.

“We just kept getting strung along,” he said. “You can't go around treating people like that. They get what they deserve.” The company has looked into potential litigation, but the time and resources dedicated to trying to recoup losses may be futile.

It appears Breen and his firm are moving on from this unfortunate chapter, recently entering the New York market with its own cannabis brand Silly Nice, which is Black and veteran-owned. 

The incident taught Breen a few tough business lessons along the way.

“Do your due diligence,” he said. “Don't do anything without an agreement first. Don't do anything on a handshake. People's words don't mean anything.”

Story edited by Jeremy Berke.