SF's most famous pot brand COOKIES accused of fraud, millions in kickbacks

SF's most famous pot brand COOKIES accused of fraud, millions in kickbacks

The Bay Area’s most famous cannabis brand COOKIES has been accused of fraud and orchestrating millions of dollars of financial kickbacks to its executives, according to a pair of lawsuits filed earlier this year.

The executives of Cookies, a pot brand founded by Bay Area rapper Berner, were accused of “self-dealing” and using the famous pot brand to “bully others into paying them millions of dollars in personal benefits and kickbacks,” according to a lawsuit filed by a group of Cookies investors in February in Los Angeles Superior Court. 

A second Los Angeles lawsuit filed in early January by a different group of business partners accused Cookies executives of negotiating kickbacks on the sale of millions of dollars of delta-8 THC vape pens.

Berner, whose legal name is Gilbert Anthony Milam Jr., defended himself in an Instagram video posted last week, claiming that lawsuits were filed by a group of “predatory investors” attempting to take his company from him. Berner is currently the CEO of Cookies.

“These guys have made extremely false, harmful, damaging claims about myself that are completely just not true. And I really look forward to the day in court that we can prove that these claims are false,” Milam said.

A representative for Cookies declined to comment.

What is Cookies? 

Cookies is the brainchild of Milam, a rapper who was raised in San Francisco and released his first hip-hop album in 2007. He brought his experiences in the city’s underground cannabis scene to his music and founded his own cannabis and clothing line Cookies in the early 2010s. The brand takes its name from the Girl Scout Cookies cannabis strain, which Milam helped make into one of the world’s most recognizable varieties of pot.

The Cookies name has become synonymous with California’s high potency and flavorful indoor cannabis. The company has followed its Girl Scout Cookies success with other strains containing high levels of THC, the most common intoxicant in pot, like Sherbet, Gelato and Apples and Bananas. 

Milam’s pot brand has gone on to outshine his music, with dozens of Cookies dispensaries and operations in legal cannabis markets across the country. The Cookies clothing line has opened stores across the world, from New York City to Thailand. In 2022, the hip-hop mogul was on the cover of Forbes magazine, and in a separate story, he estimated his Cookies business was worth $1 billion.

Vape lawsuit

In January, a company called Cookies Retail Products (CRP) sued Cookies SF, which Milam is the CEO of, for more than $38.5 million in damages. CRP alleges it signed a 2021 contract to sell Cookies-branded delta-8 THC vape pens, but the deal turned into a “power struggle” between the two firms that left millions of vape pens expired.

CRP says in the lawsuit that Cookies SF pressured the company to buy vape pens and other supplies from vendors who had a “grave conflict of interest” where Cookies SF employees were getting personally compensated for the orders without CRP’s knowledge.

CRP said the contracts repeatedly failed to deliver orders on time and delivered defective vape products with leakage issues that ultimately cost CRP $200 million in lost orders. The lawsuit also alleges that Cookies SF used CRP’s inventory as a “personal piggy bank of products” and that the company was left with millions of dollars in unsold “vape cartridges, blunts, hemp smokes, 1gram Vaporizers, Gummies, and Dab Liquids.”

CRP is owned by a series of shell companies with unclear ownership. Attorneys representing CRP did not respond to emailed questions for this story. The lawsuit’s next court hearing is scheduled for June 22 in Los Angeles.

Investors’ lawsuit

In February, a group of investors who say they own more than 10% of the Cookies brand accused Berner and other company executives of using the brand to engage in “self-dealing” and to “strongarm and bully others into paying them millions of dollars in personal benefits and kickbacks.” The lawsuit further alleges that Cookies staff used threats of physical violence against other businesses.

The lawsuit, which was filed by a company owned by Ned Fussell, a cannabis entrepreneur who is also a co-founder of Sonoma County’s CannaCraft pot business, takes direct aim at Milam, accusing the rapper of accepting more than $1 million in jewelry as a financial kickback from a partner company and for using the company resources to support a “lavish lifestyle.”

The lawsuit also accuses Cookies SF of running a series of kickback schemes where contractors with relationships to Cookies’ executives were given inflated contracts. Cookies uses a construction company owned by an executive’s brother that charged Cookies SF twice as much as other contractors would, according to the lawsuit. The suit also accuses Cookies of paying hundreds of thousands of dollars to a software company partially owned by a company executive with “no discernible benefit.”

The investor’s lawsuit also accuses Milam and his colleagues of illegally selling shares in the company worth $23 million in order to dilute the power of existing investors. Earlier this month, Cookies announced the sale of its Series A round of funding, which it described as the company’s “largest equity raise” at its highest valuation. At the time, Cookies declined to tell SFGATE how much money the company raised. 

The lawsuit seeks to remove Milam and other executives from the board of directors. The next hearing is scheduled for June 28 in Los Angeles.