Chicago City Wire

Jon Loevy, founder of the Chicago plaintiffs’ law firm of Loevy & Loevy, is on the receiving end of lawsuit alleging that he and his cousin, Michael Kanovitz, defrauded Advanced Flower Capital Inc. (AFC), a Florida-based institutional lender that specializes in financing cannabis businesses. 

Loevy & Loevy describes itself as an award-winning civil rights law firm working for justice, accountability, and transparency. In March, a federal jury awarded two Loevy & Loevy clients $120 million in the largest wrongful conviction payout in U.S. history. 

The lawsuit—filed on April 10 in U.S. District Court for the Southern District of New York— alleges that through Loevy and Kanovitz's business, Justice Grown, engaged in a criminal enterprise and cites the1970 Racketeer Influenced and Corrupt Organizations Act (RICO). 

But Loevy and Kanovitz told Law360 in a statement that the RICO lawsuit "is a phony case invented by AFC's management in retaliation for our Bossidy lawsuit, [filed in March in U.S. District Court in New Jersey], showing AFC's $250 million malfeasance. AFC's stock is down almost 50% since then and the managers are desperate to falsely discredit us and spin the dire situation to their investors."

The Bossidy complaint claims that Bossidy was appointed by AFC, and he  "has done a disastrous job."

"For example, Justice Grown’s cultivation sales are down by more than 50%, and the inventory backlog has increased five-fold," the complaint says. "Justice Grown employees have repeatedly complained to AFC Gamma about these and other injuries that Bossidy was inflicting on the company, but AFC Gamma has insisted that Bossidy remain in a place and that Justice Grown do nothing to interfere with his decisions even as the damages from his mismanagement have piled up." 

The RICO complaint alleges that “defendants have knowingly and intentionally made, or caused others to make, false and materially misleading statements to AFC, including in loan documents, compliance certificates, and draw requests. These false and misleading statements were crimes of mail or wire fraud in violation of 18 U.S.C. §§ 1341 and 1343 and money laundering in violation of 18 U.S.C. § 1957.”

The complaint cites two projects, one in New Jersey and another in Pennsylvania. Under the New Jersey project, the lending firm in April 2021 entered a credit agreement with Justice Grown affiliates to fund up to $46,150,000 to finance the cultivation and processing of cannabis.

Then in September 2021, AFC entered into a second agreement to finance a cannabis facility in Pennsylvania.

“Problems began as soon as the ink dried,” the complaint states. “The JG Borrowers defaulted on the Credit Agreement multiple times—failing to use funds as required, transferring assets to other Loevy and Kanovitz-owned entities that were not parties to the Credit Agreement, failing to meet the financial covenants, and accruing substantial unauthorized liabilities.”

AFC says that Justice Grown is “nothing more than a network of failing subsidiaries playing musical chairs with their cash to suit Defendants’ desires. Defendants have used AFC funds lent to Justice Grown as if those funds were deposits in their personal piggy banks. Defendants ultimately transferred nearly $20 million dollars from the Projects’ accounts to other Loevy and Kanovitz-owned entities, including Justice Grown entities located in Illinois, Massachusetts, Michigan, and California, and a management company in which Loevy and Kanovitz own nearly 90% of the equity interest.

AFC is asking the court for treble damages called for under RICO, and all costs incurred in filing the lawsuit. They declined to comment on the lawsuits.