Adam JacksonThe former head of a failed cannabis payment processor claims dozens of businesses are owed money and is urging a federal court not to release remaining funds to just one company seeking repayment.
Dominique Villela, who briefly led Left Coast Financial Solutions as interim CEO, said in court documents obtained by Law360 last week that about 64 cannabis companies never recovered deposits after the platform’s collapse. The filing opposes CBD company Killa Beez Distribution‘s bid to recover $127,000.
“The equitable distribution of these funds, overseen by a court-appointed receiver, is necessary to ensure fairness to all claimants,” Villela wrote in the filing.
The payment platform firm marketed itself as an online “neobank” service for cannabis companies but operated under a money transmitter license rather than a bank charter. Its primary accounts were held at City Trust Bank in the Commonwealth of the Northern Mariana Islands, where former executives Daniel Herrington and Casey Nye-Herrington remained principal account holders.
According to court documents, City Trust Bank eventually froze those accounts after repeated bounced checks, failure to follow banking rules in the Northern Mariana Islands where the accounts were held, as well as offering banking services when it only had permission to transfer money.
The Oregon Division of Financial Regulation suspended Left Coast’s license in January 2023, citing reporting failures and “inadequate” net worth, according to the Portland Business Journal. The regulatory order noted problems under previous ownership including overdrawn accounts and checks returned for insufficient funds.
The Herringtons admitted to mixing customer deposits with operating funds, with estimated losses between $900,000 and $1.2 million, according to the filing. Villela said he was brought in as interim CEO in October 2022 to investigate financial problems, but the former leaders never transferred control of the City Trust Bank accounts despite their purported resignation.
“The former leadership remained in control while defrauding additional businesses, including (Killa Beez), and using Defendant’s placement to obscure their accountability for the company’s insolvency,” Villela stated.
Left Coast’s additional troubles emerged publicly when Killa Beez sued in November 2023. The CBD company claimed multiple checks bounced, including a $30,000 withdrawal attempt. Its lawsuit named several executives including Nicholas Rupp, a company founder.
Rupp sought dismissal in a separate filing, arguing founder status doesn’t create personal liability. He blamed City Trust Bank for freezing the funds despite compliance efforts.
A federal judge will consider Villela’s request for a forensic audit and receiver appointment before processing any claims. The incomplete financial records complicate efforts to determine how to precisely dole out funds, according to court documents.
The case is pending in U.S. District Court in Oregon.
Left Coast vs Killa Beez
