With Empire Cannabis Club, Jonathan Elfand created a kingdom worth $25 million. Then his dispensaries were searched by state tax officers. He is also prepared for combat.
Written by Will Yakowicz for Forbes
A phalanx of New York State Department of Taxation and Finance officials stormed two illegal marijuana dispensaries in Manhattan on a steamy Tuesday morning in July while wearing bulletproof vests and carrying weapons on their hips. However, the staff at Empire Cannabis Club, one of the biggest unlicensed marijuana retail businesses in the state with six outlets in the city, were ready and would not let them inside without a warrant.
So started the least violent confrontation.
A few hours later, Empire co-founder Jonathan Elfand stomped up to the door of his Chelsea store. The agents, who had been waiting outside in the heat, were informed by him that they were not permitted inside and that he would be opening the door. Elfand was given cuffs around his wrists by an agent who informed him that he was being arrested for obstructing a government investigation.
The 54-year-old Elfand told the police, “My attorneys will love this—let’s go.” (He was eventually freed and no charges were filed.) Lenore, Elfand’s younger sister and business partner, was detained and accused with obstructing justice while being transported to a police precinct a few miles south at Empire’s Lower East Side site. (The state has not brought any lawsuits against the company.)
According to official evidence documents examined by Forbes, tax investigators seized several pounds of cannabis flower, THC-infused edibles, and vaporizers from an open safe inside one of Empire’s venues.
Elfand estimates that the products, which filled a few trash bags, are worth between $50,000 and $60,000.
This raid would be disastrous for certain companies. But for Empire, which Elfand estimates distributed $20 million worth of merchandise last year, it was merely a little annoyance. In 2023, he aspires to earn $35 million.
Launched in September 2021, Empire has 120,000 paying members, some of whom pay $35 per month while others pay $15 for a single visit. According to Elfand, these subscription costs generate an additional $5 million annually.
The businesses were not shut down by the authorities, and the next day all Empire sites were still open.
Elfand was with his sister, brother, Blake, and father, Ralph, inside his club’s Chelsea location hours after the raid, unperturbed by the day’s events. “I’m the fucking king of New York,” he declares. I control the marijuana industry.
The Elfand family is prepared to go to war to defend its cannabis empire, according to Lenore, who had just been released from the NYPD’s 7th Precinct.
We’re going to court because we need to demonstrate our legality, what we’ve always believed, and how we’re carrying out the law that New York drafted, she says. They came at us, so now is our chance to fight.
The raid on Empire represents a significant turning point in the protracted conflict between New York’s legislators, regulators, and its thriving and substantial marijuana gray market.
There are now only 19 licensed outlets in the entire state of New York since cannabis was legalized there in March 2021, and the government has been lax in enforcing the law.
A rough estimate puts the number of unlicensed marijuana outlets in the state at 3,500. But the mayor of New York City and the governor of New York, Kathy Hochul, have been determined that unlicensed operators would be put an end to.
Empire and a number of other unlicensed businesses received a cease-and-desist letter from the New York State Office of Cannabis Management last summer, warning them of impending crackdowns. The Elfands assert that they are legally functioning without a license because of a legal loophole—or what they refer to as a “safe harbor”—in the state statute, while some operators stopped their clinics and others were searched.
Technically, Empire is a private club and does not sell marijuana; members pay the minimal entrance fee, and any cash exchanged for cannabis-related things is considered a gift rather than payment.
STATE CANNABISM LAWS
The authorities in New York disagree and have stepped up their measures in an effort to shut down unauthorized dispensaries. Governor Hochul enacted new legislation in June that stiffens the penalties for selling cannabis without a license and without paying taxes.
The new law also gives the Office of Cannabis Management and the Department of Taxation and Finance the authority to enact enforcement measures, such as imposing fines of up to $20,000 per day for noncompliance and closing down establishments that sell cannabis unlawfully.
Governor Hochul remarked at the time that “unlicensed dispensaries violate our laws, endanger public health, and undermine the legal cannabis market.”
With $4.2 billion in annual sales, New York would overtake California as the nation’s second-largest regulated cannabis economy if it is successful in expanding its recreational marijuana market.
However, with only 19 permitted dispensaries for a population of 19 million, legal sales—and the pitiful taxes that result from the faltering legal market—are not generating the anticipated taxes.
With a special social equity objective of assisting Black and brown entrepreneurs, the state is frantically attempting to build an industry made up of “justice-involved” entrepreneurs, that is, persons who have been detained for marijuana-related offenses.
Bud Tending: Empire runs with a membership fee, in contrast to conventional cannabis stores, which Elfand thinks complies with New York law.
Julia Nikhinson for AP
Despite being white, the Elfand family has a long history of dealing marijuana, and numerous family members have the criminal records to prove it.
Jonathan Elfand has frequently been handcuffed. He was born on April 1st, 1969, grew up in the Bronx and Brooklyn, and began using marijuana in junior high after moving to Florida.
He began growing his first crop in a West Melbourne home before moving on to his father’s 12-stall horse ranch in Palm Bay. When he was 17 years old, he sailed a 32-foot Columbia to Jamaica, filled it with 680 pounds of marijuana, and brought it back to Florida. This was his first successful international marijuana smuggling operation.
After an associate was apprehended by the National Guard with a shipment off the Florida Keys, Elfand stopped utilizing that route. He would have made the journey half a dozen more times.
In 1990, Elfand returned to New York and rented a basement in a high-rise in the Garment District of Manhattan, converting it into a 200-light grow facility.
He had mastered the skill of producing high-end indoor designer pot with covert grows in Brooklyn by the middle of the 1990s. He also developed into a successful smuggler who, according to the government, collaborated with the Arellano-Felix drug gang in Tijuana.
Elfand would load up trucks with 1,000-pound loads of marijuana-filled salsa cans and drive them from Mexico to San Diego, where he operated a fictitious marine engine company that served as a front for moving tens of thousands of pounds of marijuana to Chicago, Florida, and New York via rental trucks, commercial airlines, and the U.S. Mail.
America’s drug war eventually caught up with him. A complex indoor grow that Elfand operated with his father and brother within a four-story Williamsburg warehouse was busted by the U.S. Drug Enforcement Administration and the NYPD in 1998.
The government said there were 2,000 cannabis plants inside, although the precise number was never established in court. At the time, New York DEA Special Agent Lewis Rice remarked, “This is the largest seizure of an indoor marijuana growing operation, within the five boroughs, in recent history for the New York Division.
The Elfand family allegedly made millions more through their grow operations and other smuggling ways than they did through their U.S. Mail scheme, which yielded $2 million annually, according to the government.
Elfand, who was 30 at the time of his arrest, admitted guilt and was given a 10-year prison term for conspiring to produce and distribute marijuana, while his father, 59 at the time, received a three-year sentence.
In Otisville, a federal prison in the Hudson Valley of New York, father and son shared a cell. According to Ralph, 83, “We were bunkies,” which is how Ralph describes the situation. We had a nice time in prison, despite what some would assume.
Jonathan Elfand has frequently represented himself in court throughout the majority of his legal matters and has offered numerous arguments arguing that his arrests, asset forfeitures, and detentions were illegal.
Although he had several victories, Clarence Darrow was not one of them due to his numerous courtroom defeats. After spending years in courtrooms and jail cells, he claims to have improved his legal defense and is confident that, even if he is charged with federal marijuana charges, he would ultimately prevail.
Since he is in compliance with New York law and believes his merchandise was unlawfully taken, his first step is to appear in state court to have it returned.
Elfand will keep growing his company if the judge rules in his favor. If things don’t go his way, he will appeal and present a case that he thinks will win. Elfand claims that the 14th Amendment is one of the Constitution’s greatest jewels.
His argument is based on the amendment passed after the Civil War that guarantees all Americans equal protection under the law, and he makes it with the conviction of someone without legal training.
Elfand thinks it will assist him in demonstrating his ability to run his company legally, state license or not.
According to him, the government cannot accuse him of marijuana-related offenses without shuttering multibillion-dollar corporations like Curaleaf, Trulieve, and Green Thumb Industries, which all legally cultivate, distribute, and market cannabis across several states.
He queries, “How are you not charging Curaleaf?” “It’s completely against the law. Everybody must be treated equally.
Some people do not think Elfand’s defense is foolproof. Much of Elfand’s legal posturing is dismissed by Paul Armentano, the deputy director of the nonprofit organization NORML (National Organization for the Reform of Marijuana Laws).
Armentano explains, “It’s aggravating. “I’ve done this for 30 years, and I’ve heard every excuse there is. Even terrible laws are not automatically unconstitutional.
Sam Kamin, a specialist on marijuana regulations and a professor at the University of Denver Sturm College of Law, accords Elfand some credit for originality. According to Kamin, “the legal theory sounds reasonable to a layperson.” However, I don’t believe a judge will likely accept such defense.
Unlicensed enterprises attempt to operate in every new state that legalizes cannabis sales, according to Kamin, who assisted Colorado with the implementation of its recreational marijuana program, but they eventually obtain licenses or go out of business.
People mistakenly believe that legalization will mean the end of enforcement, but this is untrue, he claims.
Cannabis legalization is not the end of enforcement; rather, it is the beginning of regulation, and anything that deviates from that is illegal.
However, some local lawyers support Elfand’s position. While not connected to the Elfands, Paula Collins, a New York attorney who represents numerous unlicensed cannabis business owners, claims that New York “goofed” while drafting its law and that club memberships are now legally permissible under the rules.
Collins predicts increased activity and a significant legal battle. “This is not illegal marijuana. The legal definition of what they label “illicit cannabis” is incorrect.
Elfand claims he has learnt from all the mistakes he has made that have landed him in jail and has researched the law so meticulously that he knows how to operate in a federally illegal industry without going to jail again while sitting at Empire Cannabis Club after the raid and with a new baby at home.
He’s now prepared to test his carefully honed legal defense and stake his future on the outcome.
“My kid is always going to be able to look up and know that their dad had the balls to walk through everything he walked into,” he claims. I take action because I am confident in my position. Let’s move on. If I somehow lose and I’m wrong, I’ll wait 30 years.
ADDITIONAL FORBES
Welcome To New York, The Wild West Of WeedBy Will Yakowicz MORE FROM FORBESADDITIONAL FORBESBy the end of the decade, New York’s massive marijuana gray market could cost the state $2.6 billion in lost taxes.Through Will YakowiczADDITIONAL FORBESBy Will Yakowicz, New York City begins to weed out its enormous cannabis gray market.
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