California has a troubling new wrinkle in the vaping story rocking the nation.
Acting on a tip, state officials raided a warehouse in Canoga Park and discovered an illegal manufacturing operation.
Prompted by a tip, investigators at the California Department of Consumer Affairs served a search warrant on Thursday, Oct. 3, at a light industrial space in northwest Los Angeles’ Canoga Park district.
There they found an illegal cannabis product manufacturing operation apparently operated by Kushy Punch, a legal state-licensed company. Authorities seized a number of finished products, including gummies in Kushy Punch packaging and 7,200 disposable vaporizers in Kushy Vape packaging with an estimated street value of $21 million.
In photos obtained by Leafly, the facility appeared to be performing petro-solvent extractions, where a technician concentrates the active ingredient in cannabis, THC. Petro-solvent extraction is legal with a permit in California. The extraction method can sometimes have the effect of concentrating pesticides along with the THC.
Edibles and vape cartridges seized
The San Fernando Valley facility appeared to be in the business of putting those extracts into professional-looking THC foods as well as disposable vape pen cartridges. Tall file cabinets held thousands of boxes of Kushy Vapes pens and Kushy Punch edibles packaged and ready for sale and consumption.
“Investigators confiscated thousands of illegal vape carts worth millions of dollars,” Bureau of Cannabis Control spokesperson Alex Traverso told Leafly. The investigation is ongoing.
Kushy Punch’s lawyer provided a statement to Leafly on Oct. 8 confirming the facility and inventory belonged to Kushy Punch. But he denied distributing the products into the illicit market.
“These cartridges were never intended for distribution,” lawyer Eric Shevin wrote in an email. “These cartridges were located in a single box labeled for destruction following their discovery among packaging and marketing materials at a separate storage facility. These cartridges were unusable due to their age as the batteries had died after being stored for more than 2 years.”
Undermining Kushy Punch’s position—gummies and CBD vapes labeled “Kushy Punch” are for sale in online marketplaces that list unlicensed stores as of Oct. 8.
Kushy Punch under scrutiny
A source familiar with Kushy Punch accused the adult-use licensee of maintaining two facilities: one licensed and one black market. (Leafly is granting the source’s request for anonymity because disclosing their personal information might endanger their own safety and the safety of others.)
A source close to Kushy Punch alleges the company maintained two facilities: one licensed and one black market.
The source alleges that cannabis that tested clean went through Kushy Punch’s licensed facility and into the licensed supply chain.
The source also says cannabis that might fail the state’s stringent pesticide standards went to the illicit extraction lab, pen factory, and kitchen located at 8427 Canoga Ave. in Canoga Park. That facility sits on the same block as the Los Angeles Police Department’s Topanga Community Police Station.
“This is where they have all black market operations going,” the source told Leafly. “They are using untested black market oil that is heavy in pesticide.”
Kushy Punch’s lawyer denied those assertions. “Kushy Punch has worked hard to successfully transition into the regulated market. All Kushy Punch products undergo stringent testing requirements to ensure product and consumer safety in compliance with all rules and regulations for licensed cannabis businesses in California.”
Kushy Punch’s licensed edibles are manufactured and distributed by Vertical Bliss Inc. of Northridge, a legal state cannabis licensee, according to documents posted on the KushyPunch.com website.
BCC investigation ongoing
The BCC said its investigation has the same information, is testing the oil, and examining the possible links between the raided facility and the Kushy Punch brand, said BCC spokesperson Alex Traverso.
“Everything about this tip has checked out 100%,” Traverso told Leafly. “Based on the tip, there is a legal side of things and an illegal side of things. We’re still investigating both sides of the equation.”
“If this is something we’re seeing linked back to someone who has a license I would be surprised if they had a license much longer,” Traverso added.
Kushy Punch’s lawyer said they will cooperate. “Kushy Punch takes the pending BCC allegations very seriously and intends to cooperate and work closely with the BCC in its efforts to protect consumers and license holders as the regulated cannabis industry continues to develop.”
Split operations detailed
California’s adult-use cannabis market is one year and nine months old. The state’s medical marijuana era lasted 23 years. Kushy Punch operated during both eras.
Leafly’s source alleged that Kushy Punch management split the legal business from the illegal one when the company obtained a state cannabis manufacturing license. The source said Kushy Punch managers assigned the same staff members to work both the legal and illegal facility.
The company’s website also states that Kushy Punch is selling its products into both markets.
Kushy Punch describes itself as “California’s #1 edible” and provides a store locator tool listing licensed stores.
But it also states that it manufactures edibles and vape products for “California collectives and clinics for California medical cardholders.” Commercial medical collectives became illegal on Jan. 1, 2019. All retail sales must go through a state-licensed adult-use or medical retailer. Licensed cannabis retailers must only carry products from licensed cannabis manufacturers.
California state officials suspect these Kushy Punch products were headed to the street market. (Courtesy of CA Dept. of Consumer Affairs)
Illicit vape carts in police crosshairs
The bust comes amid a national series of vaping associated pulmonary injury (VAPI) clusters linked to illicit THC vape cartridges.
At least 1,080 people in 48 states have a confirmed or probable vaping-associated pulmonary injury. As many as 20 people have died from VAPI, according to investigators at the Center for Disease Control. Doctors said 17 victims in Wisconsin had what’s called chemical pneumonitis—akin to a chemical burn on their lungs.
One of the main suspects in the VAPI outbreak continues to be illicit THC vape carts contaminated with toxins.
One of the main suspects in the VAPI outbreak continues to be illicit THC vape carts contaminated with one or more toxic chemicals. Known toxic chemical contaminants in so-called ‘fart carts’ sold on the street and capable of causing chemical pneumonitis include diluent thickener tocopheryl-acetate (vitamin E oil); the pesticide myclobutanil; and solvents like butane.
“The administration is really prioritizing these complaints because of the public safety aspects of that,” the BCC’s Traverso told Leafly.
Based on a tip, the BCC raided a vape shop in Fresno on Set. 25 and confiscated roughly 2,200 street market “Dank Vapes” carts and packaging for 4,400 more. Many VAPI victims have reported using Dank Vapes carts.
The BCC aims to shut down more illicit pen factories, rather than chasing down the product at their end-point—street dealers, pop-up markets, unlicensed cannabis retailers and couriers, and smoke and vape shops selling them under the counter.
“It’s not enough to just go after the retailers and shut those places down,” Traverso said. “We’re making an effort to go after the big fish.”