Cannabis-Tied Business Bankruptcy Must Be Tossed, Trustee Says

Master Equity Group LLC’s connections to the medical and recreational cannabis industry should disqualify the company from using bankruptcy laws meant for small businesses, the Department of Justice’s bankruptcy watchdog told a Michigan bankruptcy court.

“Every cent” of Kalamazoo, Mich.-based Master Equity’s earnings come from businesses that process and sell cannabis, which is still illegal federally, the US Trustee’s office said Wednesday while asking the bankruptcy court to toss the case.

The company currently derives income from “criminally illegal activity,” and would fund its reorganization plan with those same proceeds, the Trustee noted.

Master Equity Group’s lawyers didn’t immediately respond ...