Nitin Khanna sued over alleged $60 million fraud

Investors in failed Portland CBD startup Sentia Wellness sued Oregon entrepreneur Nitin Khanna and several of his associates this month, alleging they perpetrated a $60 million securities fraud by making false claims about their business and disguising the company’s financial situation.

The lawsuit’s accusations are the latest in a string of scandals that have dogged Khanna for years, including a rape allegation, manufacturing failures and a notorious real estate scheme.

Plaintiffs in lawsuit, filed Jan. 6 in Multnomah County Circuit Court, include an investment fund run by Boris Jordan, chairman of Curaleaf, one of the nation’s biggest marijuana companies. Curaleaf acquired another company run by Khanna, Portland-based Cura Cannabis, in an all-stock deal worth about $400 million when it closed in 2020.

This month’s lawsuit pits Khanna and Jordan against one another.

In the lawsuit, first reported Tuesday by the Portland Business Journal, Jordan’s investment firm and other Sentia backers accuse Khanna and his associates with scamming them by hiding the Portland company’s true financial condition and by falsely claiming that Goldman Sachs was working to raise money for the business.

“Sentia’s founder and former executive chairman Nitin Khanna committed securities fraud and violated Oregon securities laws by using untrue statements and misleading omissions of material facts to solicit and induce the plaintiff investors to purchase over $74 million in debentures in Sentia,” the lawsuit alleges.

Vivek Kothari, an attorney representing Khanna, did not immediately respond to a request for comment Tuesday. He told the Business Journal that Sentia failed because of changes in the regulatory environment and the pandemic’s impact on retail sales and said the plaintiffs in the lawsuit are “sophisticated investors” who knew what they were getting into.

“We look forward to shedding more light on what happened at Sentia and the questionable business practices of these investors, two of whom also sat on Sentia’s board and approved its budget, spending and direction,” Kothari said.

Sentia manufactured CBD, or cannabidiol, derived from hemp. While CBD doesn’t contain the psychoactive ingredient in recreational marijuana, enthusiasts believe it has properties that can improve health and well- being.

Sentia emerged from Cura amid its sale to Curaleaf in 2019. Curaleaf had its own line of CBD products and didn’t buy Cura’s CBD brand, so Khanna and other Cura insiders launched a new business, Sentia Wellness.

Sentia raised at least $91 million but faltered right out of the gate, laying off employees and abandoning manufacturing plans. It sold its Social CBD brand to a California company last year.

Allegations in this month’s suit include:

That Khanna claimed Sentia would record $175 million in revenue in 2019, even though “Khanna knew there was no reasonable basis to support his projection.”

Sentia purchased more than $32 million in “expired and unusable inventory.”

Sentia shipped more products to customers than they ordered, and customers returned more than 70% of Sentia products shipped in the fourth quarter of 2019.

Khanna claimed Goldman Sachs was Sentia’s investment bank and would take the Portland company public through a $10 billion initial public offering. In fact, the investors allege, “Goldman Sachs had done little, in any, work” to arrange a stock listing for Sentia. The plaintiffs claim the investment bank had only advised Sentia on forming its business.

That Khanna spent more time on another marijuana business and a tequila business than he did on Sentia, neglecting the leadership role he had promised to take on at Sentia.

Khanna was once among Oregon’s most prominent technology investors, but stepped away from the tech industry after settling a 2014 lawsuit that alleged Khanna raped his wife’s hairdresser on the morning of his own wedding.

Khanna denied raping the woman. Prosecutors said DNA evidence showed he had sexual contact with the woman but declined to charge him, saying they couldn’t prove the contact was nonconsensual.

Khanna subsequently ran marijuana startup Cura Cannabis. Cura emerged from Iris Capital, a Lake Oswego investment firm that cost Oregon retirees $1 million after it siphoned their real estate investments into the marijuana business. Iris’ founder pleaded guilty to wire fraud, but Khanna said he joined the company after the investors’ money was diverted and was unaware of the fraud.

In 2018, Khanna stepped down as Cura’s CEO after women in the marijuana community highlighted the rape allegations against him. But he remained active in the business and engineered its sale to Curaleaf the following year.

Just before the sale closed, Cura agreed to pay a $110,000 “dishonest conduct” penalty to Oregon regulators after incorrectly claiming that its some of its Select brand vapes contained 100% marijuana.

Other plaintiffs named in this month’s lawsuit include Khanna’s brother, Karan Khanna, who served on Sentia’s board; former Sentia President Angelo Lombardi; former Sentia Vice President Sam Knapp; and attorneys Benjamin Stoller, Allan Goodman and Nicholas Slinde, who provided legal services to Sentia.

Slinde, who was Sentia’s outside general counsel, also represented Cura Cannabis and Iris Capital. The Oregon State Bar is in its third year of an investigation into Slinde’s role at Iris.

The Bar is investigating allegations that Slinde diverted settlement money from a business dispute into the marijuana business – in which he held a stake – instead of directing it to Iris. Slinde’s attorney said he will comment on the suit and the Bar investigation later Tuesday.