Crain’s Detroit Business has given permission for us to republish this story. Last month, thieves broke through Cloud Industries on Detroit’s west side and stole an estimated total of $500,000. Within just 24 hours… this time!
Cloud’s building on Military Street, Detroit has experienced three separate burglaries over the course of just months.
Question is raised of whether legalization of marijuana sales in California has had any significant effect on crime-related to cannabis sales and possession, such as sale/possession offenses no longer punishable under laws; but law enforcement sources indicate petty theft or similar crimes have not decreased as expected.
And victims of marijuana-related crimes have increasingly turned to illegal markets as legal industry players seek ways to hedge against record low prices across their industry.
Detroit Police Department leadership told Crain’s that Cloud Industries owner Kamal Chammout has not cooperated with law enforcement efforts to solve three robberies at his grow facility.
Commander Anthony O’Rourke of DPD’s Organized Crime Division noted: “That seems suspicious to me at face value.” We have asked the owner multiple times for video footage from this event but have yet to receive anything back despite promises made; thus slowing down investigation efforts significantly.
O’Rourke noted this is now an expected interaction with cannabis operators in the city as crime reporting has increased since legalization; but cooperation seems to have decreased as market prices collapse and margins become thin, potentially opening them up to break rules or laws themselves.
O’Rourke noted the difficulties involved with connecting with victims of these crimes can be significant. “Often these legal grow up facilities do not possess an operating permit for Detroit’s city limits; therefore there could be illegal activity taking place there but investigations cannot take place without cooperation of their operators; state legislation regarding THC limits has made investigation more challenging as running legal businesses has many overhead considerations and costs to consider; I suspect black market businesses might offer cost savings that enable crimes to thrive more readily than legal businesses.”
Chammout and Cloud Industries have not been charged with any wrongdoing by either the DPD or CRA, as both organizations hold two Class C grow licenses from the state for their location allowing them to cultivate up to 4,000 marijuana plants at once and an operating permit from their city to operate their businesses.
In June this year, the Company received a warning letter from CRA after testing revealed Spinosad as being present – an illegal insecticide regulated under regulations set out in their product labeling requirements.
Peter Vredeveld of Grand Rapids-based OVD Insurance specializing in cannabis coverage products told Crain’s it would likely be difficult for operators not reporting crimes as part of an insurance scam that allows them to continue operations while staying under the radar of law enforcement authorities.
“Crop coverage can be expensive and time consuming to secure,” Vredeveld stated. To achieve it, one would effectively have to build out Fort Knox at their facility – otherwise no one is entering! In such an instance, what purpose is covered insurance anyway?”
Vredeveld observed that some operators are growing more plants than permitted legally, exporting to overseas markets or purchasing illegally grown cannabis imported from other markets – all to increase profits in an otherwise struggling legal cannabis sector.
“Cannabis businesses can hardly make any profit at present,” he noted, so many see opportunity in black markets such as Michigan’s, where illegal grow operations or people exceeding permitted amounts is an ongoing issue.
Oversupply in the market has driven down prices. Adult-use marijuana prices have declined 28.6% year over year since January 2024 and now average an ounce at $66.550; three years prior this price had reached an all-time high of around $184.90.
Break-In and Theft
Break-ins and theft have become all too familiar since legalization. According to O’Rourke’s investigation of data from CRA, however, criminals appear mainly targeting illegal grow operations or retailers and growers that do not wish regulators involvement in their businesses.
Break-in reporting to the Cannabis Reporting Agency from across the industry declined substantially in 2024 compared with 2023; more than 43% less reported by licensed retail stores alone and more than two thirds less at large Class C growing operations; in 2023 there had been 181 licensed store break-ins versus 23 Class C grows respectively.
Break-ins at retailers were reported directly to the CRA by operators within 24 hours, who are required by law to do so. While no definitive explanation could be offered by the CRA regarding why break-ins had decreased year over year.
Aric Klar, CEO of Quality Roots located in Birmingham with 10 retail stores throughout Alabama and not licensed, said criminals target non-licensed operations due to potential lack of security measures in these operations.
Klar pointed out that non-licensed stores and warehouses do not adhere to the security measures required of them by CRA.
State law mandates that cannabis operations operating legally are required to implement commercial-grade security doors with electronic or keypad access; an alarm system; and video surveillance coverage in all areas where marijuana is transported or stored – this video surveillance must include motion-activated cameras for which recordings must be kept for at least 30 days after initial detection.
Setup alone costs legal operators $250,000 or more in some instances, while violence has crept in around the fringes of this industry as well. On Jan 13th 66-year old caregiver Sam Simko was killed at his Pontiac warehouse.
Simko was executed during a suspected botched robbery attempt from Ohio, according to The Oakland Press. Four suspects from that state have since been charged with murder and armed robbery according to The Oakland Press; three suspects taken into custody one week post-murder were found with 50 pounds of marijuana according to Oakland County Sherriff’s Office reports.
Caregivers in Michigan are allowed to grow a maximum of 72 plants under the 2008 Michigan Medical Marihuana Act, which legalized private grows and sales on a small-scale. Pontiac officials knew about Simko’s operation; however, its legality remains undetermined according to reporting by The Oakland Press.
The 50 pounds of marijuana recovered could easily have come from an indoor marijuana operation comprised of 72 plants; they would just require multiple six-week harvest cycles before reaching maturity and harvest.
Simko had to cultivate 100 plants under optimal conditions in order to reach her 50-pound yield in one grow cycle. To do this, each yielded between quarter pound and half-pounds of product in total.
Ohio criminals would find the yield highly desirable; its estimated average market value in Michigan during December alone was $55,360; in Ohio where their assailants reside, 50 pounds could fetch nearly three times that much at $153,920.
“All this is driven financially,” O’Rourke stated. With marijuana legalized but the black market still present, many more individuals can now produce and ship from larger facilities whether licensed or unlicensed and make more profit in doing so.
Cannabis businesses are legal businesses in Michigan; however, crime related to it still poses a problem – according to MEDCAN24.
