American Anti-Dream: How Hemp Farmers Got Caught in a Multi-Million Dollar Scam

Last month, one of the largest court cases related to business ethics violations in the cannabis industry concluded in the United States. A handful of American and Canadian businessmen devised a plan to make hundreds of millions of dollars from selling CBD products, but delayed its execution. They ordered a massive amount of hemp from farmers but never paid for it, leaving it to rot in the fields. Worse yet, when the farmers tried to sell their crops to more responsible buyers, they were threatened.

The Rise of Hemp Farming in Montana

In 2018, hemp production in Montana began to boom. After the plant was legalized at the federal level, dozens of farmers decided to diversify and try growing this new crop. That year, Montana farmers planted 22,000 acres (about 9,000 hectares) of hemp—more than any other state at the time. Most of it, 20,000 acres, was planted by farmers under contract with a company called USA Biofuels.

According to the contracts, farmers were to be provided with seeds and paid $100 for every acre planted. For harvesting hemp from dry land, they were promised $400 per acre, and $600 per acre for irrigated land. These terms were extremely attractive, especially compared to the volatile commodity market for crops like wheat, which had a particularly poor year.

Warning Signs and Broken Promises

The first red flag appeared when the buyer delayed delivering the seeds and then postponed the initial payment. Farmers were repeatedly told that the promised $100 per acre would arrive soon. Eventually, the payment did come—but six weeks late, and not from USA Biofuels, but from a Canadian company, Vitality Natural Health LLC.

This turned out to be the first and last payment the farmers received. Despite following all instructions for bundling and baling the hemp, no one came to collect the crop, and the rest of the promised payments never materialized. When farmers told USA Biofuels they would sell the hemp to other companies, they were threatened with lawsuits if they tried. Eventually, the farmers lost patience and filed a class-action lawsuit against the company.

The Court Battle and Its Aftermath

The court case dragged on for three years. Ross Johnson, the attorney representing 25 farmers, stated that USA Biofuels was a shell company with no assets or bank accounts, and that the real beneficiaries were in Canada. He believes the businessmen involved were trying to aggressively enter the American cannabis industry, securing large hemp supplies and setting up processing and distribution for CBD products. That’s why they forbade farmers from selling their crops elsewhere—if they did, the entire scheme would collapse.

While they managed to organize the hemp supply, the rest of the plan fell apart, so the businessmen backed out. As a result, what could have brought them $350–400 million turned into a rotting pile of biomass. Bo Anderson, one of the affected farmers, said the three-year ordeal cost him a lot of personal time and caused significant distress—he had involved many of his neighbors, who also suffered from the businessmen’s poor ethics.

The final court session took place on June 25. The jury found those behind the companies guilty of breaching contract terms. Initially, the farmers sought $1 million each in damages, but the jury dramatically increased the amount, ordering a total of $65 million to be paid to the 25 farmers—to prevent similar incidents in the future. This is the second-largest civil compensation ever awarded in Montana; the largest, $250 million, was given to the families of two teenagers killed in a 2014 car crash involving a Hyundai sports car.

Impact on the Cannabis Industry

This case became a landmark for the entire U.S. cannabis industry, sending a clear message that no one should involve farmers in risky schemes that could threaten their livelihoods.

During the trial, the bales of hemp were held under court order, but have now been returned to the farmers. Unfortunately, most of it had rotted by then. Only one farmer managed to sell the ill-fated hemp—and it was used to make cheap cat litter.