New York’s Crackdown On Unlicensed Weed Revealed The Depth Of Banks’ Exposure To Drug Sales
Muddy’s Dispo was one of around 750 New York City storefronts shuttered between May and July as part of Operation Padlock to Protect, a multi-agency task force from Mayor Eric Adams that targeted retailers selling marijuana without a license.
Operators were the primary target of the initiative — which a judge found unconstitutional in October — and landlords have wound up in the crosshairs, but lenders have so far escaped responsibility.
Lenders like JPMorgan Chase, the largest bank in the country, aren’t deliberately ignorant — they’re more likely just oblivious, said Robert DiPisa, a member attorney at Cole Schotz.
“I don’t think they’re looking the other way,” he said. “I think these are just large financial institutions that really aren’t paying that much attention.”
Some lenders say they are applying heavy scrutiny.
Even in cases where lenders do their due diligence, vetting tenants that a landlord has signed to refinance, those tenants have to be represented accurately for the landlord or the lender to be able to make distinctions, DiPisa said.
“How does the lender know, if you’re advertising it as a smoke shop that sells tobacco products and paraphernalia, that what are they selling that is not being displayed?” he said. “How is the lender supposed to be able to identify them?”
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As the law continues to evolve on these matters, please note that this article is current as of date and time of publication and may not reflect subsequent developments. The content and interpretation of the issues addressed herein is subject to change. Cole Schotz P.C. disclaims any and all liability with respect to actions taken or not taken based on any or all of the contents of this publication to the fullest extent permitted by law. This is for general informational purposes and does not constitute legal advice or create an attorney-client relationship. Do not act or refrain from acting upon the information contained in this publication without obtaining legal, financial and tax advice. For further information, please do not hesitate to reach out to your firm contact or to any of the attorneys listed in this publication.
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