This article was reprinted with permission from Crain’s Detroit Business.
Last month, thieves smashed through a bay door of Cloud Industries, a cannabis operator on Detroit’s west side.
A reported $500,000 of cannabis plants and equipment was taken … this time.
It’s the third break-in at Cloud’s building on Military Street in Detroit in as many months.
The question is whether the legalization of marijuana sales in the state curbed cannabis-related crime. While it did in some form — the sale and possession of certain amounts of marijuana is no longer a punishable offense — law enforcement say petty theft and other crimes aren’t deterred.
And there’s a rise of victims of marijuana-related crimes subverting investigations as the legal industry has turned to the black market to insulate from record-low prices across the industry.
No thanks, officer
Detroit Police Department leadership told Crain’s Cloud Industries’ owner, Kamal Chammout, has not cooperated with law enforcement to solve the three robberies at the grow facility.
“That seems suspicious to me at face value,” said Commander Anthony O’Rourke, DPD’s leader of the organized crime division. “We’ve asked the owner three times for video footage of the event. He’s said he’ll get it to us and, so far, it’s not been provided. That definitely slows down the investigation.”
Several emails, texts and phone calls to Chammout were not returned.
O’Rourke said this is now a common interaction with cannabis operators in the city as crime reporting has increased since legalization — but cooperation is waning as collapsing prices in the market are leaving operators with thin margins; opening the door for them to potentially break rules and laws themselves.
“Getting in contact with the victims of these crimes is very difficult,” O’Rourke said. “Often times they will be certified to be a legal grow up, but they won’t have a license to operate in the city of Detroit. There is almost always something going on in their facilities that isn’t legal, but it’s hard to investigate any of the crimes without cooperation. Everything the state has invoked, THC limits, etc., when you’re running a legal business there’s a lot to consider and overhead. The black market can cut costs and I suspect that’s what’s happening at a lot of these places that where crime is occurring.”
Chammout and his Cloud Industries have not been accused of any wrongdoing by the DPD or the CRA. They hold two Class C grow licenses from the state for their location, allowing them to grow 4,000 marijuana plants, and are licensed by the city to operate.
The company did receive a warning letter from the CRA in June last year after testing of its product revealed the presence of Spinosad, a banned insecticide.
Peter Vredeveld, an insurance broker for OVD Insurance in Grand Rapids, specializing in insurance products for the cannabis industry, told Crain’s it’s unlikely operators not reporting crimes is an insurance scam to get paid while keeping the crime under the radar.
“You can buy coverage to cover your crops, but it’s a lot of hoops to jump through and very expensive,” Vredeveld said. “To get it, you basically have to build out Fort Knox at your facility. If you build out Fort Knox, then why do you need the coverage? No one is getting in.”
Vredeveld said operators are often growing more plants than they are legally allowed, exporting to other markets or acquiring illicitly grown cannabis imported from other markets — all to create a greater profit margin in a struggling legal industry.
“You can barely make any money in cannabis right now,” he said. “So these companies playing on the edges, they see opportunity in the black market. Michigan has a huge problem with illegal grows or people illegally growing more than they are allowed.”
Oversupply in the market has cratered prices.
Adult-use marijuana prices plummeted 28.6% since January 2024 to an average cost of just $66.50 for an ounce of marijuana flower this January. Three years ago, the average price of an ounce was $184.90.
Breaking bad
Break-ins and theft have been commonplace in the industry since legalization, but data from the CRA may validate O’Rourke’s suspicion that criminals are largely targeting either illegal grow operations, or retailers and growers not wanting regulators involved.
Reporting of break-ins to the CRA from across the industry dropped in 2024, down more than 43% from 2023. There were 91 break-ins at licensed retail stores last year; and another 23 break-ins at large Class C growing operations. In 2023, there were 178 break-ins at licensed retail stores and 18 break-ins at Class C grows.
Break-ins are self-reported to the CRA from operators, who are required to do so within 24 hours of the crime. The CRA could not immediately offer an explanation as to why break-ins at retailers dropped year-over-year.
Aric Klar, CEO of Birmingham-based Quality Roots, which has 10 retail stores across the state, said criminals target non-licensed operations because they know security may be lax.
“Non-licensed stores and non-licensed warehouses do not have the same security measures as required for us by the CRA,” Klar said.
Licensed cannabis operations in the state are required to have commercial-grade security doors with an electronic or keypad access; a commercial alarm system and a video surveillance system covering all areas where marijuana is transported or stored. Those cameras must be motion-activated; and their recordings must be stored for a minimum of 30 days.
That setup alone costs legal operators $250,000 or more in some cases.
Besides petty theft, violence has also entered on the fringes of the industry.
Sam Simko, a 66-year old caregiver, was murdered at his Pontiac grow warehouse on Jan. 13.
Simko was executed in a suspected robbery-gone-wrong. Four suspects from Ohio have been charged with felony murder and armed robbery, The Oakland Press reported. Three of the suspects, taken into custody a week after the murder, were found with 50 pounds of marijuana, according to the Oakland County Sherriff’s Office.
Caregivers in the state are allowed to grow a maximum of 72 plants under the 2008 Michigan Medical Marihuana Act, which allowed private grows and sales on the small scale to protect medical patients. The city of Pontiac was aware of the operation, but it remains unclear whether Simko was operating above board of the regulations, according to reporting from The Oakland Press.
The 50 pounds of recovered marijuana could have easily come from a 72-plant operation, as long as it represented multiple six-week cycles, the average time it takes to grow an indoor marijuana plant to harvest.
The industry average for an indoor grow operation is a yield of a quarter pound to half pound of product per plant. To net 50 pounds in one grow cycle, Simko would have had to cultivate buds from 100 plants under optimal conditions.
The yield would also be very valuable to those Ohio criminals, with an estimated average value of $55,360 in Michigan in December. In Ohio, where the assailants are from, that same 50 pounds would be worth nearly three times as much at $153,920.
“This is all financially driven, as it’s always been,” O’Rourke said. “Because marijuana has gone legal, the black market still exists and there’s a lot of people out there who are now able to grow and ship from much larger facilities, licensed or not, and it’s very lucrative.”
Break-ins and theft have been commonplace in the industry since legalization. Read More
