Ex-directors of cannabis firm accused of fraud and other offences related to illegal growing facility
The Ontario Securities Commission (OSC) has accused three former directors and officers of a cannabis firm of fraud and other violations of the Securities Act.
The charges come following a joint investigation by the OSC and the Royal Canadian Mounted Police (RCMP), Integrated Market Enforcement Team (IMET), which was launched in August 2019.
Mark Litwin, Eric Paul, and Peter Aceto have each been charged with fraud; making false or misleading statements to the OSC and to the market; and authorizing, permitting or acquiescing in the commission of an offence. They also have been variously charged with insider trading and making a false prospectus and false preliminary prospectus.
The allegations are being made in relation to illegal growing activity in CannTrust’s facility in Pelham, Ontario. Over a 10-month period straddling 2018 and 2019, around 50% of the growing space in the facility was not licensed by Health Canada, a fact that the three purportedly did not disclose to investors.
“In press releases, corporate disclosures, analyst calls and prospectuses, they asserted that CannTrust was compliant with regulatory requirements, and they included all cannabis production in the company’s financial statements, without stating that half was grown without a license,” the OSC said in a statement.
Litwin and Aceto, the statement added, signed off on prospectuses stating that CannTrust was fully licensed and compliant with regulatory requirements. Those prospectuses were used to raise capital in the U.S.
Litwin and Paul, the OSC said, also traded shares of CannTrust while they possessed material, undisclosed information regarding the unlicensed growing.
“This matter demonstrates how the OSC’s quasi-criminal team, working closely with policing partners, is evolving to focus on more complex cases involving senior level market participants, in addition to fraudsters and repeat offenders,” said Jeff Kehoe, the OSC’s director of Enforcement.
