CannTrust Bankruptcy Fraud Allegations – Latest Cannabis News Today

Three former CannTrust directors were charged after they were arrested for illegal cultivation. Former chief executive officer Peter Aceto, company co-founder and director Eric Paul, and chairman of the board, Mark Litwin, have all been accused of fraud. In addition, Eric Paul and Mark Litwin are also charged with insider trading. If found guilty, the three men face up to five years in prison and fines of up to five million dollars for each conviction. Here are the details of the CannTrust bust.

The bust

From October 2018 to March 2019, CannTrust illegally built and sold cannabis in five unlicensed company premises. This was done in their Niagara greenhouse in Pelham, ON before it was licensed in April 2019. According to the non-compliance report, Health Canada seized 5,200 kg of dry cannabis product from the Niagara facility and 7,200 kg of cannabis oils and derivatives from the Vaughn website.

aftermath

On the day CannTrust issued the breach report, the company’s shares were down 22.5%. Health Canada did not close the Niagara or Vaugh site, but confiscated a third of that quarter’s crop. Many people were affected. Registered patients had to deal with drug shortages and shareholders lost a lot of money.

What does management have to say?

Lots of people asked how this could happen and CannTrust posted a statement on their website. “Our team has focused on building a culture of transparency, trust and excellence in every aspect of our business, including our interactions with the regulator. We made a lot of changes to get this right with Health Canada. We made mistakes in assessing this, but the lessons we learned here will be of use in the future, ”said Peter Aceto, Chief Executive Officer.

The other members of the Board of Directors carried out an investigation. On July 25, 2019, they fired Peter Aceto for an important reason and demanded the resignation of Eric Paul. Mark Litwin left the board on March 12, 2021.

Larry, Curly and Moe

All three are charged with fraud; Eric Paul and Mark Litwin were also charged with insider trading. Allegations of fraud include activities such as misleading statements to investors, producing and selling unlicensed cannabis, and disregarding compliance. According to the Ontario Securities Commission, “Litwin and Paul also traded CannTrust stock while in possession of tangible, undisclosed information about the unlicensed cultivation.”

CannTrust answers

CannTrust responded after charges became known. This statement comes from the press release: “Since the Special Committee’s investigation was completed in 2019, CannTrust has established the best governance and compliance structures and processes in its class. Legal compliance, risk management and effective oversight have become an integral part of all company activities. In August 2020, CannTrust’s operating licenses were restored by Health Canada and the company resumed operations shortly thereafter.

CannTrust remains focused on resolving its civil claims and fully restoring its business operations as the leading Canadian manufacturer of recreational and medicinal cannabis. The company expects to announce the hiring of a replacement independent auditor in the third quarter and has started discussions with the OSC on a proposal for a plan and timeline to address CannTrust’s historical disclosure shortfalls, in order to later file a request with the OSC to revoke the Die OSC order to cease trading on April 13, 2020. ”

Peter Aceto, Eric Paul, and Mark Litwin will have their first trial date on July 26, 2021 at the Old City Hall Courthouse in Toronto.

Footnote (s)

https://canntrust.com/canntrust-statement-regarding-health-canada-audit/
https://m.marketscreener.com/quote/stock/CANNTRUST-HOLDINGS-INC-55820172/news/KAPLAN-FOX-INVESTIGATES-CANNTRUST-HOLDINGS-INC-CTST-28869143/
https://www.marketwatch.com/story/canntrust-shares-tumble-after-canadian-regulator-seizes-its-cannabis-2019-07-08
https://financialpost.com/fp-finance/canntrust-former-ceo-and-two-former-directors-face-fraud-charges
https://financialpost.com/fp-finance/canntrust-former-ceo-and-two-former-directors-face-fraud-charges