Charged over the CannTrust scandal that rocked the Canadian cannabis industry
After nearly two years, the CannTrust cultivation misconduct was finally charged, which shocked the industry and broke patients’ hearts. The scandal appeared to have come straight from a television broadcast – hidden grow rooms, possibly unlicensed shipping overseas, and 12,500 kg of illegally grown weed destroyed.
Three former directors and officers of CannTrust Holdings Inc. have been charged with offenses under the Ontario Securities Act. The investigation is a joint effort by the Ontario Securities Commission (OSC) and the Royal Canadian Mounted Police (RCMP), the Integrated Market Enforcement Team (IMET).
The fees
The defendants are former chairman Peter Aceto, former vice chairman Mark Litwin and former chairman Eric Paul. Each of the defendants is charged with fraud, false or misleading information given to the OCS and the market. Litwin and Paul are also charged with insider trading, according to the OSC announcement.
“This matter shows how the OSC’s quasi-criminal team is evolving in close collaboration with law enforcement partners to focus on more complex cases involving fraudsters and repeat offenders as well as high-level market players,” said Jeff Kehoe, Director of Enforcement at the OSC. “In cases of serious market misconduct, prosecution in a provincial court gives us a range of severe sanctions, including prison terms.”
A short summary
For those who don’t remember, CannTrust abruptly announced via a newsletter in July 2019 that it would no longer offer medical cannabis to patients. The announcement came almost 24 hours after medical customers were banned from the company’s online ordering portal.
At that time, patients were informed that the voluntary sales ban was temporary. But behind the scenes officials had launched an investigation into which CannTrust would soon have all licenses revoked. A whistleblower had alerted Health Canada, the authority responsible for the cannabis law, to misconduct in several of the company’s growing areas.
The allegations are wild: allegedly, CannTrust used fake walls to hide unlicensed Health Canada cannabis. According to reporters from Globe and Mail, who published the story in 2019, CannTrust staff were asked to stay long to erect fake walls to hide “several thousand” plants from view for photos taken by Health Canada had been ordered.
What about the cannabis law?
The Canadian cannabis industry was surprised to see that the Ontario Security Act charges were being brought in lieu of the Cannabis Act, which is the governing law governing cannabis in Canada from seed to sale.
“It’s interesting to see how these fees are charged under the Securities Act,” said attorney Trina Fraser, partner at Brazeau Seller Law. “I am curious to see how the OSC can conclude that they have sufficient evidence to bring these charges, all of which are based on cannabis law violations, but no charges or fines have ever been imposed or imposed under the Cannabis Act. ”
According to a report by Marijuana Business Daily, Health Canada has not imposed any fines under the Cannabis Act on companies or individuals since legalization went into effect in October 2018. Penalties for violating the Cannabis Act and its regulations include administrative fines of up to Canadian $ 1,000,000.
Along the road
The CannTrust case is the biggest scandal in Candian cannabis history and shakes the trust of many patients and breeders alike in the legal system. It is still unclear how much cannabis from the unlicensed grow rooms was given to Canada’s registered medical patients, the recreational market, or even exported.
The current CannTrust leadership team dissociates itself as much as possible from its three former executives and their charges, and notes that no charges have been brought against CannTrust, any of its subsidiaries, or any of the Company’s current directors, officers or employees. The manufacturer is again approved for both the medical and the leisure market.
“Our license restoration is the result of tremendous hard work by the CannTrust team,” said Greg Guyatt, CannTrust chief executive officer. “Today marks the beginning of the next chapter in the history of CannTrust. We have used the last 12 months to improve every aspect of our business, with a clear focus on legal compliance in the reorganization, restructuring and development.
As for Aceto, Paul and Litwin, the three defendants are due to appear before the Ontario Court of Justice in Toronto on July 26th.
Ashley Keenan
Ashley Keenan is a writer and editor at Leafly Canada. Ashley is also a freelance journalist, consultant, and patient advocate in the cannabis industry. She uses science and stories to normalize cannabis and chronic illness, both at work and on her personal blog, Ask CannaQueen. Since 2018, Ashley has served the cannabis industry by covering cannabis industry news, advocating for medicinal cannabis and the patient perspective, and creating lifestyle content that matters. Their byylines include Leafly, The GrowthOp, StratCann, The Her (B) Life, Vancouver Sun, Ottawa Citizen, National Post, and more.
View article by Ashley Keenan
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