Securities regulators are accusing the former executives at a cannabis company of fraud, alleging that they misused millions of dollars of investor funds for their own benefit.
The Ontario Securities Commission (OSC) has announced that it will hold a hearing on Sept. 30 into allegations that the founders of Canadian Cannabis Corp. (CCC) raised millions of dollars from investors to finance the company’s cannabis medical cultivation business, but ultimately depleted those funds without ever actually growing any cannabis.
This marks the OSC’s first case involving fraud allegations in the cannabis sector. The allegations have not been proven.
The OSC alleged that the company’s founders, Benjamin Ward, Peter Strang and Silvio Serrano, engaged in fraudulent conduct and violated the public interest by raising approximately $3.2 million and US$8.8 million from approximately 125 investors to fund the company, but then “diverting investor funds away from [the company] for their own personal gain.”
The regulator said that the company was formed in 2014 and went public via reverse takeover, raising financing from investors by selling shares and debt.
“Ward, Strang and Serrano represented to investors that their funds would be used to develop and operate CCC. Instead, Ward, Strang and Serrano syphoned off more than $3 million from CCC by making a loan to a company owned by Serrano,” the OSC alleged.
The OSC said that the loan was never repaid and that by the fall of 2016, “Ward, Strang and Serrano had resigned from CCC, leaving behind a company depleted of all investor funds without ever having engaged in the cultivation or distribution of cannabis.”