Cannabis producer CannTrust’s former directors face fraud, insider trading charges

(This is a developing story. Please check back for updates.)

Three former directors of embattled Canadian cannabis producer CannTrust, including its former chief executive officer, have been charged with offenses such as fraud and making false or misleading statements.

The charges are the culmination of a nearly two-year joint investigation by the Ontario Securities Commission (OSC) and Royal Canadian Mounted Police (RCMP) after a whistleblower alerted Canada’s cannabis regulator in July 2019 to five unlicensed cultivation rooms the company had been operating since late 2018.

Mark Litwin, a director of the company until recently, is charged with:

• Fraud.
• Insider trading.
• Making a false prospectus and false preliminary prospectus.
• Making false or misleading statements to the OSC and to the market.
• Authorizing, permitting or acquiescing in the commission of an offense.

Eric Paul, a former CannTrust chair, is charged with:

• Fraud.
• Insider trading.
• Making false or misleading statements to the OSC and to the market.
• Authorizing, permitting or acquiescing in the commission of an offense.

Peter Aceto, the company’s CEO at the time of the alleged incidents, is charged with:

• Fraud.
• Making false or misleading statements to the OSC and to the market.
• Making a false prospectus and false preliminary prospectus.
• Authorizing, permitting or acquiescing in the commission of an offense.

“These allegations relate to efforts to conceal the illegal growing of cannabis at CannTrust over a 10-month period in 2018 and 2019,” the OSC said in a statement announcing the charges.

The OCS said the three men failed to disclose to investors that approximately half the total growing space at CannTrust’s facility in Pelham, Ontario, was not licensed by Health Canada.

“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 OCS noted.

In addition, the OCS said Litwin and Aceto “signed off on prospectuses used to raise capital in the United States, which stated that CannTrust was fully licensed and compliant with regulatory requirements.”

Litwin and Paul also traded shares of CannTrust while in possession of the material, undisclosed information regarding the unlicensed growing, the OCS said.

The three accused are scheduled to appear in court on July 26 at the Ontario Court of Justice in Toronto.

Matt Lamers is Marijuana Business Daily’s international editor, based near Toronto. He can be reached at [email protected].