The Ontario Securities Commission has accused the former chief executive and two vice-presidents of a supposed upstart pot company that raised more than $10 million of defrauding its investors. It’s the first time the provincial regulator has claimed fraud in Canada’s burgeoning cannabis sector.
According to the detailed statement of allegations released late Friday afternoon, the scheme dates back to January 2014, when Benjamin Ward, Peter Strang and Silvio Serrano allegedly made numerous false statements about their not-yet-incorporated pot company, dubbed Canada Cannabis Corp. (CCC), in a briefing for prospective investors. Among the allegedly false claims, the company said it had acquired a 45-per-cent stake in a horticultural lighting firm named Growlite Canada.
Ward was CCC’s chief executive and a director; Strang and Serrano were vice-presidents and, according to the OSC, either directors or de facto directors of the firm.
The OSC said that between January 2014 and August 2016, CCC raised roughly $3.2 million and US$8.8 million from about 125 investors, almost half of whom were in Ontario. The regulator noted in its statement of allegations the cannabis industry has attracted some investors who “believe that they can earn a quick and profitable return from their investment.”
Meanwhile, the OSC said Ward, Strang and Serrano mapped out a plan to syphon investor funds to invest in Growlite and also make a loan to the firm, which was owned by Serrano. According to the allegations, the trio spent 20 minutes at a CCC board meeting on Jan. 19, 2014 negotiating the investment.
“At no point before during or after the meeting did [they] hire a valuator to determine the value of Growlite, address the conflict arising from investing in Serrano’s company, or conduct meaningful negotiations on the price,” stated the OSC, whose allegations have not yet been proven.