Prosecution collapses towards execs caught up in CannTrust hashish scandal

Prosecution collapses towards execs caught up in CannTrust hashish scandal

The prosecution of three businessmen caught up in considered one of Canada’s most spectacular cannabis-industry flameouts suffered its personal collapse on Wednesday, as attorneys for the Ontario Securities Fee (OSC) moved to withdraw all costs mid-trial.

However even defeat did not come simple for the prosecution: Defence attorneys for former CannTrust Holdings officers Peter Aceto, Eric Paul and Mark Litwin refused to merely have the fees dropped and held out for full acquittals for his or her purchasers.

“After cautious evaluate of the proof through the trial, we’re of the view that as charged, there isn’t a affordable prospect of conviction,” OSC lawyer Dihim Emami instructed the courtroom. He requested for extra time to think about the defendants’ request for acquittals, nonetheless, saying it had solely been offered to him minutes earlier.

Scott Fenton, a lawyer for CannTrust’s former vice-chair Litwin, appealed to the choose to finish the matter “as we speak.”

“I am respectfully towards drawing this out.… It is time to finish it for all of the gents.”

The sudden turnaround within the case is simply the most recent twist in a saga that noticed considered one of Canada’s most useful publicly traded hashish firms shattered by allegations that it grew hundreds of kilograms of unlawful weed after which lied to buyers about it. Tons of of jobs and practically a billion {dollars} in shareholder worth had been worn out, whereas the corporate and its executives, administrators, underwriters and auditors had been hit with a raft of class-action lawsuits on either side of the Canada-U.S. border.

Expenses based mostly on alleged unlawful rising

The RCMP and OSC charged Paul, Litwin and Aceto —  who beforehand headed up Scotiabank’s online-banking subsidiary Tangerine — with quasi-criminal securities offences final yr.

CannTrust’s greenhouse in Pelham, Ont., was on the centre of now-abandoned allegations towards the corporate’s former CEO, ex chairman and a former director. (Tijana Martin/The Canadian Press)

The fees got here after CannTrust introduced in July 2019 that Well being Canada had realized of “the rising of hashish in 5 unlicensed rooms” on the firm’s Pelham, Ont., greenhouse between October 2018 and March 2019, earlier than the rooms obtained the right approvals in April 2019.

The OSC claimed the lads didn’t open up to buyers that almost half the rising house on the facility wasn’t correctly licensed, and that they used company disclosures to say that “CannTrust was compliant with regulatory necessities.”

Prosecutors had been additionally alleging Litwin and Aceto signed off on pitches to U.S. buyers that said CannTrust was absolutely licensed and compliant, and that Litwin and Paul traded shares of CannTrust whereas realizing in regards to the allegations of unlicensed rising however earlier than it was publicly disclosed.

Trial testimony final week and submissions by defence attorneys, nonetheless, painted a special image: that the corporate’s complete greenhouse was licensed all alongside, and it simply wanted some routine approvals from Well being Canada to start out rising pot vegetation within the further rooms.

Below cross-examination, CannTrust’s former director of high quality and compliance Graham Lee agreed with Fenton that the corporate’s hashish manufacturing licence from Well being Canada did not really prohibit what rooms it may develop in.

That undercut the prosecution’s case, which hinged on the concept the corporate had been engaged in unlicensed hashish cultivation.

At one level, Lee testified, CannTrust workers did stage images as a part of a submission to Well being Canada, in an try and disguise the additional rising rooms. However senior administration didn’t instruct him to do that, he stated.


The implications of CannTrust’s regulatory struggles have been huge: Days after it made its July 2019 announcement in regards to the purportedly “unlicensed rooms,” the corporate voluntarily suspended gross sales of all its hashish merchandise. Then in September 2019, Well being Canada formally suspended the corporate’s licence to promote. The subsequent month, the corporate stated it might destroy $77 million value of vegetation and stock.

As its income streams ran dry, CannTrust was compelled into chapter 11 safety in March 2020. As soon as value $1.5 billion on inventory markets, the enterprise was shortly delisted in New York and Toronto.

The corporate, a few of its former executives and quite a few its underwriters settled the cross-border class-action lawsuit for $83 million final yr, with none admissions of wrongdoing. Many of the firm’s remaining property had been purchased earlier this yr by a gaggle of buyers led by a Dutch-based non-public fairness agency. CannTrust then modified its identify to Phoena Holdings Inc.

Defence attorneys didn’t wish to remark Wednesday. Earlier than the trial started, Aceto’s lawyer Frank Addario instructed The Canadian Press that his shopper “behaved legally and with integrity throughout his time at CannTrust.”

The OSC, Ontario’s stock-market regulator, stated it would not remark whereas the matter continues to be earlier than the courtroom.

CBC Information additionally reached out to Well being Canada with questions. The company stated it might look into it.

The case is again in Toronto’s Previous Metropolis Corridor courtroom on Thursday for a dedication of whether or not all three males can be formally acquitted.

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