The Canadian Cannabis sector has long been a gateway for new businesses to grow and expand into the world. The industry has been relatively free of frauds and scams until recently.
OSC alleges misuse of funds
According to the Ontario Securities Commission, Canada Cannabis Corp. misused investor funds worth $3 million. In a Friday statement, the regulator accused three people of misleading investors by making false statements. The three individuals are- Peter Strang, Silvio Serrano, and Benjamin Ward. However, the allegations against the three and Canada Cannabis haven’t but yet. The regulator will preside over the initial hearing on September 30th in this matter.
More specifically, the OSC said that Canada Cannabis raised around $3.2 million and another US$8.8 million from investors between 2014 and 2016. Over 125 people were duped in this scheme, half of whom were from Ontario. The three company staff members accused by the regulator told investors that the money will be used for the development and operation of Canada Cannabis. However, the three siphoned off the funds. CCC reportedly loaned over $3 million to one of Serrano’s companies, which helped them misuse investor funds.
The regulator also suggests that the company’s investor brief, used to raised funding, from January 16, 2014, includes multiple misleading statements. The company lied about what it owns and also went on to misrepresent the educational achievements of Ward.
CCC’s plans explained by OSC
The regulator also says that CCC originally planned to get a license for producing medical cannabis in Canada. It also applied for the same in 2014. However, the investors did not know that they withdrew the application in 2019.
The OSC crafted 8-page document detailing allegations against the company as well as its staff. It noted that the three accused employees “devised a scheme whereby CCC (Canada Cannabis) would use investor funds to purchase an interest in and make a loan to Growlite.” Note that Growlite is owned and operated by Serrano.
The three also agreed to use $1 million of funds to buy a 45% stake in Serrano’s company. However, they did not hire a valuator to decide if the company was worth over $2 million. Not only this they also completely ignored the fact that investing in Growlite could lead to conflicts of interest allegations. The OSC documents state that the investor funds were used to the advantage of Strang and Serrano and their respective families and companies.