Trial Begins for Former Cannabis Industry CEOs Charged with Fraud

Three former executives at CannTrust Holdings Inc., now operating as Phoena Holdings Inc., are facing charges of fraud, insider trading, and allowing unlicensed activity related to thousands of kilograms of cannabis grown in 2018, Cannabis Business Times reports. The case against former CEO Peter Aceto, former Board Chairman Eric Paul, and former Board Vice-Chairman Mark Litwin commenced Monday in the Ontario Court of Justice. 

The Ontario Securities Commission (OSC) alleges the men did not report half of the growing space at a Pelham, Ontario facility, which was not licensed by Health Canada. Additionally, the agency claims the former executives used corporate disclosures to falsely claim they were in full compliance, the report says.

Two of the defendants, Litwin and Paul, face insider trading charges after the OSC says they traded CannTrust stocks while possessing undisclosed information about the unlicensed property. Aceto and Litwin are charged with creating a false prospectus and a false preliminary prospectus, which they would later use to raise money in the U.S.

The company board fired Aceto as CEO and forced Paul out in 2019. Litwin resigned last year. Charges were filed in 2021 by the OSC, marking the first time the agency has filed charges against a publicly traded cannabis company.