Part of cannabis and investments
The Ontario Securities Commission claims that three men, including the former CEO of publicly traded cannabis reseller Wayland Group Corp., committed fraud in a separate pot company.
In the first case of regulator fraud in the cannabis industry, the OSC claims that Benjamin Ward, Peter Strang and Silvio Serrano were responsible for misleading statements while they raised millions of dollars from Canadian and US investors for a company called Canadian Cannabis Corp. Some of that money was improperly diverted to Mr. Strang, Mr. Serrano and others associated with Mr. Serrano, says the OSC.
Mr. Ward was managing director and director of Canadian cannabis. Subsequently he was CEO of the Wayland group. Both Mr. Strang and Mr. Serrano were vice-presidents and "de facto directors or directors" of Canadian cannabis, according to OSC.
The charges do not relate to Wayland, formerly Maricann Group Inc., to which Ward joined in 2016 as CEO. He left Wayland in this year's August.
The OSC declined to comment beyond its statement of charges on Friday. The Globe and Mail was unable to contact Mr. Ward, Mr. Serrano and Mr. Strang for comment.
"Nobody from Wayland will comment on this," Wayland CEO Matthew McLeod said in an e-mail.
The OSC claims that there were "numerous false statements" at an initial investor briefing prepared before Canadian cannabis was incorporated, including that the horticultural lighting company Growlite Canada was a "core business" in which Cannabis Canadian owned a 45% stake. The OSC also states that the briefing stated that Mr. Ward holds a doctorate. "This was false", states the OSC.
Mr. Ward, Mr. Strang and Mr. Serrano are responsible for misleading statements, states the OSC.
In over 2 and a half years, men have raised $ 3.2 million in Canada and $ 8.8 million in the United States for Canadian cannabis.
The company used $ 4 million of investor money on Growlite Canada, with $ 1 million used to buy a stake in Growlite Canada and $ 3 million for a loan, the OSC states. Serrano was the owner of Growlite Canada, said the OSC.
OSC claims that approximately $ 2.73 million, plus US $ 224,000, "have been turned away from the business of Growlite [Canada] and for the benefit of Serrano and Strang, their families or their subsidiaries." The OSC claims that $ 860,000 went to Mr. Strang while the rest went to Mr. Serrano, one of his brothers, his father, his cousin and a defense lawyer who represented his father.
The father of Mr. Serrano is Diego Serrano, whose drug-related beliefs include cocaine trafficking in the 80s and, more recently, head of a ring that imported and trafficked in ecstasy, the club's famous drug.
The OSC states that no interest was paid on the Canadian cannabis loan to Growlite Canada and that the three men "made no attempt" to recover the balance, which was canceled as uncollectible in April 2016. "Ward, Strang and Serrano used the loan to defraud investors", states the OSC.
Furthermore, the OSC states that, in 2015, approximately $ 800,000 of Growlite lights stored in a Canadian Cannabis facility "have disappeared under suspicious circumstances". The three men "did not report the matter to the police, nor did they present an insurance claim or take steps to recover the value of the inventory." This "private [company] of one of its only remaining resources", says the OSC.
The OSC investigation into Ward caused problems to Wayland at the beginning of 2018, when it emerged that it was under investigation by the securities regulators, but had not disclosed it to investors of Wayland.
At the time, Wayland was trying to raise $ 70 million in a purchased deal signed by a group of investment banks. The underwriters canceled the agreement after information emerged on the OSC investigation into Mr. Ward, along with the insider trading charges against two Wayland directors.
The OSC subsequently abandoned its investigation into the insider trading allegations by Wayland directors.
OSC is trying to prohibit Ward, Strang and Serrano from trading securities or becoming officials or directors of publicly traded companies. The Commission also requests administrative fines of "no more than $ 1 million each" and that the three men return "any sum obtained as a result of non-compliance with the Ontario securities law".
An execution procedure is scheduled for September 30 in Toronto.