The ongoing scandal with CannTrust (TSE: TRST) is quickly shaping up to be one of the worst in the cannabis sector, easily surpassing other notorious incidents such as the Aphria LATAM acquisition debacle which caught storm in late 2018.
Shares of the company have fallen by around 50% since news broke a couple of weeks ago that Health Canada had seized illegally produced weed that the company was growing without necessary licenses.
Since then, the controversy has only gotten worse. Now, leaked emails have gone on to show that CannTrust executives had full knowledge about the illegal grow operation they had been keeping a secret.
The updated story was covered by the Canadian newspaper, The Globe and Mail, in a subscriber-only story that said they had seen leaked emails from CannTrust’s top executives proving they were well aware of what was going on.
The newspaper went on to say that Chairman Eric Paul and CEO Peter Aceto, as well as other top executives, were in on the scheme, and the Graham Lee, the company’s compliance officer, reportedly said in an email that CannTrust had “dodged some bullets” after a Canadian government inspection failed to find the hidden plants in November 2018. The story goes on to say that the chairman had instructed staff on how to proceed and hide the matter from authorities.
If true, it will likely be the final nail in the coffin for this scandal. When Health Canada found that CannTrust was growing unlicensed cannabis in its facilities, they weren’t sure whether any of it had been shipped internationally, or to what extent senior management was aware of the issue.
Since then, it became apparent that some of this illegal weed was sold to Denmark, which already is an offense in Canada that could lead to hefty fines or possible jail sentences. Now that it’s clear that top CannTrust executives were in on the scheme, a full-scale criminal prosecution will likely take place.
The push back has already been severe, as CannTrust has seen itself getting many of its awards revoked. CannaChiefs media ended up expelling CEO Peter Aceto from their “2019 TOP 50 Most Influential Canna Chief” honors in response to these allegations.
The cannabis sector has a lingering veneer of shadiness that’s stuck through, despite the progress the industry has made in becoming more transparent and open.
As such, having a stellar reputation is essential for cannabis companies as even a moderate scandal can leave a permanent impact. The last time the industry saw something like this was back in late 2018 when short sellers came out against Aphria (NYSE: APHA)(TSE: APHA), accusing the company of fraudulent, insider-dealings regarding their LATAM acquisitions.
However, while Aphria recovered from the incident after shedding its top executives and taking other measures, that’s in a completely different league then illegally producing cannabis, which will likely carry jail time for CannTrust’s top executives.
CannTrust Company Profile
CannTrust Holdings Inc is engaged in the business of producing and distributing medical cannabis in Canada. Its facility is located at Vaughan, Ontario in Canada. Its brands include LIIV, ESCAPE, SYNR.G and Peak Leaf. – Warrior Trading News
