Canadian cannabis company Cronos Group Inc (TSX: CRON) and its former senior executive were charged with accounting fraud for improperly reporting revenue during various quarters.
The SEC on Monday announced charges against Cronos Group for violating antifraud, reporting, books and records, and internal controls security law provisions by submitting inaccurate revenue levels and goodwill impairment for three separate quarters between 2029 and 2021. The company’s former chief commercial officer William Hilson was also charged with fraud and aiding and abetting in the accounting misconduct. Specifically, the SEC alleged that Hilson made a $2.3 million oral deal to sell raw cannabis and then repurchase the subsequent cannabis product later on, which was not disclosed by Cronos Group on its accounting documents.
However, given that Cronos Group reported the accounting misconduct to regulators, cooperated with investigators, and made efforts to fix the errors, the commission decided to forego imposing a financial penalty against the company. In order to settle the SEC’s accusations, both Cronos and Hilson agreed to cease and desist from such future violations, as well as appoint an independent compliance advisor to overlook the company’s accounting methods. Hilson, meanwhile, agreed to cease practicing as an accountant for a minimum of three years.
“While today’s order finds that Cronos’s controls were not up to standards when it began filing financial statements with the SEC, Cronos avoided penalties by promptly self-reporting its accounting misconduct as it came to light within the company, cooperating with our investigation, and promptly taking effective remedial steps,” explained SEC Enforcement Division Associate Director Mark Cave.
Cronos Group traded at around $4.02 on the TSX at the time of writing.
Information for this briefing was found via the SEC. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.