Securities and Exchange Commission (SEC) officials have outlined charges against a Toronto-based cannabis company and its former Chief Commercial Officer, alleging improper revenue accounting and other accounting misconduct.
The SEC indicated the charges involved Cronos Group Inc., a Nasdaq-listed cannabis company, and Cronos’s former Chief Commercial Officer William Hilson.
According to the SEC’s order, the fancy alleged Cronos Group Inc. violated the antifraud, reporting, books and records, and internal controls provisions of the federal securities laws, while the SEC indicated its order against Hilson alleged he violated the antifraud provisions of the federal securities laws and further aided and abetted and caused Cronos’s violations of the reporting, books and records and internal controls provisions.
The SEC’s order determined in three separate quarters between 2019 and 2021, Cronos Group Inc. submitted financial statements with the SEC containing material accounting errors related to, among other things, revenue recognition and goodwill impairment.
Additionally, the SEC noted the order also found that, in one of the quarters, Hilson entered into an undisclosed oral agreement to sell cannabis raw material and to repurchase cannabis products in the following quarter. The agreement was neither known nor accounted for by Cronos Group Inc., which discovered the $2.3 million accounting error during an internal investigation.
The SEC determined Cronos Group Inc. should not incur a financial penalty given its timely self-reporting, significant cooperation, and remediation.
According to the SEC, Cronos Group Inc. and Hilson offered to settle the matter by agreeing to cease and desist from future violations of the charged provisions without admitting or denying the SEC’s findings.
The SEC noted Hilson agreed to a three-year officer and director bar and to be suspended from appearing and practicing before the SEC as an accountant for at least three years.