The Securities and Exchange Commission today charged Cronos Group Inc., a Nasdaq-listed cannabis company based in Toronto, for improperly accounting for millions of dollars of revenue and for other accounting misconduct in multiple reporting periods. The SEC also charged Cronos’s former Chief Commercial Officer, William Hilson, with fraud and aiding and abetting the company’s violations. In agreeing to settle with Cronos, the Commission determined that the company should not incur a financial penalty, given its timely self-reporting, significant cooperation, and remediation.
According to the SEC’s order, in three separate quarters between 2019 and 2021, Cronos submitted financial statements with the SEC that contained material accounting errors related to, among other things, revenue recognition and goodwill impairment. 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 product in the following quarter. This agreement was neither known nor accounted for by Cronos, which discovered the $2.3 million accounting error during an internal investigation. After discovering the accounting errors, Cronos promptly reported the misconduct to the SEC and provided extensive cooperation that meaningfully advanced the Commission’s investigation. It also took effective remedial steps to enhance its internal accounting controls.
Source: SEC.gov | SEC Charges Canadian Cannabis Company and Former Senior Executive with Accounting Fraud
