Brian White  |  January 22, 2021

Category: Canada

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Marijuana Dispensary

A Canadian cannabis company is looking to settle with investors who lost money following an illicit growing scandal and sanctions that resulted in numerous class action lawsuits. 

Announced Wednesday, the deal will have CannTrust Holdings Inc. paying out $39.6 million into a trust intended to settle plaintiff claims once the company completes restructuring.

The marijuana producer was in the hot seat with Canadian regulators over unlicensed grow operations, BNN Bloomberg reports. 

CannTrust’s license to grow and sell marijuana in Canada was revoked in 2019 when inspectors found unregistered plants at a facility.

A former employer admitted to investigators to hiding the illegal pot from health department officials behind false walls, according to BNN Bloomberg. Seeds were also reportedly sold on the black market. 

The news CannTrust was selling thousands of kilograms of pot illegally sent the company’s stock price plummeting at the time.

By Feb. 2020, a class action lawsuit was filed by investors, according to Marijuana Business Daily. A month later, CannTrust was filing for bankruptcy protection. 

In April, CannTrust was delisted from the New York and Toronto stock exchanges.

Marie Henein, an attorney working for the firm representing CannTrust said the problems came from the marijuana industry’s transition from an illegal business to a legal one, in a February 2020 interview with BNN Bloomberg.

“It’s just normal growing pains, I don’t think it’s anything extraordinary or unusual in terms of the outlook [for] the industry,” Henein said.  

The company reportedly went through extensive staff changes, implemented more controls and improved record keeping in efforts to get licensed again. 

By June 2020, CannTrust’s license to grow was reinstated by Canada’s health department, and the company was back on the market selling recreational pot by December, Marijuana Business Daily reports

“Today’s announcement represents a significant milestone towards the resolution of substantially all of the civil litigation claims that were filed against CannTrust following the company’s non-compliance with certain Health Canada regulations,” CannTrust CEO Greg Guyatt said in a release.

CannTrust says the settlement still requires good faith negotiations with the plaintiffs to be finalized. 

CannTrust has been growing marijuana for Canada consumers since 2013, according to the company website

In filings with Canadian regulators, CannTrust reported an estimated 61.2 million in cash on hand in January. 

Top Class Action is tracking updates relevant to consumers in a variety of market sectors, including the growing marijuana industry. 

Read more on our recent coverage on alleged unwanted calls and texts from Colorado and California dispensaries. 

What do you think about this proposed settlement? Do you invest in CannTrust or use their products? Tell us what you think in the comments below.  

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