Cannabis company dinged by SEC over ‘round-trip’ transfer to inflate year-end cash

A cannabis company agreed to pay $225,000 to settle allegations that funds were temporarily deposited into its year-end accounts for the sole purpose of inflating year-end cash, the Securities and Exchange Commission (SEC) said.

Investors evaluate publicly traded companies by considering their financial assets, including how much cash they have at the end of the year. For this reason, the SEC, whose mission is to protect investors, requires companies to accurately report their cash balances. Not doing so is misleading and a violation of agency rules.

Acreage Holdings, incorporated in Canada in 2011 and based in New York, was recently purchased by Canopy USA, a subsidiary of Canada-based Canopy Growth Corporation.

In late 2019, Acreage senior management became concerned that the company’s cash balance, of about $26.5 million, was not as strong as they wanted, the SEC said in its order Friday.