Former Cannabis CEO Ordered to Pay Over $7.4M for Scheme to Bypass U.S. Securities Regs
The Supreme Court of British Columbia, Canada, last week ordered a former cannabis company executive to pay more than $7.4 million after he was found to have engaged in a financial workaround designed to bypass securities regulations in the United States, BIV reports. The judge ruled that Nicholas Vita, former CEO of Columbia Care LLC and Columbia Care Inc., was fully liable for a debt he guaranteed through an offshore margin account, despite Vita’s claims that the arrangement was fraudulent.
In 2019, when Vita was serving as CEO, the companies closed a deal with the Canadian financial services firm Canaccord Genuity Corp. to take the company public on the Canadian stock exchange. During the process, Vita and Columbia Care’s Executive Director and Chairman Michael Abbott floated the idea of a “margin account” loan, which allows the account holder to borrow against the value of the securities they deposit as collateral.
Both sides agreed that Canaccord, as a Canadian company, could not open a margin account for Vita personally because he is a U.S. citizen and subject to U.S. regulatory laws, according to the ruling from Justice Simon R. Coval.
“Instead,” Coval determined, “the margin account was opened in the name of Amaranthus, an Isle of Man company beneficially owned by Mr. Abbott’s family trust.”
In the summer of 2019, more than 10.6 million Columbia Care shares, valued at about $650 per share, were deposited into the account. Canaccord then paid loans into the account totaling US$11.3 million. Four months later, Vita asked Canaccord for Amaranthus to borrow another US$2 million.
Canaccord agreed to the loan on the condition that another 17 million Columbia Care shares were deposited into the account and that Vita personally guarantee Amaranthus’s debt, which he did on Dec. 31, 2019, according to the ruling. Within a month, the account held about about $127 million in Columbia Care shares and US$14 million in debt.
By December 2020, the value of Columbia Care shares dropped, the report says, and at that time, there was $30 million in shares and US$6.7 million in debt in the account. In October 2024, Canaccord told Amaranthus’s representatives it sought to cancel the agreement and that the total debt was due, and sent a letter to Vita asking him to repay the nearly US$7 million in outstanding debt. Ultimately, four months later, Canaccord sued Vita to enforce the loan guarantee and collect its debt, the report says.
Vita argued the debt should be “extinguished” due to a missed two-year limitation period, according to the ruling. Vita also characterized the entire Amaranthus structure as an illegal attempt to circumvent U.S. anti-money laundering and securities laws.
The judge rejected those claims, deciding that even if the limitation period had expired for the offshore company, Vita had signed a “principal debtor” clause that left him responsible for the debts.