Dive Brief:

• The Securities and Exchange Commission charged the CFO of a cannabis company with orchestrating a so-called round-trip exchange of $4.2 million in cash with an affiliated non-profit organization to inflate the company’s end-of-year cash balance.
• The former CFO for Acreage Holdings, Glen Leibowitz, allegedly directed company accountants to falsify the December 2019 transaction — first as a loan repayment and later as a short-term loan from the non-profit to Acreage — and then misrepresented the cash exchange to auditors, the SEC alleged.
• “Leibowitz knew that the round-trip cash transfer had no economic substance or legitimate business purpose and was intended to bolster Acreage’s publicly traded reported year-end cash balance,” the SEC alleged Monday in a release.

Dive Insight:

The attorney for Leibowitz said on Tuesday that the SEC allegations lack merit.

“Mr. Leibowitz acted properly in all respects, and this case should not have been brought,” John Nowak, a partner at Schulte Roth & Zabel in New York, said in an email.

Acreage, incorporated in British Columbia, was headquartered in New York and listed on the Canadian Securities Exchange.

In late 2019, as the end of the fiscal year approached, Acreage senior management grew increasingly concerned about the company’s “looming cash shortfall,” the SEC said in a March 14 court filing.

“All of our competitors are showing [cash flow] positive,” a senior executive said to Leibowitz in a November 2019 email, according to the SEC. “Why are we so far off?”

At the time, securities analysts tracking cannabis companies were especially focused on cash balances at Acreage and its rivals because of the industry’s challenges in obtaining bank loans and other traditional sources of financing, the SEC said.

In December 2019, Leibowitz facilitated a plan by senior Acreage executives to persuade a non-profit affiliated with the company to transfer funds with the understanding that Acreage would return the exact amount to the non-profit at the start of 2020, the SEC alleged.

The cash boosted Acreage’s year-end cash balance by more than 15%, to approximately $30.7 million, according to the SEC.

“Leibowitz’s conduct contributed to Acreage’s accounting staff’s creation of journal entries that mischaracterized the round-trip transaction and concealed its true purpose,” the SEC alleged.

When employees voiced concern about the transaction to a board member, Leibowitz allegedly directed company accountants to make a journal entry that reversed the round-trip transaction by falsely indicating Acreage returned the funds to the non-profit in December 2019 rather than January 2020.

“Although the fraud had been aborted, Leibowitz proceeded to lie about the transaction on multiple occasions to Acreage’s outside auditor,” the SEC alleged.

Nowak denied the charges against Leibowitz, saying his client “always acted in good faith, and he took steps to ensure that the transaction had no impact on the company’s financial statements.”

“The company’s auditors determined that the transaction at issue was not material, and Mr. Leibowitz was transparent with those around him, including the company’s board and auditors, as to what he was told about the transaction,” Nowak said.

In January 2025, the SEC said that it settled charges with Acreage pertaining to the round-trip accounting scheme. Acreage, without admitting or denying the SEC findings, agreed to pay a $225,000 civil penalty.

Ontario-based Canopy Growth Corp. announced in December that it had completed the acquisition of Acreage. It noted that the U.S. cannabis market is forecast to grow to $50 billion next year.