Key Points:

  • The U.S. Securities and Exchange Commission (SEC) charged the chief financial officer of a cannabis company with orchestrating a $4.2 million "round-trip" cash exchange with an affiliated nonprofit to inflate the company's year-end cash balance.
  • The SEC alleged that Acreage Holdings' former CFO, Glen Leibowitz, directed company accountants to falsify the December 2019 transaction—first recording it as a loan repayment, then changing it to a short-term loan from the nonprofit to Acreage—and lied to auditors about the cash exchange.
  • "Leibowitz knew the round-trip cash transfer had no economic substance or legitimate business purpose and was designed to bolster Acreage's publicly reported year-end cash balance," the SEC said in a statement on Monday.

Deep Dive:

Leibowitz's lawyers said on Tuesday that the SEC's allegations lack merit.

"Mr. Leibowitz acted appropriately in all respects, and this case should never have been brought," John Nowak, a partner at New York's Schulte Roth & Zabel LLP, said in an email.

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

The SEC said in a March 14 court filing that in late 2019, as the fiscal year neared its end, Acreage's senior management grew increasingly concerned about the company's "imminent cash shortfall."

According to the SEC, one executive wrote in a November 2019 email to Leibowitz: "All our competitors are showing positive (cash flow), why is our gap so large?"

The SEC noted that securities analysts tracking cannabis companies at the time were particularly focused on cash balances at Acreage and its competitors because the industry faced difficulties in obtaining bank loans and other traditional financing.

The SEC alleged that in December 2019, Leibowitz facilitated a plan by Acreage executives to persuade an affiliated nonprofit to transfer funds, with the agreement that Acreage would return the same amount to the nonprofit in early 2020.

According to the SEC, the cash increased Acreage's year-end cash balance by more than 15%, to approximately $30.7 million.

The SEC alleged: "Leibowitz's conduct caused Acreage's accountants to create journal entries that mischaracterized the round-trip transaction and concealed its true purpose."

When employees raised concerns about the transaction to board members, Leibowitz allegedly directed company accountants to create a journal entry that reversed the round-trip transaction by incorrectly indicating that Acreage had returned the funds to the nonprofit in December 2019 rather than January 2020.

The SEC alleged: "Even after the fraud was halted, Leibowitz repeatedly lied to Acreage's external auditors about the transaction."

Nowak denied the allegations against Leibowitz, saying his client "always acted in good faith and took steps to ensure the transaction had no impact on the company's financial statements."

"The company's auditors determined the transaction was not material, and Mr. Leibowitz was transparent with those around him, including the board and auditors, about what he knew regarding the transaction," Nowak said.

In January 2025, the SEC said it had settled with Acreage over the round-trip accounting scheme. Without admitting or denying the SEC's findings, Acreage agreed to pay a $225,000 civil penalty.

Ontario-based Canopy Growth Corp. announced in December the completion of its acquisition of Acreage. The company noted that the U.S. cannabis market is expected to grow to $50 billion next year.