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.