Settlements
SpeakEasy Cannabis Club Ltd. [Settlement Agreement]
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BCSECCOM #:
2020 BCSECCOM 126
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Document Type:
Settlement Agreement
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Published Date:
2020-05-05
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Effective Date:
2020-05-04
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Details:
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2020 BCSECCOM 126
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Settlement Agreement
SpeakEasy Cannabis Club Ltd.
Securities Act, RSBC 1996, c. 418
- The Executive Director of the British Columbia Securities Commission (the Executive Director) and SpeakEasy Cannabis Club Ltd. (SpeakEasy) agree as follows:
Agreed Statement of Facts
1. SpeakEasy is a cannabis company headquartered in Rock Creek, British Columbia. It is a reporting issuer in British Columbia and listed on the Canadian Securities Exchange (CSE) and Frankfurt Stock Exchange (FSE).
2. SpeakEasy has no history of securities regulatory misconduct.
Misconduct
3. On July 24, 2018, SpeakEasy issued a news release informing the market that it had closed a non-brokered private placement raising approximately $3,000,000. According to SpeakEasy’s news release, the proceeds from the private placement were to be used for general working capital. This was inaccurate.
4. In fact, SpeakEasy retained only $1.55M of the private placement proceeds. On or around the same day as the news release, SpeakEasy returned $1.25M in consulting fees to seven purported consultants. One further payment was made to another purported consultant on August 2, 2018 for $200,000, for a total of $1.45M in payments to the group of consultants (Purported Consultant Group).
5. No services were provided by the Purported Consultant Group in exchange for those payments.
6. An associate of SpeakEasy’s then-CFO, and two members of the Purported Consultant Group (together, the Consultant Subscribers) subscribed for 3,452,857 units of SpeakEasy’s 4,285,714 unit private placement. SpeakEasy relied on prospectus exemption 2.24 of NI 45-106 for distributions to the Consultant Subscribers, which meant that the shares were immediately free-trading.
7. Various of the Consultant Subscribers represented to SpeakEasy that the shares were for investment purposes and were not for resale in the short term. However, by September 13, 2018, the Consultant Subscribers sold a total of 2,782,426 SpeakEasy shares at average prices below the private placement acquisition cost, for a profit of $1,530,753.
8. As a result of the activity above, SpeakEasy participated in conduct abusive to the capital markets that, but for the mitigating factors outlined below, would warrant public interest orders under s. 161 of the Act.