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Ben Ward, former chief executive officer of Canadian Cannabis Corp., speaks during the Cannabis Business Europe 2018 congress in Frankfurt, Germany, on Aug. 28, 2018.RALPH ORLOWSKI/Reuters

The former chief executive officer of Canadian Cannabis Corp. has been banned from running public companies in Ontario for six years as part of a settlement in a long-running securities enforcement case that has featured unusual secrecy.

Ben Ward, who founded Canadian Cannabis with Silvio Serrano and Peter Strang in 2014, admitted Friday before the Capital Markets Tribunal – an independent division of the Ontario Securities Commission (OSC) – that he “acquiesced” when the company lent $3-million in investor funds to a marijuana lighting company owned by Mr. Serrano and failed to ensure that those funds were used properly.

Mr. Ward also admitted that Canadian Cannabis misled investors, in one instance issuing an offering memorandum that falsely stated he had a PhD.

Mr. Ward agreed to pay $10,000 toward the OSC’s costs for the investigation, but because none of the $3-million loan was diverted to him, the tribunal agreed that he should not be subjected to further financial penalties, such as disgorgement. Although he is still permitted to trade securities he owns, he has agreed to a six-year ban from acting as an officer or director of a securities registrant or issuer.

In a statement, Mr. Ward said he was “ambivalent” about the settlement. He said he was pleased that the agreement recognized that he didn’t defraud anyone, but said the regulator’s statement of allegations made three years ago effectively ended his career in Canada.

“After my experience, a six-year ban is academic,” he said. “The permanent damage was done on the date of the statement of allegations being made. The OSC knew from the outset where the money went and that I didn’t take it.”

The OSC also sanctioned Canadian Cannabis as a corporation, but because it is no longer operational and has no assets, it is not subject to any financial penalties.

The regulator also made clear in its Friday hearing, however, that it is proceeding with its enforcement case against Mr. Serrano and Mr. Strang, who allegedly defrauded investors by diverting the $3-million loan to themselves and Mr. Serrano’s family members. Those allegations have not been proven, and both men have launched legal challenges to the OSC’s case, which has been subject to an unusual level of confidentiality for a regulatory proceeding.

When the OSC first brought allegations against Canadian Cannabis and the three men in 2019, it marked the regulator’s first enforcement case against a cannabis company. At the time, the sector had exploded in popularity with retail investors and had become, according to the OSC, “a magnet for unscrupulous market participants.” Canadian Cannabis raised about $3.2-million through private placements, as well as US$8.8 million from about 125 investors, but ultimately never obtained, cultivated or distributed any marijuana.

But in the three years since, the case has taken some extraordinary turns.

When Mr. Serrano and Mr. Strang were supplied with the evidence the OSC had amassed against them – what’s known as disclosure – the transcripts of the regulator’s compelled interview with Mr. Ward was missing. Mr. Serrano and Mr. Strang requested the transcripts, but when they were provided in April, 2020, portions of the interviews were redacted. The only explanation was an accompanying note that stated the evidence had been redacted by “confidential order of the commission.”

The men sought more information about the order, arguing that this material was needed to defend themselves. An OSC adjudicator heard their arguments, but allowed for a portion of the regulator’s submissions to be made in secret, without Mr. Serrano, Mr. Strang or their lawyers present. The OSC retained high-profile criminal defence lawyer Frank Addario to represent it, and Toronto litigator Nader Hasan was appointed to act as an amicus curiae – or friend of the court – to observe the confidential proceedings. It was the first time such an appointment had taken place in the history of the OSC.

Since then, Mr. Serrano and Mr. Strang have been provided with what they say is a “significantly redacted” version of the secret order that allowed for the redactions in Mr. Ward’s transcript.

The men are still pushing for the release of the entire transcript and, if they are denied it, a declaration that the OSC’s refusal to provide it amounts to an abuse of process. The OSC disagrees and is due to file its response this month.

In 2017, there were two high-profile killings in Toronto that had ties to Canadian Cannabis. It is not known if either of those incidents had anything to do with the confidential order or the operations of the company.

In March of that year, a gunman opened fire on a BMW in a parking lot outside a lighting store owned by Mr. Serrano. The intended target, Mr. Serrano’s brother, Saverio Serrano, was wounded, but his girlfriend, 28-year-old Mila Barberi, was killed. Saverio Serrano is one of the family members the OSC alleges improperly received investor funds.

Two weeks after Ms. Barberi’s killing, Tony Sergi, a known Mafia figure and cannabis grower, was shot to death in his driveway in the Toronto suburb of Etobicoke. Mr. Sergi had talked with Canadian Cannabis about the company possibly acquiring some of his cannabis facilities and had purchased some lighting equipment from the company.

The OSC has also alleged that $45,000 of investor funds flowed to Silvio Serrano’s father, Diego Serrano, who has been convicted multiple times of drug-trafficking offences. In his compelled interview with the OSC, though, Silvio Serrano distanced himself from his father, explaining that Diego Serrano hadn’t been present for a large portion of his life.

He acknowledged that he acted as a surety when his father was arrested in 2015, but explained that it was something he felt compelled to do as his son. “I wasn’t proud of Diego and his history,” he told investigators.