A New York federal judge has reopened the door for investors to pursue securities fraud claims against cannabis company Cronos Group Inc., ruling that allegations tied to a U.S. Securities and Exchange Commission (SEC) settlement provide enough basis for the case to proceed.
U.S. District Judge Eric N. Vitaliano issued an order last week granting investor Keith Norman’s motion for reconsideration of an earlier dismissal, vacating the previous denial of leave to amend the complaint.
SEC Settlement Adds Weight to Claims
Norman alleges that Cronos misled investors by inflating its revenue figures to meet financial benchmarks, later amending these reports and causing its stock prices to plummet. He sought to incorporate findings from an SEC settlement involving Cronos’ former Chief Commercial Officer and CFO, William Hilson, who was accused of manipulating revenue numbers in public filings.
Cronos argued that the SEC settlement, characterized as allegations “upon information and belief,” cannot substantiate a fraud claim. Judge Vitaliano, however, disagreed, stating the settlement bolsters the complaint enough to survive dismissal.
