When it comes to #cannabis companies raising money, people have been chiming in on what does or does not constitute “fraudulent” activity, seemingly oblivious to the actual laws.
Although it’s true that investors have an obligation to do proper due diligence before handing over their cash, companies looking to raise money from investors have disclosure obligations that will be scrutinized on a case by case basis.
"Fraudulent misrepresentation" may exist when a company possesses specific knowledge and information establishing that the value of their business is significantly overstated, and despite this knowledge, represents the inflated value to investors, knowing the representations are false.
"Fraudulent concealment" may exist when, in addition to the four elements of fraudulent misrepresentation, the company had a duty to disclose material information and failed to do so.
"Fraudulent failure to disclose facts" may exist when a company fails to disclose that its value was not as stated in appraisal.
When trying to look as enticing as possible to investors, companies must remain honest and realistic regarding their products and services and their executives’ financial expectations.
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