Canopy Growth ($CGC) Inflated BioSteel Financials and Concealed Control Failures Case

Case: CV-23-00701769-00CP

• CGC investors filed a claim against Canopy Growth Corporation for overstating the financial performance of its BioSteel Nutrition subsidiary, concealing serious internal control weaknesses, and failing to correct known accounting issues despite prior warnings.
• Following disclosures on May 10, 2023, and June 22, 2023, admitting to material misstatements, control deficiencies, and overpayment to BioSteel’s minority shareholders, CGC shares traded down sharply, causing significant investor losses.
• CGC investors can join this case to be notified about potential recovery.

Case Details:

Between June 1, 2021, and June 22, 2023, Canopy Growth Corporation, through public statements and financial reports, repeatedly portrayed its subsidiary BioSteel Nutrition as achieving strong revenue growth, profitability, and goodwill. The company assured investors that its internal controls over financial reporting (ICFR) and disclosure controls and procedures (DC&P) were effective.

In reality, BioSteel’s revenue was allegedly overstated, and Canopy’s internal controls were deficient, enabling improper revenue recognition. These weaknesses had been flagged years earlier in the Mode v. Canopy Growth Corporation lawsuit, which revealed BioSteel engaged in “channel stuffing,” speculative or undocumented sales, and poor assessment of customers’ ability to pay. Despite this, Canopy and its auditor KPMG allegedly failed to address the problems.

The truth began to surface on May 10, 2023, when Canopy disclosed material misstatements in its financial statements and admitted to ICFR/DC&P deficiencies. On June 22, 2023, the company revealed additional inaccuracies and confirmed it had overpaid BioSteel’s minority shareholders, some of whom were the company’s founders and senior executives.

Based on these events, CGC investors filed a claim against Canopy Growth, alleging the company:

• It misrepresented BioSteel’s financial performance and growth trajectory.
• It failed to disclose and correct known internal control deficiencies.
• It ignored prior evidence of accounting misconduct revealed in earlier litigation.

Investors argue Canopy artificially inflated its stock price by concealing material risks and control failures, leaving shareholders exposed when the truth emerged.