The 1 year anniversary of Canadian cannabis legalization is behind us, and the effects of Cannabis two. are nevertheless ahead. Investors in the pot market are presently in the eye of the storm, waiting to see which way the wind will blow subsequent. Some of the leading cannabis stocks are starting to show indicators of life, but is it adequate to resurrect the market?

At instances like this, it is critical to try to remember that not all cannabis corporations will be about to celebrate the second anniversary of legalization. To get an thought of which pot stocks are headed for the grave, investors require to watch very carefully for undesirable-faith operations in cultivation, production, and retail.

It could be surprising—spooky, even—to understand that some of the leading cannabis stocks on the marketplace are hiding skeletons in their closets. So, with Halloween proper about the corner, let’s bring these skeletons out and discover out which corporations investors could want to consider twice about prior to trusting once more.

CannTrust: The Cannabis Boogeyman

Yes, all proper, absolutely everyone knows about CannTrust Holdings Inc. (TSX:TRST) (NYSE:CTST) currently. It is develop into a folktale for the entire market, a warning of what undesirable items are lurking behind seemingly respected corporations. We will not go more than all the sordid particulars once more (you can study all about that in earlier articles), but it is worth searching at 1 component of the story that is not obtaining adequate focus.

On October 14, CannTrust announced it will destroy $77 million of pot. According to firm spokesperson Jane Shapiro, “the destruction of this material is each an vital and integral component of CannTrust executing its remediation strategy, as effectively as addressing Overall health Canada’s remediation expectations.”

All the things becoming destroyed stems from the illicit cannabis cultivation that was found back in July. That discovery led CannTrust, 1 of the greatest cannabis stocks, to resort to massive layoffs and the ousting of two leading executives.

But what is CannTrust undertaking to address the truth that it let black marketplace pot enter its facility and flow into the legal market in the 1st location?

This second scandal proves that CannTrust didn’t just make 1 error. It produced quite a few. The truth that more than a thousand cannabis plants that originated from black marketplace seeds had been grown at the company’s cultivation facility indicates that the firm has a systemic trouble following regulations.

It need to give investors cause to think that there might be additional CannTrust scandals just waiting to come to light.

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Curaleaf: The Monster Stock Beneath the Bed

Also in July, Curaleaf Holdings Inc. (CSE:CURA) (OTCQX:CURLF) spent close to a billion dollars acquiring a Chicago-primarily based rival. It claimed that this deal produced it not just 1 of the leading cannabis stocks offered, but the greatest cannabis firm in the planet.

Inside days, even so, it was hit by a warning letter from the FDA. The letter addressed claims that Curaleaf was illegally promoting CBD goods and producing “unsubstantiated claims” that the goods treat cancer, Alzheimer’s illness, opioid withdrawal, discomfort, and pet anxiousness.

More than the subsequent two weeks, Curaleaf was also slapped with a class action securities lawsuit for producing knowingly false and misleading statements to the investing public and was fined $250,000 by the State of Massachusetts for failing to disclose a modify of ownership to state regulators.

As with the CannTrust story, this wasn’t just 1 scandal. It was a multi-headed hydra, swallowing up investor trust and spitting out an market-wide decline in stock costs. When the leading cannabis stocks misbehave, they bring the complete cannabis space down with them.

That is not to say, even so, that only the greatest corporations have scandals they want you to overlook. Little closets can hide massive skeletons as well.

PotNetworks: A Haunted Prospect

As soon as once more, we return to July. In that month, Charles Vaccaro, President of PotNetwork Holdings (OTCPK:POTN), contacted an undercover FBI agent hoping to discover an individual to aid “liquidate about $100 million in stock in many corporations.”

Vaccaro and two other males had been involved in a scheme to buy shell corporations and “take around 20% ownership by means of debt conversions. They would then transfer shares to an offshore brokerage, sell the shares, and transfer the income back into the United States.”

The FBI arrested all 3 males, but PotNetwork Holdings is nevertheless trading and nevertheless attempting to develop into a trustworthy cannabis stock.

But trusting it could not be a excellent thought for investors, seeing as it was lately hit by a class-action lawsuit that alleges two of its subsidiaries misrepresented the quantity of CBD in their goods.

As we’ve noticed, when a firm is caught ignoring 1 regulation, there’s excellent cause to think it is ignoring other regulations as effectively. When CannTrust, Curaleaf, and PotNeworks might get their collective acts collectively and abide by the law, investors need to be cautious prior to trusting them once more.

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Featured image: DepositPhotos © Yarygin