Well, now the SEC has weighed in with lawsuit alleging fraud on the part of Canopy and one of its co-founders Jeremy Blackburn, who was the COO. He misled investors about Canopy’s financial condition when raising a $75 million round. When the fund-raising was complete, he paid off existing investors to the tune of $40 million, and took about $1.7 million for himself, according to the complaint (embedded below).
According to the SEC:
The SEC’s complaint alleges that Canopy and Blackburn solicited investors from at least October 2008 through August 2009, providing them with documents devised to show that Canopy had a much healthier cash balance and larger client base than it actually did. Blackburn also falsified at least one bank statement to show an account balance of approximately $8.9 million, when in fact it was a custodial account of a Canopy client that held approximately $86,952. The SEC further alleges that Canopy raised approximately $75 million from investors and paid approximately $40 million in redemptions to existing investors, including Blackburn who redeemed 250,000 shares in exchange for approximately $1.625 million.
The complaint was filed on November 30, six days after our initial story ran.