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Marijuana financial restatements show industry still maturing, insiders say

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The marijuana industry has an accounting problem, with a number of companies correcting errors in financial statements in recent years through restatements.

Restating financial results is a rare occurrence for most public companies: 2020 had the lowest number of financial restatements by public companies in the past 20 years with only 364, according to a report by Massachusetts-based Audit Analytics.

But a disproportionate number of them have come from the cannabis industry over the past few years, making it harder for investors to gauge the financial health of a company.

Restatements also can lead to potentially costly class action lawsuits.

In the case of the marijuana industry, the restatements have included high-profile companies:

Florida-based multistate operator Jushi Holdings in September said it filed restated financial results for this year’s first quarter.
Chicago-headquartered MSO Verano Holdings announced in July it would restate five quarters of financial results.
KushCo Holdings, a California-based packaging company now known as Greenlane Holdings, announced in 2019 it was restating results from fiscal 2018 and 2017 to reflect accounting errors stemming from previous acquisitions.
Canadian cultivator and processor Cronos Group, headquartered in Toronto, said in November 2021 it would restate financials for the three- and six-month periods ending June 30 of that year.
Matt Karnes, founder of New York-based cannabis financial consultancy GreenWave Advisors, attributes the problem largely to the U.S. government’s marijuana prohibition.

That has prevented major accounting firms such as the Big Four – Deloitte, EY (formerly Ernst & Young), KPMG and PricewaterhouseCoopers – from servicing the marijuana industry.

He also chalks it up to inexperienced and/or understaffed in-house accounting departments at public cannabis companies.

“Financial reporting is definitely an area that many people overlook,” he said.

Accounting for errors

Jushi announced on Sept. 9 it filed restated first-quarter 2022 results.

The company identified two errors:

Right-of-use assets associated with finance leases, accrued expenses and other liabilities.
Operating, investing and financing activity cash flow.

“These errors did not impact the cash balance as of March 31, 2022, and there was no net change in cash flows during the three months then ended,” according to a Jushi news release.

Verano said in July that it would be restating five quarterly financial statements dating to March 31, 2021, and that all of its disclosures and investor presentations since then “should therefore no longer be relied upon.”

Stock-based compensation had been understated, according to a news release, affecting the stated tax expenses.

“In this particular case, it seems like it was an error that was overlooked,” Karnes said, “and it seems like a very simple matter that should have been identified.

“And so it really brings home the point that I’ve been expressing for a long time now, that many cannabis companies lack the in-house accounting expertise that other industries have.”

Common pitfalls

John Pelliterri, a partner at New York-headquartered Grassi Advisors and Accountants, said the issues Verano and Jushi have grappled with are common in the marijuana industry, where accounting for the cash-based sector is particularly challenging and equity-based compensation is common.

In addition, he said common pitfalls include:

Inventory, which moves quickly in cannabis.
State taxes combined with issues related to Section 280E of the federal tax code, which prohibits marijuana businesses from taking traditional business deductions.
Convoluted ownership structures.
Some management teams might choose to invest more in the company’s brand rather than key areas such as accounting.

But, Pelliterri said, with time and, perhaps, by learning the hard way, restatements will become less common.

“We’re getting there,” he said. “Once you get in a year, two years, you start to understand the nuances and then you get a handle on a lot of the issues.

“But there’s not that many people that have been doing it that long.”

Legal risks

Toronto-based Cronos Group announced in November 2021 it would restate financials for the three and six months ending June 30, 2021, after failing to report more than $220 million in impairment charges.

“As we move forward, we are committed to improving our internal controls and financial reporting practices, maintaining the highest standards of transparency and accountability, and enhancing our capabilities and resources across functions to support our strategy,” President and CEO Kurt Schmidt said in a statement this past February.

In the meantime, a number of law firms launched investigations to determine whether there were grounds for – and shareholder interest in – filing a class action lawsuit.

“Cronos stock was down more than 15% during intraday trading on Nov. 9, 2021, thereby injuring investors,” according to a November 2021 news release, issued by Philadelphia-based Kehoe Law, soliciting investors who lost more than $25,000 to contact the firm.

“The restating of a public company’s financial statements is like ringing the alarm bell for class action lawyers,” Robert Cohen, a litigation partner at the Cassels law firm in Toronto, told MJBizDaily via email.

“It doesn’t necessarily mean that a class action will ensue or be successful, but it typically means that there is smoke to be investigated, and often when there is smoke, there is fire.”

In another instance, Cronos Group restated its first-, second- and third-quarter financial statements in 2019 after reviewing sales of bulk resin and wholesale products.

That spurred one shareholder to attempt to file a class action lawsuit on behalf of other individuals, arguing that the company had “orchestrated a scheme to inflate its reported revenue figures” and that the errors had ultimately negatively affected the share price.

According to the Ontario Court Appeal’s Sept. 26 decision to allow the class action regarding the 2019 restatements to move ahead, the defendants dispute that the share price drop is attributed to the restatements but, rather, to the COVID-19 pandemic and delayed distribution of a new product in the United States.

Cronos Group did not respond to a request for comment from MJBizDaily.

The Court of Appeal’s decision shows that class actions are the most common way to take action against public companies for alleged misrepresentations that come to light from the restatement of financial statements, Cohen said.

“Starting a class action, obtaining leave of the court to proceed and getting it across the finish lines of both a trial and an appeal is rare in Canada, as many class actions settle along the way,” Cohen said.

“Having said that, just the commencement of a class action which has various badges of merit can prove to be very damaging to a public company, including to its ability to raise funds at critical times.”

Considering the risks and costs associated with restatements of financial statements, both Karnes and Pelliterri advise marijuana companies to invest in accounting and make an effort to stay on top of the latest developments. The industry is still new.

“A lot of the rules are still being written,” Pelliterri said.

“As more people get into the industry and it becomes more mainstream, a larger group will gravitate (toward cannabis) from a financial perspective.”

Kate Robertson can be reached at kate.robertson@mjbizdaily.com.

Source: https://mjbizdaily.com/marijuana-financial-restatements-show-industry-still-maturing-insiders-say/

Business

EU Pressure Builds on Google as Regulators Face Calls for Massive Fine Over Search Practices

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A growing coalition of European industry groups is intensifying pressure on regulators to take decisive action against Google over allegations of unfair search practices that could reshape competition rules across the region’s digital economy.

Investigation Under Digital Markets Act Gains Momentum

The case is being examined by the European Commission under the European Union’s landmark Digital Markets Act (DMA), introduced to curb the dominance of major technology platforms and ensure fair competition.

Launched in March 2024, the investigation focuses on whether Google has been prioritising its own services in search results, potentially disadvantaging rival businesses that rely on online visibility to reach customers.

Industry Groups Demand Swift Action

Several prominent European organizations have jointly urged regulators to conclude the probe without further delay. They argue that prolonged investigations allow alleged anti-competitive practices to continue, putting European companies—especially startups—at a disadvantage.

Signatories include the European Publishers Council, the European Magazine Media Association, the European Tech Alliance, and EU Travel Tech.

In a joint statement, these groups warned that delays in enforcement are affecting innovation, profitability, and growth prospects for regional businesses competing in digital markets.

Google Denies Allegations

Google has rejected claims of bias, stating that its search algorithms are designed to deliver the most relevant and useful results to users. The company has also proposed adjustments to address regulatory concerns.

However, critics argue that these changes are insufficient and fail to address the core issue of market dominance.

Potential Billion-Euro Penalties

If found in violation of the DMA, Google could face significant financial penalties. Under EU rules, fines can reach a substantial percentage of a company’s global turnover, potentially amounting to billions of euros.

Regulators may also impose corrective measures requiring changes to business practices, which could have long-term implications for how digital platforms operate in Europe.

Wider Implications for Big Tech

The case highlights ongoing tensions between European regulators and major U.S. technology firms. In recent years, the EU has taken a more aggressive stance in enforcing competition laws, aiming to create a level playing field for local businesses.

A final ruling against Google could set a major precedent, influencing future enforcement actions and shaping the regulatory landscape for global tech companies operating within Europe.

As scrutiny intensifies, the outcome of the investigation is expected to play a critical role in defining the future of digital competition across the European Union.

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AI & Technology

Amazon Faces Potential Criminal Trial in Italy Over €1.2 Billion Tax Evasion Allegations

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Milan: U.S. tech giant Amazon is facing the prospect of a major legal showdown in Italy, after prosecutors in Milan formally requested a court to move forward with criminal proceedings over alleged tax evasion totaling approximately ₹12,500 crore (€1.2 billion).

The case targets Amazon’s European division along with four senior executives, marking one of the most significant tax-related investigations involving a global e-commerce platform in Europe.

Trial Push Despite Multi-Million Euro Settlement

The move comes even after Amazon reached a financial settlement with Italian tax authorities in December, agreeing to pay around ₹5,500 crore (€527 million), including interest, to resolve part of the dispute.

Typically, such settlements lead to the closure of criminal investigations. However, Milan prosecutors have opted to proceed, signaling a tougher stance on alleged corporate tax violations.

A preliminary hearing is expected in the coming months, where a judge will decide whether to formally indict the company and its executives or dismiss the case.

Allegations of VAT Evasion Through Marketplace Sellers

At the center of the investigation are claims that Amazon’s platform enabled non-European Union sellers to avoid paying value-added tax (VAT) on goods sold to Italian consumers between 2019 and 2021.

Prosecutors allege that the company’s marketplace structure allowed thousands of foreign vendors—many reportedly based in China—to operate without fully disclosing their identities or tax obligations. This, authorities argue, led to substantial VAT losses for the Italian government.

Under Italian law, online platforms facilitating sales can be held partially liable if third-party sellers fail to comply with tax requirements, a key point in the prosecution’s case.

Italian Government Named as Affected Party

In their filing, prosecutors identified Italy’s Economy Ministry as the injured party, citing significant financial damage resulting from the alleged tax evasion.

Legal experts say the outcome of the case could have wide-ranging implications across the European Union, where VAT systems are harmonized and similar compliance rules apply to digital marketplaces.

Multiple Investigations Add to Pressure

The VAT probe is just one of several legal challenges facing Amazon in Italy. The European Public Prosecutor’s Office is reportedly examining additional tax-related issues covering more recent years.

Meanwhile, Milan authorities are pursuing separate investigations into alleged customs fraud linked to imports from China and whether Amazon maintained an undeclared “permanent establishment” in Italy—potentially exposing it to higher tax liabilities.

In a separate regulatory action, Italy’s data protection authority recently ordered an Amazon unit to stop using personal data from over 1,800 employees at a warehouse near Rome.

Amazon Denies Allegations

Amazon has consistently denied wrongdoing and indicated it will strongly contest the allegations in court if the case proceeds. The company has also warned that prolonged legal uncertainty could impact investor confidence and Italy’s appeal as a destination for international business.

Broader Impact on Europe’s Digital Economy

If the case moves to trial, it could become a landmark moment for the regulation of global e-commerce platforms in Europe. Governments across the region are increasingly scrutinizing how digital marketplaces handle tax compliance, especially in cross-border transactions.

With online retail continuing to expand, regulators are under mounting pressure to ensure that multinational platforms and third-party sellers adhere to the same tax rules as traditional businesses.

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Aviation

IndiGo Crisis Exposes Risks of Monopoly: What If Telecom or E-commerce Collapses Next?

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Airports across India witnessed scenes of distress and confusion as thousands of passengers were stranded due to IndiGo’s massive flight disruptions. Families with medical emergencies, funerals, and personal crises were left helpless as the airline cancelled hundreds of flights without adequate communication or support.

Passengers described desperate situations — a mother pleading for sanitary pads for her daughter, a woman unable to transport her husband’s coffin, and others stranded while trying to reach family funerals or hospitals. “It was like a lockdown at the airport,” one passenger said, describing the panic that unfolded as IndiGo’s mismanagement crippled operations nationwide.

Root Cause: IndiGo’s Market Monopoly

The turmoil, industry experts argue, stems from IndiGo’s monopolistic control over India’s domestic aviation market. The airline operates nearly 2,100 flights daily and holds around 60% market share — meaning every second plane flying within India belongs to IndiGo.

This dominance has given the company unparalleled influence. When IndiGo falters, the entire aviation system suffers. Passengers are left with few alternatives, as other airlines lack capacity to absorb stranded travellers. The result: skyrocketing ticket prices, chaos at terminals, and total dependence on a single private operator.

Aviation pioneer Captain G.R. Gopinath, founder of Air Deccan, criticised the government’s inaction, noting that on some routes, IndiGo’s economy fares surged to ₹1 lakh. He compared the situation to a hostage crisis, writing that the airline “held the system ransom” and forced regulators to defer new safety rules meant to protect pilots and passengers.

Government Intervention and Regulatory Weakness

The crisis erupted after IndiGo failed to comply with the Flight Duty Time Limitations (FDTL) — rules introduced by the DGCA in January 2024 requiring adequate rest for pilots. Despite having nearly two years to adapt, IndiGo blamed the rule for operational disruptions, citing a shortage of pilots.

Under mounting public pressure, the government stepped in, temporarily relaxing FDTL norms and capping airfare hikes. Officials claimed the move was to protect passengers, but analysts say it exposed the state’s vulnerability to corporate monopolies. “The government had no option but to yield,” said one aviation policy expert, pointing out that ignoring safety regulations for short-term relief could have long-term consequences.

The crisis also rekindled memories of the June 2025 Air India crash near London, which claimed over 240 lives. Experts warn that compromising pilot rest and safety standards to maintain flight schedules could risk another tragedy.

If Telecom Giants Fail: A National Paralysis

The article raises a troubling question — what if a similar crisis struck the telecom sector, where Jio and Airtel together control nearly 80% of subscribers and serve over 780 million users?

If both networks failed simultaneously, the repercussions would be catastrophic. Internet shutdowns would halt UPI transactions, online banking, OTP verifications, video calls, OTT streaming, and emergency communications. Critical services such as airports, hospitals, stock exchanges, and small businesses — many of which rely on WhatsApp and digital payments — would come to a standstill.

In essence, a telecom breakdown could paralyse India’s digital economy, exposing the nation’s dependence on a duopoly.

E-commerce Monopoly: Another Fragile Ecosystem

The same risk looms over the e-commerce sector, where Amazon and Flipkart dominate nearly 80% of the market. A disruption similar to IndiGo’s could cripple daily life — halting delivery of groceries, medicines, and essential goods, freezing refunds and customer support, and leaving small sellers without platforms to trade.

Local retailers, freed from competition, might exploit shortages by inflating prices. Such a scenario underscores the perils of market centralisation in sectors critical to everyday living.

A Wake-Up Call for Regulators

The IndiGo crisis, analysts say, is a warning shot for policymakers and regulators. A single company’s operational failure exposed systemic weaknesses in India’s infrastructure and consumer protection mechanisms.

As the aviation regulator DGCA investigates and IndiGo works to restore normalcy, the broader lesson remains clear: unchecked monopoly power in any essential service — whether air travel, telecom, or e-commerce — poses a direct threat to economic stability and citizen welfare.

Without stronger competition laws, redundancy frameworks, and regulatory oversight, India risks repeating this crisis across multiple sectors — each time with millions of citizens paying the price.

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