CULTIVATED: A boutique cannabis bank founded by Goldman and JPMorgan alums is chasing deals, CannTrust is exploring a sale

Happy Friday!

Hello from the tiny town of Winhall, Vermont, where I’m thankfully escaping the 90-degree weather in New York.

This week, we saw the latest fallout at embattled Canadian marijuana producer CannTrust as the Ontario Securities Commission opened an investigation into the company.

CannTrust hired the investment bank Greenhill & Co to explore a sale, though Robert Marcovitch, the company’s interim CEO, said in a BNN interview that he’d still prefer CannTrust remain independent.

The Globe and Mail had reported this week that CannTrust insiders sold $6 million worth of company stock after the company’s chairman was informed of the unlicensed cannabis growing.

As CannTrust grabbed headlines, short sellers were working on a report about Hexo, another Canadian cannabis producer. (I covered Hexo’s run-in with Riposte Capital, an activist investor, last year).

The short-sellers claim that Hexo was promoting products on Snapchat — a social media platform used mostly by teens under the legal consumption age — as recently as June. According to the short report, the ads “included slogans that encouraged risk-taking, and associated Hexo’s brand and products with glamour, excitement, and vitality.”

That’s all clearly against the rules Health Canada laid out about advertising cannabis to kids. Snap itself admitted that its age control restrictions don’t work, because kids, well, they’re not stupid. Health Canada has since opened an investigation into Hexo.

And cannabis producer WeedMD invited some Twitter controversy of its own after it partnered with Instagram star Dan Bilzerian’s cannabis company, Ignite. Bilzerian’s marketing tactics, relying on semi-automatic weapons and half-naked women, seem to appeal to a narrow slice of 17-year-old boys, and nobody else.

So far, neither company has backed down from the agreement.

Both the CannTrust and Hexo debacles show that Health Canada has its hands full with the move-fast-and-break-things Canadian cannabis producers. And like we’ve reported before, the Canadian public does not view the cannabis sector favorably. Expect more questions from investors, short-sellers, journalists, and regulators alike.

In other news, cannabis producer Aphria defied Wall Street and turned a profit.

And on the home front, Gov. Andrew Cuomo signed a bill decriminalizing marijuana possession in New York State.

The penalties will be similar to a traffic ticket once the law goes into effect: $50 for possessing less than an ounce of pot or a maximum of $200 for 1 to 2 ounces. The bill will also allow certain past offenders to expunge their records for low-level marijuana possession.

Looking forward to next week — I’ll have a pair of stories about how the mainstream venture capital world is looking at cannabis, so look out for those.

-Jeremy