Antonio Stella, a Donvale resident, has been sentenced to 11 months in home detention. For these reasons, in August 2020, he was found guilty of two counts of insider trading relating to Cann Group, a medicinal cannabis company. The court ordered him to pay a civil fine of $225,447.24. Stella’s trading activities resulted in a profit of $204,490, which he accrued by selling shares between July 19 and July 20, 2021, shortly before the company’s share price fell following a public announcement.
This case is a testament to the Australian Securities and Investments Commission’s (ASIC) resolute commitment to fighting insider trading. Their interests particularly acute in developing industries, like the recently thriving medical cannabis industry. What Stella did was a huge financial benefit to him. In doing so, they undermined the integrity of the investment landscape for all Australians.
Details of the Trading Scheme
Stella’s illegal trading included reacquiring 2,090,909 shares at a lower price during a share placement period. Existing institutional investors were given the opportunity to purchase shares at a low price of $0.275 per share. This strategic action allowed Stella to avert $20,986 in potential losses. His trades just happened to coincide with Cann Group’s ASX announcement that they would be raising funds through a placement that day. Consequently, stock prices fell precipitously. Sure enough, by August 2, 2021, the fledgling company had closed on their $10 million. Next, on October 15, 2021, it raised another $8.69 million with a Share Purchase Plan.
The Mildura facility has become the backbone of Cann Group’s operations. At full capacity, it is expected to be producing 12,500 kilograms of medicinal cannabis annually. This dramatic growth highlights the importance of protecting the integrity of the market as the unique and rapidly-growing medicinal cannabis industry matures.
Implications and Actions Taken
Stella was handed a sentence of time served and released on a 12 month good behaviour bond. This ruling is a welcome sign that the court is acknowledging his previous treatment as a pretrial detainee. ASIC deputy chair Sarah Court said the impact of insider trading is significant. She concluded that these crimes undermine the trust and equality that is essential to the share market.
“This crime affects all Australians who invest in the share market and ASIC will continue to take strong action to combat insider trading.” – Sarah Court
In doing so, the court underscored the harm such insider trading does to other investors. It complained, with great logic, that when one side wins at the other side’s expense, everybody else loses.
“If someone unfairly makes a gain from insider trading, other investors are losing.” – Sarah Court
