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None of the allegations have been tested in court.

THC’s response, filed in November, alleges the settlement agreement was entered into as a result of Jacob’s “false pretences, fundamental misrepresentations and omissions.” THC had engaged Jacob to act as an agent for an equity financing and to publish a research report, the response says, adding that if THC had “been aware of the true status of (Jacob) with its regulatory authority, they would not have entered into the settlement agreement.”

That regulatory authority, the Investment Industry Regulatory Organization of Canada, had placed Jacob under scrutiny over the previous two years, unbeknownst to THC, according to court filings.

On Nov. 10, 2015, a month before the Investment Industry Regulatory Organization suspended Jacob Securities, the firm announced the launch of the Jacob Capital Management Cannabis Fund, which would “target both private and public investments across the global cannabis value chain.”

The announcement said the Jacob fund would have a maximum size of $50 million, and that George Smitherman, a former deputy premier of Ontario and also a director of THC, had been “specifically chosen as senior adviser.”

Jacob’s cannabis fund, Smitherman said this week, “never did take off.”

Jacob had announced the fund without requisite registration approvals, the Investment Industry Regulatory Organization alleged.

Within weeks of the fund announcement, the regulator learned about more of Jacob’s troubles: the chief financial officer was resigning and the company had been “locked out of its business premises due to its failure to pay rent of approximately $110,000,” the Investment Industry Regulatory Organization hearing panel wrote in itssuspension decision, adding, “apparently, unsupervised trading continued by (Jacob’s) registered representatives through their mobile phones and by meeting with clients in the lobby of the building.”