Australian medical cannabis company Cann Group (ASX:CAN) went into a trading halt last Friday, and when it emerged the news wasn’t good.
On February 5, Cann requested a trading halt, pending an announcement to the market not related to manufacturing but to “an investigation that the Company is undertaking”.
On Monday February 8, the nature of that investigation became clear.
Described as a “cyber security” incident, a breach was discovered on the night of February 4.
The nature of the breach involved payments of approximately $3.6 million the company had made that were meant to go to an overseas contractor in relation to works being carried out on Cann’s medical cannabis facility in Mildura.
“.. however, those payments have been received by an unknown third party as a result of a complex and sophisticated cyber fraud..,” states an announcement from the company.
External security and forensic IT experts have been called in to assist with the investigation and the incident has been reported to Cann’s insurers, the Office of Drug Control, and police in Victoria, the Netherlands and Hong Kong.
The loss of $3.6 million is a big blow to the company, but Cann Group says it will be able to continue with day-to-day operations and projects, including the construction of the facility in Mildura – regardless of whether the funds are recovered or not.
Further details will be provided by Cann as they become available.
While how this happened is yet to be determined, what can occur in such incidents is a malicious third party monitors the email communications of a company after gaining unauthorised access to systems; learning about suppliers, projects and finances – this can happen over a long period. When an invoice is submitted, the party dives in, intercepting it and changing the banking details to those belonging to the fraudster.
It was interesting to note the impact (or lack thereof) the incident had on Cann Group shares – on Friday they finished at around 66c, but on Tuesday – the day after the announcement – they closed at around 90c.
On a related note, Cann Group reported in late January it was continuing to work toward mobilising construction in Mildura, with site activities scheduled to begin late this month.
“The final cost of $65m to complete the facility, with an initial capacity of 12,500kg, will be funded via Cann’s existing cash on balance sheet as well as the $50m NAB debt facility announced in November,” stated the company at the time.
Australia’s Office of Drug Control (ODC) varied the licences necessary to enable activity at Cann Group’s Mildura medical cannabis facility in November last year.