The former chief executive officer and chief financial officer of WM Technology (Nasdaq: MAPS), the parent company of popular cannabis dispensary finder site Weedmaps, each agreed to pay $175,000 in fines to settle allegations that the company issued “misleading” user number metrics while they ran the business, essentially lying to investors and regulators about how successful the site had been after it went public.
According to a press release from the U.S. Securities and Exchange Commission on Wednesday, former CEO Chris Beals and former CFO Arden Lee agreed to pay the civil penalties without having – admitted any guilt to the alleged violations – and also agreed to three-year bars on serving as corporate executives of any public company.
The SEC announced earlier that the company agreed to a $1.5 million fine to settle the same allegations of wrongdoing.
In the announcement, the SEC said that Beals and Lee were both at fault when they signed off on corporate documents for Weedmaps that included “negligent misrepresentations in WM Technology’s public reporting of a self-described key operating metric, the ‘monthly active users,’ or ‘MAU,’ for WM Technology’s online cannabis marketplace.”
For more than a year, beginning in May 2021, shortly after Weedmaps went public on the Nasdaq, Beals and Lee signed off on earnings filings with the SEC and relied on the MAU stats in earnings calls with investors to present a rosier picture of Weedmaps’ success than was justified by actual numbers, the SEC said.
Rather, the company – along with Beals and Lee – relied on faulty MAU numbers, due to pop-up ads on third-party websites redirecting many customers to Weedmaps, which Weedmaps then counted as part of its MAU statistics as evidence to the SEC and investors that its website was much more popular than it actually was.
“These purportedly ‘active’ users did not volitionally seek out the WM Technology site, and, in most instances, did not click on any links or engage in measurable activity on the WM Technology site,” the SEC said in its release, when in reality the user numbers “were stagnant or declining.”
Beals and Lee were well aware of the flawed metrics, the SEC charged, but they “failed to reasonably follow up and negligently continued to sign WM Technology’s SEC filings and make public statements” based on the faulty MAU numbers, the SEC said.
After an “internal complaint” shed light in mid-2022 on the flawed reliance on MAU stats, the company began an investigation and that led to an SEC investigation, which ultimately resulted in fines for the company, Beals and Lee.
Beals stepped down from the helm of Weedmaps in November 2022, just a few months after the complaint came to light and the SEC began investigating. Lee resigned in July 2023.
Weedmaps debuted on the Nasdaq in April 2021, but quickly began floundering financially and its active user base steadily declined. The questionable pop-up redirects for consumers online accounted for up to 65% of Weedmaps’ reported MAU numbers by August of 2022, according to the SEC case against WM Technology.
Weedmaps reported net income of $152.2 million in 2021, but lost $82.7 million the following year and another $15.7 million in 2023. The company has had a slight rebound in recent quarters, with net income this year of $3.2 million total for the first six months of 2024.
[[{“value”:”The SEC announced earlier that the company agreed to a $1.5 million fine to settle the same allegations of wrongdoing.
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