Ever since the Canopy Financial scandal broke last month, there has been lots of speculation about existing investors cashing out during the company’s July financing round. peHUB has now learned that $40 million of the $62.5 million deal was used as liquidity for Granite Global Ventures, Canopy board member John Powers (CEO of Stanford Management Co.) and Canopy’s three co-founders. Of that, GGV took the lion’s share with $27.5 million.
It’s time for them to give the money back.
As Deb reports below, over 1,000 people have had their Health Savings Accounts frozen because of the Canopy fraud. This mean sick people could be unable to access money saved for the purpose of paying medical bills. They may get the cash back eventually — via bankruptcy proceedings — but that’s cold comfort to someone who is ill or injured right now.
I’m told that one large healthcare administrator is making its clients good in the meantime, but it is an exception to to rule. Everyone else is just out of luck, and the FDIC doesn’t care because a failed bank isn’t involved.
GGV and Powers will almost certainly be required to pay back the money via the bankruptcy proceeding — let alone a possible civil case from the July investors — but they shouldn’t wait. At the very least, set up some sort of fund for those currently unable to access their accounts. It wouldn’t have to be an admission of wrongdoing, but rather an example of doing right.