The U.S. Securities and Exchange Commission has filed further complaints against B.C. residents who it says conducted a complex international scheme to defraud U.S. investors by illegally trading shares of hundreds of smaller listed companies on the stock market through offshore entities.
In a civil suit filed Aug. 11 in the Supreme Court of British Columbia, the commission is seeking an order freezing assets belonging to offshore facilitator Fred Sharp and his alleged accomplices Paul Sexton, Zhiyeng Chen aka Yvonne Gasarch, Jackson T Friesen, Courtney Kelln, Graham R. Taylor and Mike K. Veldhuis — all residents of British Columbia.
In the complaint, the commission alleges that Sharp operated an “illicit business facilitating securities fraud”, with the direct assistance of Kelln and Gasarch, residents of Surrey and Richmond, respectively. In addition to the commission’s civil lawsuits, the trio face criminal fraud charges in the United States.
The firm, known as the ‘Sharp Group’, reportedly used an array of offshore shell companies to conceal the identities of clients involved in promoting US-listed companies, helping them avoid disclosure requirements while they fraudulently manipulated the price of shares in “pump”. and dump programs,” the commission noted. The group also carried out stock transfers and money transmissions through an encrypted communication network, as part of their service. Sharp called the network “Q”, nicknaming himself Bond and Gasarch “Wires”, according to the commission’s preliminary evidence.
Taylor, Veldhuis, Sexton and Friesen were among the Sharp Group’s “largest” clients, as they collectively accounted for more than $140 million in illegal stock sales.
Sharp, a former Vancouver lawyer, had other client groups engaged in similar arrangements, who are collectively accused of facilitating more than $1 billion in illegal deals, generating around $770 million in profits since 2011 , according to civil charges filed in the United States by the command in August 2021.
The commission is asking the court for freezing (preservation) orders at 16750 Maki Rd. in Lake Country, owned by Sexton, and 2769 1st Ave. in Vancouver, owned by Friesen. The commission is also seeking to freeze vehicles belonging to others.
The commission says it does not have “a full picture of the defendants’ financial affairs and the location of their assets in Canada,” except for rated assets and Canadian investment accounts already subject to an injunction. temporary ban issued by a Massachusetts court last year. .
The commission relied on the BC government’s land title registry. The government, in particular, is finalizing filings for its beneficial ownership registry, which will allow companies to search for residential titles.
The commission is also seeking a court order that the defendants provide it with an affidavit disclosing all of their assets, including those that are beneficially owned by a nominee or jointly with another person.
There is at least one instance where defendants sold a property following the 2021 charges and prior to this claim – this is the $2.78 million sale of a Richmond home on Gabriola Gate, which once belonged to Gasarch.
The claim does not relate to Sharp’s West Vancouver home.
After failing to respond to allegations and attempted service by a sheriff, Sharp has since been found liable for the fraud. On May 12, Massachusetts Federal District Court Judge William G. Young issued a default judgment against Sharp, “accepting as true the factual allegations of the U.S. Complaint regarding Sharp and finding several violations of U.S. law on securities,” the complaint noted.
As such, other than Sharp, none of the allegations against any other defendants have been proven in court.
Fred Sharp responds to US SEC case against him
Sharp was fined a civil penalty of US$24 million and found liable for repayment of US$21.8 million plus US$7.2 million in interest.
But after the commission filed a $29 million lawsuit against Sharp in the BC Supreme Court, Sharp recently responded, through criminal defense attorney Joven Narwal.
Sharp now denies all of the commission’s allegations, according to its response to the civil suit notice. Sharp claims he was denied procedural fairness, in part because the email address at which service was supposed to be made was not his own and attempts to serve him at his home and by mail, under the Hague Convention, failed.
“Evidence in the form of a certificate was totally unsatisfactory because it did not describe whether the person attempting the service knocked on the door, rang the doorbell, left a card or took other significant action,” notes the answer.
As such, the default judgment should not be enforced in Canada, Sharp argued in its Aug. 16 response to the court.
Sharp is also engaged in a complex and longstanding constitutional challenge against the Canada Revenue Agency, which is investigating its offshore tax arrangements. The CRA made a criminal referral in 2013, alleging that Sharp’s business, Corporate House Group of Companies (Corporate House), was involved in a complex tax evasion scheme. In 2016, Corporate House arrangements were revealed in the Panama Papers leak.
gwood@glaciermedia.ca
