This is part one of a two-part story. The second part can be found here.
Within the last three years, more than US$150 million in civil penalties and repayment orders have been levied against 15 British Columbians for their alleged involvement in “a sophisticated, multi-year, multi-national attack on the United States financial markets and retail United States investors,” according to the U.S. Securities and Exchange Commission (SEC).
A network of at least 18 British Columbians is claimed to have collectively, through separate groups of associates, manipulated roughly $1 billion of stock sales across more than 100 public companies, according to the SEC and the Department of Justice (DOJ).
Of those 18 individuals, 15 have been banned from operating in the U.S. securities market, three have been convicted of criminal charges in the U.S. and six face criminal charges south of the border.
All but two can still operate freely in B.C.’s markets.
Richmond resident Kris Kallu claims to be one of an unknown number of local victims impacted by one of the most significant stock-fraud schemes to have allegedly been orchestrated out of Vancouver.
And he has a question about the authorities who regulate and enforce the laws that govern the province’s capital markets: “Where are they?”
U.S., local cases proceed against Sharp Group
U.S. authorities allege former Vancouver lawyer Fred Sharp was the “mastermind” of the network that, for nearly a decade, manipulated U.S. penny stock exchanges between 2010 and 2019.
They allege Sharp concealed beneficial stock ownership through offshore shell companies and trading platforms to avoid reporting requirements and trading restrictions. His clients then sold their shares to retail investors at elevated prices after surreptitiously promoting the companies.
Among the first criminally convicted in relation to this alleged “Sharp Group” is Kallu’s cousin, Avtar Singh Dhillon, who is scheduled to serve four months in a federal prison starting today, after pleading guilty in December 2022 to multiple charges, including the wilful failure to disclose stock sales, aiding and abetting the sale of unregistered securities, and conspiracy to not disclose touting compensation.
Obstruction of justice charges for lying to SEC investigators under oath were dropped against Dhillon as part of a plea deal, which assisted the SEC in securing a US$10 million monetary order from Dhillon and US$51 million in orders against five co-defendants from B.C.
Dhillon, 65, is a University of British Columbia-trained medical doctor who had begun promoting medical company stocks by 2000. He moved to the U.S. in 2001 but has maintained numerous properties and business ties in B.C. while residing in a $12 million waterfront home in Long Beach, CA.
His home for the next four months is anticipated to be Terminal Island federal prison, just 11 miles from that property.
Dhillon once claimed to have raised more than $1 billion from investors. He has served as past chair of the Cannabis Canada Council and is a former member of the B.C. Securities Commission’s (BCSC) securities practice advisory committee.
And yet, facing possible deportation back to Canada as a felon, Dhillon remains free to conduct business in B.C. despite being banned from operating in the U.S. securities market.
To date, the BCSC has only barred Sharp from the B.C. markets, as well as Surrey resident Amar Bahadoorsingh, who was ordered to pay the SEC US$1.4 million after being found liable for stock fraud. Sharp has been found liable for fraud in civil proceedings, owes the SEC US$52.9 million and is among those facing U.S. criminal charges, which remain unproven in court.
In total, eight individuals connected to the alleged Sharp Group have been criminally charged or convicted by the DOJ in the one-year period between August 2021 and August 2022.
By comparison, just 12 people have been criminally convicted by B.C. authorities in relation to securities and investment fraud over the past five years.
Kallu told BIV that he took his concerns to the BCSC, whose mandate is to “protect and promote the public interest by fostering a securities market that is fair and warrants public confidence.”
But Kallu says he was met with more of an “interogational” attitude from the criminal enforcement division, which is led by Doug Muir and overseen by chair and CEO Brenda Leong. The BCSC declined to speak to BIV about the case.
“It didn’t really seem they were concerned about it; they were not interested,” said Kallu.
Sharp associates shareholders in Canadian companies
Kallu is suing Dhillon’s now-former Canadian investment holding company Emerald Health Sciences, a company he says he co-founded with Dhillon and other family members, including his cousin Punit Dhillon and brother Yadvinder Kallu.
The claim alleges “unlawful civil conspiracy and fraudulent misrepresentation causing loss.”
Sharp, and Punit Dhillon’s company Skye Biosciences, are named as co-defendants.
Kallu alleges Dhillon, as a director, concealed ownership of Emerald Health shares through nominees. He also notes several companies linked to Sharp and associates by the SEC are shareholders in the Emerald Health central securities registry.
According to the claim, Emerald Health—without Kallu’s knowledge—“was either from inception or became over time a sham company which, albeit appearing to be a true investment vehicle in medical cannabis products, in reality served the defendants as a conduit for payments.”
Neither Dhillon or Sharp have responded to the claim, which remains unproven in court, and BIV did not hear back from their respective lawyers after providing them with an opportunity to comment.
In a response to the claim filed March 4, Emerald Health, Punit Dhillon and Skye Biosciences deny all of Kallu’s allegations, via their counsel at Poulus Ensom Smith LLP.
The defendants assert Kallu failed to plead material facts of any fraud and that, as such, his claim is “scandalous, frivolous and vexatious” and should be struck.
Kallu previously sued the company before Dhillon was indicted in August 2021.
In that first lawsuit, he claimed Emerald Health oppressed him by unfairly undercompensating him for the work he did as a marijuana cultivator, including not distributing founders’ shares back in 2013.
He was never listed as a director of the company. Emerald Health denies all of Kallu’s claims, which have not been proven in court.
Kallu claims that Dhillon shifted Emerald Health from a proposed medical marijuana company to an investment holding company that controlled subsidiary public companies.
One of Dhillon’s crimes was undisclosed marketing of an Emerald Health subsidiary based in the U.S. named Emerald Health Pharmaceuticals, which itself reached a US$517,955 settlement in 2023 without admitting or denying allegations of undisclosed paid promotions.
Another Emerald Health subsidiary was B.C.-registered public company Emerald Health Therapeutics, which was listed on Canadian exchanges until 2022.
Dhillon and longtime Vancouver business associate and lawyer Jim Hepell co-founded Therapeutics as a public company in 2014 through a reverse takeover of a Victoria-based cannabis company.
Company records show Sciences amassed 67.5 per cent of Therapeutics’ free-trading stock by November 2016, at about $0.20 per share.
After Therapeutics spent millions on consultants and marketing, Emerald Health sold six million shares for between $5 and $8 each, netting an estimated $23 million by 2018, records indicate.
What is not clear is how the sales proceeds were distributed among Sciences investors, but Kallu alleges in his lawsuit that he never saw any dividends for his Emerald Health shares, which otherwise became illiquid.
In a B.C. court affidavit, Dhillon explained that, “in general, [Emerald Health] does not provide a secondary market for its shares.” Instead, directors “informally connect” prospective buyers and sellers.
Two days after his August 2021 arrest, Dhillon stepped down as chair of Therapeutics, which promptly stated it “is not aware of any improper trading in [Therapeutics] securities and no allegations have been made against any other person associated with [Therapeutics], including any of its officers or other directors.”
By 2022, Therapeutics was trading at $0.04 per share. It was then acquired by Skye Biosciences, which at the time was directed by Heppell and Punit Dhillon.
Skye is now being investigated by law firms in California for alleged market manipulation.
A planned winddown of Emerald Health has been proposed by Punit Dhillon and would see Emerald Health shareholders receiving Skye shares as compensation. Kallu also opposes this transaction.
Dhillon is not the only Sharp Group client who directed Canadian companies.
B.C. stock promoter David Sidoo has been charged by the SEC with fraud in the offer or sale of securities, fraud in the purchase or sale of securities and unregistered offerings of securities for his alleged part in two “pump-and-dump” schemes, including B.C.-registered American Helium Inc., which traded on Canadian exchanges.
The allegations against Sidoo — a convicted felon for his role in the U.S. college bribery scandal — remain unproven and proceedings were temporarily stayed until the DOJ completed a parallel criminal prosecution of his associate Ronald Bauer.
A judge found Bauer guilty of criminal fraud last November.
Click here for the second part of this two-part series, exploring the scheme's alleged ties to organized crime in B.C. and the criminal enforcement record of the BCSC and Integrated Market Enforcement Team (IMET).
