A list of assets belonging to a group of British Columbians found liable for a complex, multifaceted $1-billion U.S. penny stock fraud scheme orchestrated from Vancouver will be sealed in a B.C. court ahead of a penalty hearing in Boston next month.
The list had been sought by the U.S. Securities and Exchange Commission (SEC), which has otherwise agreed to keep it sealed.
On March 21, 2023, Supreme Court of B.C. Justice Amy Francis granted the SEC a Mareva injunction (freeze order) to prevent some of the B.C. defendants from dispersing their assets. In her ruling, Francis acknowledged the commission’s submission that it is “under-secured with respect to its claim for disgorgement (repayment) against the defendants” despite having already frozen dozens of bank accounts in the U.S. and Canada.
The SEC brought the claim against Zhiying Yvonne Gasarch, Courtney Kelln, Mike K. Veldhuis, Paul Sexton, Jackson T. Friesen, Graham R. Taylor and Fred Sharp — all of whom have been found liable in civil proceedings, by various means, for the stock market violations.
In a Vancouver courtroom Monday, Francis heard from Malcolm Ruby, the commission’s lawyer based in Toronto, that a hearing is taking place on May 8 in the District of Massachusetts to determine what Friesen, Gasarch, Sexton, Kelln and Veldhuis will be ordered to repay after a jury found the first two liable for fraud and the latter three admitted their roles in the alleged scheme. The commission alleges the scheme was “masterminded” by Sharp, a former B.C. lawyer turned offshore shell facilitator residing in West Vancouver.
In December, the commission demanded US$68.1 million from those five individuals. The largest final monetary order, for US$52.9 million, is already in place against Sharp, who was found liable in a default judgment. Taylor is to pay the commission US$5 million after reaching a settlement in January 2023, in which he neither admitted nor denied the allegations against him.
When B.C. stock promoter and co-conspirator Avtar Dhillon is added to the demands, the commission intends to take close to C$170 million out of their pockets.
Dhillon, a resident of Long Beach, Calif., has been criminally convicted in relation to the alleged scheme and awaits sentencing next month. In January, the U.S. Attorney’s Office in the District of Massachusetts updated criminal charges against Sharp and Kelln, of Surrey, who now face two counts each of securities fraud and conspiracy to commit securities fraud. Veldhuis, of Vancouver, and Sexton, of Anmore, were charged with one count each of securities fraud and conspiracy to commit securities fraud. Those charges have not been proven in court and the foursome remain innocent unless proven guilty.
U.S. indictments have alleged Canadian lawyers, companies and other “entities” have been involved in the scheme.
On Monday, Francis amended the injunction to allow Friesen, of Delta, to access up to $300,000 for U.S. legal fees. Friesen’s request was handled by lawyer Owais Ahmed.
The SEC opposed the amendment with Ruby claiming Friesen was “forum shopping” between the American and Canadian courts, after the American court ruled on legal fees.
Representing Veldhuis, Sexton, Kelln and Gasarch is criminal defence lawyer Greg DelBigio, KC, who had previously argued the SEC had no jurisdiction to impose an injunction and evoked Charter, and U.S. Fifth Amendment claims, albeit to no avail.
It’s understood that part of the reason the asset list is sealed is to prevent self-incrimination, DelBigio explained in court.
Sharp has proceeded separately in an attempt to fight the freeze orders from the commission and so far has not had an injunction placed against him.
Sharp’s criminal defence lawyer Joven Narwal, KC, contested in court March 15 that Sharp was never properly served by the commission, in his argument to have the SEC's injunction application against his client dismissed.
But Narwal told the court Sharp can’t provide an affidavit because he’s under indictment in the U.S., prompting B.C. Supreme Court Justice Neena Sharma to note “he’s in a pickle.”
