US SEC Asks BC ‘Mastermind’ for $ 68 Million In Huge Stock Fraud

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US officials are asking a court to order former Vancouver lawyer Fred Sharp to pay the equivalent of C $ 68 million after he allegedly created dozens of offshore shell companies to enable a decade-long streak of a billion dollar penny stock pump and dump. fraud and did not contest the civil charges.

In a filing on Wednesday, the United States Securities and Exchange Commission said Sharp, a West Vancouver private banker who runs one of Canada’s largest offshore services companies, should pay US $ 24 million in penalties. , US $ 21.8 million in disgorgement – a legal term for repayment of unwarranted gains – and US $ 7.2 million in interest for its role in the stock market schemes.

“For a decade, Sharp functioned as the mastermind of a service network designed with the sole purpose of facilitating fraud. His schemes were designed as ‘masterful stock manipulation’ and he sold his services as a means of keeping her clients “out of jail,” the SEC wrote in the US district court filing, citing what it describes as Sharp’s own writings.

“Sharp’s scheme facilitated the scamming of thousands of US investors and generated nearly $ 1 billion in fraudulent securities sales that should not have happened.”

The second first filed allegations against Sharp, along with seven other Canadians and an American, in August, following an investigation initiated in 2017.

Authorities say Sharp and its associates have set up and managed a network of shell companies and offshore accounts around the world, and have effectively leased it out to clients so that they can manipulate the prices of hundreds of listed stocks. in cents listed on the stock exchange.

It is alleged that the shell companies allowed them to hide ownership and control of the stocks they were selling and bypass public disclosure requirements. Sharp has even reportedly provided its customers with an encrypted communication system, using devices dubbed “xPhones”, running on servers based in Curaçao.

The inventory pumping programs generated net proceeds of US $ 770 million, the SEC says.

‘Lights on’ but no one answered the door

Documents filed with the Massachusetts U.S. District Court show Sharp made no effort to dispute the civil charges against him. The SEC even attempted to serve court documents on him in West Vancouver via one of the Hague conventions. But when a British Columbia deputy sheriff visited Sharp’s home, he noted that despite “the lights on in the residence, the car in the driveway, the window open,” no one opened. the door.

Sharp’s attorneys did not immediately respond to a request for comment on Thursday. Legally speaking, by failing to respond to the civil charges and being declared in default, Sharp is presumed to have admitted the factual allegations made against him.

An SEC accountant calculated that Sharp’s personal share of the scheme was US $ 21.8 million, that the agency asks a judge to force Sharp to repay with interest. The SEC says it aims to end up distributing the money to investors who have been conned by the manipulation of the stocks.

The agency obtained a freezing order on accounts known to Sharp in August, including securities brokerage accounts in Mauritius and Malta and an account at the Bank of Montreal in a company name. It is now a question of entering any balances.

The agency is also seeking to ban Sharp from participating in any penny stock offerings and from engaging in other stock transactions that do not trade in its own personal accounts on a national exchange.

“Sharp represents a permanent danger for investors and the American markets”, indicates the file of the SEC. “The Commission also believes that there are many other accounts and many other nominee entities controlled and administered by Sharp that are available for other illegal activity.”

The US court has yet to rule on the sanctions requested by the SEC.

Sharp and two other Canadians also face US criminal charges for their role in the scheme.

CBC / Radio-Canada first reported in 2016 that Sharp was the main Canadian intermediary overseas in the Panama Papers leak and was running what was called the ‘go-to’ investment firm for high net worth Canadians. wanting confidentiality and minimal tax on their assets. The Panama Papers revealed that Sharp’s offshore services company in Vancouver has created more than 1,100 offshore companies and accounts for clients.

It is also in the recent Pandora Papers leak, and is fight ARC on his attempts to audit it.

Other defendants demand that charges be dropped

Although Sharp has not contested the civil lawsuits against him, six of his Canadian co-defendants are seeking to have their charges dismissed.

Jackson Friesen, Graham Taylor, Paul Sexton, Zhiying Yvonne Gasarch, Courtney Kelln and Mike Veldhuis, all residents of British Columbia, have filed motions to dismiss the SEC charges.

They variously claim that the SEC has gone well beyond the five-year deadline to file civil suits and seek fines, or that, for some of them, the agency’s allegations do not in fact detail any illegal activity.

A judge will hear their arguments on January 18.


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