The B.C. Securities Commission (BCSC) is re-commencing proceedings against two junior companies previously embroiled in an alleged illegal consulting scheme connected to Vancouver financial services firm Bridgemark Financial Corp.
The commission first issued a hearing notice Jan. 25 against Affinor Growers Inc., which purports to be a vertical farming company based in Vancouver.
The new hearing notice is the first instance of the commission circling back after it dropped serious civil charges against the vast majority of 54 individuals and their respective businesses known as the Bridgemark Group, as well as 11 issuing companies traded on the Canadian Securities Exchange and over the counter via stock dealers, including Affinor.
But now, Affinor is alleged to have made “misrepresentations” in two news releases in March 2018 wherein it sought a $4-million private placement but failed to disclose it would spend “almost all of the funds immediately on consultants,” stated the commission.
According to the notice, “Affinor did not disclose it would retain only about $325,000, or approximately 8%, of the private placement as it intended to immediately spend $3,675,000 on consulting fees.”
The notice names three Affinor officers or directors: Abbotsford’s Nicholas Gordon Brusatore (CEO), Langley’s Brian Kent Whitlock (director) and Surrey’s Usama Zafar Chaudhry (CFO implicated in only one release) as respondents facing the same alleged violations of the B.C. Securities Act.
On Feb. 14 the commission then issued a similar hearing notice to Preveceutical Medical Inc.
The commission now alleges in 2018 Preveceutical, a purported cannabis research firm, and its then-CEO Stephen Van Deventer “made a statement or provided information that was materially misleading or false in a record that had to be filed under the Securities Act,” when it didn’t disclose it spent half of a $6.5-million private placement on consulting fees.
The BCSC’s allegations have not been proven. The commission says it will schedule a hearing date for Affinor on March 24 and one for Preveceutical on April 14.
Affinor reported no revenue in 2021 while posting a $1.02-million net loss. It has an accumulated deficit of $33.1 million, according to its latest audited annual statement. Likewise, with a $26.9-million deficit, Preveceutical also reported no revenue, and a $3.8-million net loss.
The Bridgemark Group, a collection of purported consultants, was alleged to have conspired to buy shares in private placements of those 11 companies and then receive lucrative pre-paid consulting contracts only to quickly sell the shares back to retail investors on the open market and not perform any substantial work to improve the companies.
The commission identified $50.9 million in questionable gross private placement proceeds. In effect, company shares were devalued leading some investors to launch a class action lawsuit against several of the companies.
Last April, the commission amended its original Nov. 26, 2018 notice of hearing to include only four of these purported consultants and their six respective companies, who are now alleged to have performed illegal insider trading and/or conducted themselves contrary to the public interest as directors.
Facing a hearing this November for conduct contrary to the public interest and insider trading will be the key alleged orchestrators of the consulting scheme, Anthony Kevin Jackson, a registered accountant and principal of Bridgemark Financial Corp., Justin Edgar Liu, and Cameron Robert Paddock — all of West Vancouver. Robert John Lawrence faces likewise alleged Securities Act contraventions.
The commission’s April 29, 2021 notice of discontinuance against much of the group ended what had been one of, if not the largest proceedings against a single group of market actors in B.C. history. No explanation was provided, although a commission panel had previously overturned temporary trading orders against the group citing a lack of prima facie (first impression) evidence by BCSC executive director Peter Brady.
It remains to be seen the exact association the purported consultants had with what the commission has described as the “architects” of the group — namely Liu and Jackson.
A class action claim against the respondents and others asserts Liu, Jackson, Paddock and convicted fraudster Aly Mawji conceived the scheme. The litigants have already reached a settlement (worth $2.4 million) with Beleave Inc.
No longer included in the class action is Affinor, after B.C. Supreme Court Justice Sandra Wilkinson ruled on Nov. 22, 2021 that commission evidence of quid pro quo agreements did not exist even if Affinor sold shares to the same consultants as the other companies did around the period in question.
“Engaging the same consultants around the same time as other respondent issuers against whom there is evidence of the quid pro quo agreement does not, in my opinion, overcome the credible evidence standard to support a finding …Therefore, I find there is not a reasonable possibility of the petitioner proving their statutory claims at trial against the Affinor respondents,” stated Wilkinson.
Wilkinson did grant leave to bring the class action claim against Kootenay Zinc Corp., Cryptobloc Technologies Corp., BLOK Technologies Inc. and New Point Exploration Corp. while reserving judgment against Preveceutical Medical Inc.
The litigants (Tietz et al), led by Vancouver securities lawyers Paul Bennett and Reidar Mogerman, still have an opportunity to appeal the decision on Affinor.
It remains to be seen if the RCMP’s Integrated Market Enforcement Team will investigate the matter. The BCSC refers files to police but only issues civil penalties, such as trading restrictions or monetary fines.
This article was updated 01/13/23 to clarify Lawrence faced illegal insider trading charges