Two small public companies registered in British Columbia allegedly misrepresented to the public when dealing with consultants
The British Columbia Securities Commission (BCSC) is resuming proceedings against two small companies previously implicated in an alleged illegal advice scheme linked to Vancouver financial services firm Bridgemark Financial Corp.
The commission first issued a notice of hearing Jan. 25 against Affinor Growers Inc., which claims to be a Vancouver-based vertical farming company.
The new notice of hearing is the commission’s first instance of returning after dropping serious civil charges against the vast majority of the 54 people and their respective businesses known as Bridgemark Group, as well as 11 publicly traded issuers. Canadian Securities and more at the counter via securities dealers, including Affinor.
But now Affinor allegedly made “misrepresentations” in two press releases in March 2018 in which it sought a $4 million private placement, but did not disclose that it would spend “almost all of the funds immediately on consultants,” the commission said.
According to the notice, “Affinor did not disclose that it would only retain approximately $325,000, or approximately 8%, of the private placement, as it intended to immediately spend $3,675,000 in consulting fees. .”
The notice names three officers or directors of Affinor: Nicholas Gordon Brusatore (CEO) of Abbotsford, Brian Kent Whitlock (director) of Langley and Usama Zafar Chaudhry (chief financial officer involved in single statement) of Surrey as respondents facing the same alleged violations of the BC Securities Act.
On February 14, the commission then issued a similar Notice of Hearing to Preveceutical Medical Inc.
The commission now alleges in 2018 that Preveceutical, an alleged cannabis research company, and its then-CEO, Stephen Van Deventer, “made a statement or provided materially misleading or false information in a filing that was to be filed under securities law,” when he did not disclose that he had spent half of a $6.5 million private placement on consulting fees.
The BCSC’s claims have not been proven. The commission says it will set a hearing date for Affinor on March 24 and another for Preveceutical on April 14.
Affinor reported no revenue in 2021 while posting a net loss of $1.02 million. It has an accumulated deficit of $33.1 million, according to its latest audited annual balance sheet. Similarly, with a deficit of $26.9 million, Preveceutical also reported no revenue and a net loss of $3.8 million.
The Bridgemark Group, a collection of so-called consultants, allegedly conspired to buy shares in private placements of these 11 companies and then receive lucrative prepaid consulting contracts only to quickly resell the shares to retail investors on the open market and not carry out any substantial work for the improvement of the companies.
The commission identified $50.9 million in gross questionable private placement proceeds. Indeed, the company’s shares were devalued, leading some investors to launch a class action lawsuit against several of the companies.
Last April, the commission amended its original November 26, 2018 Notice of Hearing to include only four of these alleged consultants and their six respective companies, who are now charged with insider trading and/or to conduct themselves contrary to the public interest as directors.
Facing a hearing in November for conduct contrary to the public interest and insider trading, the alleged lead orchestrators of the advisory program, Anthony Kevin Jackson, chartered accountant and director of Bridgemark Financial Corp., Justin Edgar Liu and Cameron Robert Paddock – all of West Vancouver. Robert John Lawrence also faces alleged violations of the Securities Act, but not insider trading.
The commission’s April 29, 2021 dismissal notice against a large part of the group ended what had been one of, if not the most significant, proceedings against a single group of market participants in history. of British Columbia. No explanation was offered, although a commission panel 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 what exact association the purported consultants had with what the commission described as the group’s “architects” – namely Liu and Jackson.
A class action lawsuit against the respondents and others claims that Liu, Jackson, Paddock and convicted fraudster Aly Mawji engineered the scheme. The litigants have already reached a settlement (worth $2.4 million) with Beleave Inc.
Affinor is no longer included in the class action, after B.C. Supreme Court Justice Sandra Wilkinson ruled on November 22, 2021 that proof of the quid pro quo commission did not exist even though Affinor sold shares to the same consultants as the other companies. the period in question.
“Engaging the same consultants at approximately the same time as other Respondent Issuers against whom there is evidence of the Counterparty Agreement does not, in my view, exceed the standard of credible evidence to support a conclusion… By Accordingly, I conclude that there is no opportunity for the petitioner to prove his legal claims at trial against the Affinor respondents,” Wilkinson said.
Wilkinson authorized the class action 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 the option of appealing the decision on Affinor.
It remains to be seen whether the RCMP’s Integrated Procurement Enforcement Team will investigate the matter. The BCSC refers cases to the police, but only issues civil penalties, such as trade restrictions or fines.