The $15 million West Vancouver waterfront residence of chartered professional accountant and stock promoter Anthony Jackson will not face a freezing order until his insider trading hearing in November .
On the contrary, Jackson and other “architects” of a $50.8 million consulting agreement alleged by the BC Securities Commission succeeded in reducing or eliminating the amount of assets frozen by the regulator, following long and complex legal proceedings.
Now, Jackson will have just $50,000 in frozen assets, assuming the status quo remains ahead of his hearing, while his alleged co-accomplice Justin Liu will have $750,000 in frozen assets; Additionally, the freezing orders against alleged co-accomplice Cameron Paddock have been lifted, according to a decision by the independent panel of commissioners Audrey Ho and Judith Downes.
The commission’s executive director, Peter Brady, alleges that Liu and his company Lukor Capital Corp. obtained $6.4 million by violating the BC Securities Act, while Jackson and his company BridgeMark Financial Corp. got $1.5 million.
The July 14 decision removed the previously frozen amounts; however, the length of the write-up indicates that both Liu and Jackson potentially had assets valued at over $1 million frozen.
Respondents at the hearing argued hardship stemming from freezing orders, and while the panel said it had seen no such specific evidence, it acknowledged that two frozen Liu properties were co-owners at 50%, just like a Jackson property.
Jackson’s residence on Bellevue Avenue is jointly owned by his wife Lisa Jackson and his father Kenneth Tollstam, a retired city manager from North Vancouver. It was purchased in November 2018 for nearly $15.9 million in a cash sale, according to land title records.
Tollstam is among dozens of purported consultants and their respective companies (approximately 50 entities) who became the subject of market misconduct allegations in April 2021, following an unprecedented notice of hearing in November 2018.
Many of these entities had ties to Jackson personally or to his company BridgeMark Financial Corp. The alleged participants are known in Vancouver business circles as the Bridgemark Group.
As alleged by the commission, between February and August 2018, the respondents (Jackson, Liu and Paddock) participated in a scheme involving nine companies (issuers) listed on the Canadian Stock Exchange.
In total, the companies sold $50.8 million worth of new shares through 12 fundraising rounds (private placements).
Some companies have since admitted that they never disclosed to investors that they only kept a small portion of those funds while using most of the money to pay consultants with prepaid consulting contracts, despite the fact that little or no consultancy work has been done to justify these fees.
These consultants, many of whom are closely associated with Jackson and Liu, were also buyers of the shares, which were then quickly sold to retail investors, often at a loss. Lucrative contracts made up for those losses, according to the commission.
The companies’ shares were thus diluted and lost value, triggering an ongoing class action lawsuit.
In an effort to safeguard the funds against possible monetary claims and penalties for possible violations of the law, the commission had issued a large number of freezing orders against bank and brokerage accounts, as well as registered charges. against the properties of the alleged consultants, including Jackson, Liu and Paddock.
The group has since sought to overturn the orders and appealed to the British Columbia Court of Appeal. The group argued that the orders were invalid because Brady had not alleged any specific violation of the law, which is required for such orders; on the contrary, they had initially only been charged generally with “conduct contrary to the public interest”.
Last October, the appeals judge agreed that the commission had erred; however, it only referred the appeal to the commission panel after Brady filed a new Notice of Hearing against the band specifically alleging insider trading in the middle of the appeals process. (The judge also overturned the freezing orders against Jackson’s company, Jackson and Company Professional Corp.)
The panel noted how the group called Brady’s new notice an 11th-hour reclassification of evidence that is “nothing more than a tortured attempt to disguise its allegations of the scheme as a violation of law” and thus maintaining the “disproportionate” freezing orders. dishonest.
Attorneys Patrick Sullivan and Sara Shuchat represented Jackson; representing Liu were Kenneth McEwan QC and Emily Kirkpatrick and representing Paddock was Andrew Crabtree.
Brady argued that he was within his rights to change the original notice from November 2018.
For the appeal, the panel accepted Brady’s new allegations; he then had to assess whether the evidence would reasonably support the orders by raising “a serious matter that the investigation may show a violation of the insider trading provisions under the statute,” namely that Liu and Jackson had a relationship. deal with issuing companies and traded stocks with significant (and undisclosed) knowledge of private placements.
The panel noted, based on Brady’s evidence, that Jackson and Liu appeared to arrange both financing and prepaid consulting contracts for certain companies.
“We are satisfied, based on a preliminary assessment, that the evidence raises a serious issue that Liu and Jackson knew the amounts of advisory fees paid by each of the issuers at the time of the financing,” the ruling noted.
And, the panel said, “There is enough evidence to raise a serious question that the investigation could show that Liu and Jackson brought to each issuer (company) a group of people to subscribe to the issuer’s private placement. on the condition that the issuer also engage a group of individuals appointed by Liu and Jackson (not always the same individuals as the individuals placed) as consultants and pay substantial consulting fees to such consultants along with the financing.
However, since under the law the orders only cover insider trading and the group would have traded many shares for a loss, the panel significantly reduced the blocking orders.
“In assessing the extent of potential claims and penalties at this preliminary stage, we have taken into account any gains or losses incurred by the applicants for reconsideration of the sale of the issuers’ shares, but not the advisory fees that would have been payable to them. paid, directly or indirectly.”
This is partly because Brady “provided us with no evidence to indicate whether counseling services were provided”.
And, the panel said, “We cannot assume that little or no work was actually provided under the consultancy agreements at issue. Without evidence on this issue, we are not justified in concluding that the counsel fees allegedly received should be included in determining whether there is a proportionality between the value of the frozen assets and possible financial sanctions.
Meanwhile, the panel also ruled on Paddock’s circumstances, finding that there was no similar evidence indicating that Paddock could have been in the custody of material facts which he discussed. As such, the panel rejected his freezing orders and refused to enforce new ones against a recently purchased home.
“When we weigh the weak evidence of the Paddock petitioners’ knowledge of any material information against the intrusive nature of the freezing orders, for the purposes of this application, the public interest favors revoking the freezing orders at this time. “, said the panel.
The parties will now determine which assets should be frozen, according to the panel.