Five B.C. residents found liable for their roles in an expansive US$1 billion-plus offshore stock fraud scheme orchestrated, in part, from Vancouver are appealing the more than US$48 million in civil penalties and repayment orders issued to them by a U.S. federal court judge in Boston last June.
Disgorgement of ill-gotten gains was ordered against: Paul Sexton, of Anmore (US$17.4 million); Jackson Friesen, of Delta (US$11.8 million); Mike Veldhuis, of Vancouver (US$11.8 million); Zhiying Yvonne Gasarch, of Richmond (US$2.5 million); and Courtney Kelln, of Surrey (US$1.6 million).
Sexton, Veldhuis and Friesen were each issued US$1.56 million in civil penalties whereas Gasarch must pay a US$269,651 penalty and Kelln is ordered to pay an additional US$904,078.
The orders from Judge William G. Young against the five British Columbians were actually about US$20 million less than what the U.S. Securities and Exchange Commission (SEC) had sought in January, on account Young removed the requirement for them to pay pre-judgment interest.
Based on limited court filings to date, it is unclear when the appeals will be heard and to what extent the appeal consists of.
The fines are in addition to three previously secured monetary judgments totalling US$68.3 million against two other B.C. residents and one former B.C. resident now residing in California: Graham Taylor of Vancouver is to pay the commission US$5 million after reaching a settlement in January 2023, in which he neither admitted or denied the allegations against him; Avtar Dhillon, a former B.C. resident who now resides in Long Beach, Calif,. owes US$10.4 million after admitting to fraud.
Dhillon now faces jail sentencing in a parallel criminal case wherein he's been found guilty. Dhillon’s sentencing is set for Dec. 4.
The largest final monetary order, for US$52.9 million, is against West Vancouver resident Fred Sharp — the man the commission claimed was the “mastermind” of the “sophisticated, multiyear, multi-national attack on the United States financial markets and retail United States investors."
All said, the eight B.C. residents have been ordered to pay US$110.8 million to the SEC.
In June, the SEC touted the judgment, stating the five were found liable "for their roles in fraudulent schemes that collectively generated hundreds of millions of dollars from unlawful stock sales and caused significant harm to retail investors in the United States and around the world."
Sharp, a former lawyer, was found liable for setting up layers of offshore accounts to disguise beneficial ownership of shares for numerous groups that had control of large amounts of public company shares. One so-called “control group” consisted of Veldhuis, Sexton and Friesen. Meanwhile, it was Gasarch and Kelln who worked with Sharp to complete the trades, the judge found.
Sharp, Kelln, Sexton and Veldhuis are also charged by the U.S. Attorney with criminal stock fraud but have yet to face a trial and are presumed innocent of those charges.
All of the individuals have been banned from the U.S. penny stock market in any capacity, save for trading on a national securities exchange in personal accounts.
The saga is expected to produce many more court decisions, including here in B.C. as individuals contest the SEC’s efforts to seize their property under civil forfeiture laws.
