The top officers of FS Financial Strategies Inc. and related companies in the FS Insurance group allegedly defrauded investors of $47 million between 2012 and 2017 by failing to tell them to fully explain the company’s poor financial situation, according to the British Columbia Securities Commission (BCSC).
FS Financial Strategies founder and directors Aik Guan “Frankie” Lim and Scott Thomas Low allegedly did not tell investors the company wasn’t profitable and that it was paying expenses using money raised from investors.
Company general manager Darrell Wiebe allegedly was aware of the situation and routinely told Low and Lim how much money the company required to stay afloat.
According to the allegations, investors were told they could expect returns on their investments of 10%-12%, to be paid monthly. As well, the company went to great lengths to maintain the image that the company was doing well.
“Lim and Low ‘created an illusion of profitability’ by opening new offices in rapid succession, donating money to charities, telling customers that they planned to take the insurance group public and hosting parties for clients at expensive hotels,” the BCSC said in a news release.
Six other officers were also named in the allegations: Chun Ying “Jim” Pan, Chung-Sheng “Johnson” Kao, George Lay, Gagan Deep Bachra, Chi Key “Dixon” Wong and Meng Cher “Phillip” Tsai. These individuals were directors of companies related to FS Financial that sold unsecured loans. These companies sold securities without a prospectus and without being registered.
Lim and Low also sold securities without a prospectus or registration. They continued to violate the B.C. Securities Act by trading and selling securities even after making a promise to the executive director of the BCSC in 2014 that they would cease doing that.
A hearing is scheduled for December 4.