Two investors have launched a class action lawsuit against a group of alleged purported consultants, known as the Bridgemark Group, and 11 public companies who are subject to a fraud investigation by the B.C. Securities Commission.
Vancouver lawyer Paul Bennett of Bennett Mounteer LLP filed a notice of claim in BC Supreme Court July 11 under the Class Proceedings Act on behalf of Saskatchewan resident Michael Tietz and B.C. resident Duane Loewen.
“We are looking for people to come forward to give evidence about their share purchases,” Bennett told Glacier Media via email July 12.
Tietz bought $44,519 in Cryptobloc Technologies Corp. while Loewen bought $4,000 in KOPR (formerly known as New Point Exploration Corp.). The two are suing those companies.
The notice of claim outlines when a class member (shareholder) would have had to purchase shares in these companies, which would have been at various points between January 2018 and November 2018, depending on the company. The notice is posted on the website bridgemarkclassaction.com.
Bennett is also seeking evidence from shareholders against the following defendant companies listed on the Canadian Securities Exchange: Kootenay Zinc Corp., Affinor Growers Inc., Green 2 Blue Energy Corp., Beleave Inc., Citation Growth Corp. (formerly Liht Cannabis Corp.), BLOK Technologies Inc., PreveCeutical Medical Inc., Abattis Bioceuticals Corp. and Speakeasy Cannabis Club Ltd.
The purported consultants are listed as defendants in the claim, just as they are listed as respondents to a BCSC notice of hearing, which alleges violations of the Securities Act with conduct “abusive to the capital markets.”
On his clients’ behalf, Bennett takes things a step further, naming the executives of the issuing companies, at the relevant periods, and also alleging criminal fraud on their part.
The case has spawned a number of court battles, allegations and admissions.
An example of the alleged Bridgemark Group scheme shows three major transactions: 1. The consulting contract 2. The private placement (sale) of shares 3. The sale of diluted stock to retail investors. The illustration outlines how, according to BCSC, Bridgemark consultants bought $17.9 million worth of shares from four CSE-listed companies, which then returned most of the money — $15.3 million — in a “cash swap.” The consultants then flogged their shares for $8.8 million. The scheme generated profits of $6.2 million for the Bridgemark Group from these four companies alone | Illustration by Randy Pearsall, Business in Vancouver
The enforcement action involves an unusually high number of operatives, who, according to the Canada Stockwatch database, have collectively been involved in hundreds of other penny stock companies listed on the CSE and TSX Venture Exchange. Should the BCSC allegations be proven, they raise serious questions about the credibility of those other companies and how the exchanges are monitored.
Starting in January 2018 these companies, their executives and the more than two-dozen supposed consultants — including many members of the Chartered Professional Accountants of British Columbia — are alleged to have entered into phony consulting agreements. The companies collectively issued tens of millions of dollars worth of shares to the consultants via private placements (sales of shares) while simultaneously entering into contracts for services that were never rendered, the BCSC alleges. The consultants then offloaded their newly acquired free-trading shares on the exchanges, to unwitting retail investors, such as Tietz and Loewen, according to the allegations. Essentially, there was a cash swap (shares for contracts) between the consultants and companies, the BCSC alleges. The money the consultants made was through the offloading of shares (sold at a below market price) to retail investors. The alleged scheme resulted in shareholders holding depreciated and diluted stock.
Bennett describes how the companies never disclosed the arrangements to the public.
“The Scheme was dishonest, deceitful and deceptive, and constituted a fraud on the market for the Issuers’ (companies) shares affecting the public market price of those shares,” states the claim, which has yet to receive a response from defendants.
“The consulting agreements entered into between the Issuers and the Purported Consultants and concluded as part of the Private Placements were a scam and a false pretence. Neither the Purported Consultants nor the Issuers had any bona fide expectation that services of any real value would be provided under the consultant agreements, and no such services were provided.”
Bennett notes that in each case there are possible arrangements between the consultants and companies that are yet known, which may explain the full extent of the scheme.
The lawsuit seeks damages for unlawful conspiracy, secondary market misrepresentations and fraud, or disgorgement of the benefit the defendants obtained as a result of the scheme.
According to the claim, the scheme was conceived in or around January by a quartet of West Vancouver penny stock promoters: BridgeMark Financial Corp. principal and chartered professional accountant Anthony Jackson; Justin Liu, a man known to operate illegal cannabis dispensaries; Cameron Paddock, a former NHL hockey player; and Aly Babu Mawji, a convicted fraudster (in Germany). Bennett said he asserts this because these four implemented the first disputed private placement with Kootenay Corp., for which Jackson then acted as both a director and Chief Financial Officer of the company. The four men are named as pitchmen by the BCSC and in a lawsuit by PreveCeutical against Mawji, Liu and BridgeMark Financial, noted Bennett, when asked about his claim.
PreveCeutical meanwhile is claiming it is a victim of a “conspiracy” by Mawji and Liu, who are alleged to have set up $2.8 million worth of consulting agreements (including their own) with PreveCeutical while concurrently obtaining $4 million worth of securities under exemptions of the Securities Act – only to not provide any such services and quickly sell the newly issued securities back into the market.
“Unbeknownst to PreveCeutical, at no time did the defendants intend to provide services,” the Dec. 18, 2018, notice of claim states.
However, Bennett’s class action claims the companies, including PreveCeutical, knowingly deceived shareholders.
For his part, Mawji claimed PreveCeutical gave his company a $425,000 prepaid contract to conduct online promotions. He also stated in his counterclaim he bought 30 million shares for $1.5 million. Mawji denies selling shares contrary to the best interests of shareholders and said it was up to PreveCeutical to do its due diligence.
Mawji and Jackson had a business relationship before the former’s conviction related to a pump and dump. BCSC respondents also include Jackson’s father-in-law Kenneth Tollstam, brother-in-law Ryan Venier, and sister Tara Haddad. Jackson’s wife, realtor Lisa Jackson, is a respondent to a similar investigation by the Alberta Securities Commission involving Prize Mining Corp.
For a list of BCSC respondents, and defendants, click here.
Here are the additional class action defendants who were, during the relevant trading periods in 2018, executives of the issuing companies listed in the class action application:
- Neil William Stevenson-Moore (“Stevenson-Moore”), is a resident of North Vancouver, British Columbia and was the Chief Executive Officer of Cryptobloc.
- Kenneth Clifford Phillippe (“Phillippe”), is a resident of West Vancouver, British Columbia and was the Chief Financial Officer of Cryptobloc.
- Brian Biles (“Biles”), is a resident of Vancouver, British Columbia and was a director of Cryptobloc.
- Bryn Gardener-Evans (“Gardener-Evans”), is a resident of Calgary, British Columbia and was the Chief Executive Officer and a director of KOPR.
- Robert Tindall (“Tindall”), is a resident of Vancouver, British Columbia and was, at all material times in 2018, a director of Kootenay Corp.
- Nicholas Brusatore (“Brusatore”), is a resident of Anmore, British Columbia and was the Chief Executive Officer and President of Affinor Corp.
- Sam Chaudhry (“Chaudhry”), is a resident of the greater Vancouver area, British Columbia and was the Chief Financial Officer of Affinor Corp.
- Slawomir Smulewicz (“Smulewicz”), is a resident of Vancouver, British Columbia and was, at all material times in 2018, the Chief Executive Officer of Green Corp.
- Michael Young (“Young”), is a resident of Vancouver, British Columbia and was the Chief Financial Officer and a director of Green Corp.
- Glenn Little (“Little”), is a resident of Vancouver, British Columbia and was a director of Green Corp.
- Andrew Wnek (“Wnek”), is a resident of Toronto, Ontario and was the Chief Executor Officer and director of Beleave.
- Bojan Krasic (“Krasic”), is a resident of Stoney Creek, Ontario and was the Chief Financial Officer and direct of Beleave.
- Linda Sampson (“Sampson”), is a resident of Kelowna, British Columbia and was the Chief Executive Officer and director of Citation.
- David Alexander (“Alexander”), is a resident of North Vancouver, British Columbia and was a director of Citation Corp. Alexander also was the Chief Financial Officer of BLOK.
- Yari Alexander Nieken (“Nieken”), is a resident of North Vancouver, British Columbia and was a director of Citation Corp. Neiken subsequently became a director of the Defendant, BLOK.
- Hanspaul Pannu (“Pannu”), is a resident of the greater Vancouver area, British Columbia and was the Chief Financial Officer of Citation Corp.
- Robert Dawson (“Dawson”), is a resident of the greater Vancouver area, British Columbia and was the President and Chief Executive Officer of BLOK.
- James Hyland (“Hyland”), is a resident of Vancouver, British Columbia and was a Vice-President and a director of BLOK
- Stephen Van Deventer (“Van Deventer”), is a resident of Vancouver, British Columbia and was the President and Chief Executive Officer of PreveCeutical.
- Shabira Rajan (“Rajan”), is a resident of Richmond, British Columbia and was the Chief Financial Officer of PreveCeutical.
- Robert Abenante (“Abenante”), is a resident of Vancouver, British Columbia and was a director and the President and Chief Executive Officer Abattis Corp.
- Kent McParland (“McParland”), is a resident of Richmond, British
Columbia and was the Chief Financial Officer of Abattis Corp. McParland was also the Chief Financial Officer and a director of Cryptobloc.
- Marc Geen, is resident of Rock Creek, British Columbia and was the Chief Executive Officer and a director of Speakeasy Ltd.
- Mervyn Geen, is resident of Rock Creek, British Columbia and was a director of Speakeasy Ltd.
- Jeremy Ross (“Ross”), is a resident of the greater Vancouver area, British Columbia and was a director of Speakeasy Ltd.
- Alexander Kaulins (“Kaulins”), is a resident of the greater Vancouver area, British Columbia and was a director of Speakeasy Ltd.
