The Law Courts building, which is home to B.C. Supreme Court and the Court of Appeal, is seen in Vancouver on November 23, 2023.DARRYL DYCK/The Canadian Press
U.S. regulators have won a victory in British Columbia courts in their quest to collect damages from Frederick Sharp, a Vancouver lawyer accused of masterminding a stock-fraud scheme that generated more than US$1-billion.
In a decision released Monday, Justice Amy Francis of the B.C. Supreme Court agreed to a request from the U.S. Securities and Exchange Commission to freeze all of Mr. Sharp’s assets in the province, ensuring he can not dispose of them or move them overseas before the regulator can seize control.
Joven Narwal, Mr. Sharp’s lawyer in the B.C. case, did not return a request for comment.
In May, 2022, the SEC won a civil judgment of US$52.9-million – a combination of penalties and the return of US$29-million profits – against Mr. Sharp. It was a default judgment, as he did not appear before the court to defend himself, allowing the court to say it “accepts as true the factual allegations of the complaint.”
The SEC began its pursuit of Mr. Sharp’s assets in B.C. courts in June, 2022. While the British Columbia Securities Commission had issued asset-preservation orders against him and other defendants in the case, who are also B.C. residents, they covered only about US$2.2-million of his assets.
In August, 2021, the SEC alleged Mr. Sharp masterminded a complex scheme from 2011 to 2019 in which he and his associates helped insiders at various small publicly traded companies conceal their ownership, then sell large amounts of stock without disclosing the sales, as required by securities law.
The SEC alleged Mr. Sharp and his associates furnished networks of offshore shell companies to conceal stock ownership, arranging stock transfers and money transmittals, and provided encrypted accounting and communications systems.
The U.S. Department of Justice has also launched a criminal case against Mr. Sharp and several defendants at the same time as the SEC case and obtained a warrant for his arrest. That case is continuing.
Part of Mr. Sharp’s argument to the B.C. Supreme Court was that he should not be ordered to turn over a list of his assets to the SEC because they, in turn, might provide the list to prosecutors in the criminal case, which would violate his rights against self-incrimination under the Fifth Amendment to the U.S. Constitution.
However, the B.C. order proposed by the SEC bars the regulator from doing so.
“I cannot find that this poses a realistic enough risk that the plaintiff should be deprived of access to the information,” Justice Francis ruled, saying the list of his assets “will breathe life” into the asset-freeze order.
“Mr. Sharp argues that there is no real risk of dissipation of assets,” Justice Francis wrote in her ruling. But, she said, “the fraud alleged in this case is very serious” and that, “given Mr. Sharp’s unique role at the helm of this fraudulent operation and given that he has now been found liable in this court for such behaviour, in my view, this is clearly a case in which it is appropriate to infer that there is a risk of dissipation of assets.”
With files from Stephanie Chambers