The Ontario Securities Commission (OSC) is seeking a range of penalties against three former Bridging Finance Inc. executives amid formal allegations of defrauding investors out of millions of dollars, intimidating witnesses, and concealing their wrongdoing by obstructing the regulators’ investigation, according to statement of allegations released Thursday afternoon.
OSC staff is asking the commission to impose fines of up to $1 million against David Sharpe, Natasha Sharpe, and Andrew Mushore — who each held senior executive roles at Toronto-based private lender Bridging Finance. The staff also wants all three of them to disgorge funds allegedly received through fraudulent activities, and to be barred from roles as directors and executives — or from acting as investment fund managers or promoters, among other penalties.
“The Sharpes were registrants and the most senior leaders at Bridging Finance Inc., which managed investment vehicles focused on making short-term loans to borrowers. Through their relationships with three borrowers and with the assistance of Bridging’s Chief Compliance Officer, Andrew Mushore, the Sharpes funnelled investor funds to themselves and Bridging, then concealed their wrongdoing from investors,” the securities regulator’s staff said in its statement of allegations.
In the filing, the OSC staff also allege that Mr. Sharpe, Bridging Finance’s former chief executive officer, also sent intimidating and “profanity-laden” texts and voicemails to employees at the firm, including Mushore, who were set to be interviewed by the regulator in connection with the investigation. According to the allegations, those communications “contained disparaging insults and threats of physical violence.”
The OSC also claimed that the Sharpes and Mushore made false and misleading statements to the regulator and instructed the firm’s employees to either alter or destroy company records tied to the investigation.
The OSC probe into Bridging Finance came to light almost a year ago, after the lender was rushed into receivership at the behest of the provincial securities regulator.
At the time, a sworn affidavit by a senior forensic accountant in the OSC’s enforcement branch included allegations that $35 million from Bridging Finance’s investment funds had been misappropriated, and that there were improper dealings with two of the firm’s key clients — Sean McCoshen and Gary Ng – including $19.5 million in allegedly undisclosed payments sent to Mr. Sharpe’s personal chequing account by an entity controlled by McCoshen.
None of the allegations have been tested or proven in court or before the OSC, which has scheduled an initial hearing for April 27.
The detailed statement of allegations were released a short time after the OSC disclosed that it had dismissed a complaint by Mr. Sharpe about how the investigation was handled.
“Mr. Sharpe plans to challenge OSC Staff’s decision to commence a proceeding against him in the face of the prior ruling by a Hearing Panel of the Ontario Securities Commission that the OSC improperly publicly disclosed his compelled testimony. Mr. Sharpe intends to defend the proceeding, should it be permitted to proceed,” said Alistair Crawley, a lawyer representing Mr. Sharpe, in a statement via email. He also stated Mr. Sharpe’s lawyers “will seek a remedy” for the OSC’s conduct.
Lawyers representing Ms. Sharpe and Andrew Mushore did not respond to emailed requests for comment Thursday.
Earlier this week, Superior Court of Ontario Justice Geoffrey B. Morawetz approved a motion from PricewaterhouseCoopers Inc. (PwC), Bridging Finance’s court appointed monitor, to end the planned sale and solicitation process for the lender’s assets.
That decision came despite arguments made by a lawyer representing some of Bridging Finance’s unitholders who sought to have a better informed say and wanted the sale process to be extended.
The court’s ruling cleared the way for Bridging Finance to be liquidated, with any remaining funds distributed to investors, who PwC has warned stand to lose more than $1 billion in the process.
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