Vancouver tennis coach transferred $7 million via Marshall Islands: US SEC

A West Vancouver man accused of being the “mastermind” of an offshore scheme allegedly used his wife’s Vancouver tennis coach to siphon off funds, US authorities allege.

US authorities say the alleged “mastermind” of an offshore scheme embezzled around $7 million through his wife’s tennis coach in Vancouver.

The money was transferred from a Swiss trading platform named Wintercap SA to a Marshall Islands-based company called Cortona Equity Inc. between August 2017 and July 2018.

But the money did not belong to the tennis coach, say investigators from the United States Securities and Exchange Commission (SEC) and the Federal Bureau of Investigation.

“(Fred) Sharp had named his wife’s tennis coach as the alleged beneficial owner of Cortona,” the amended lawsuit proposed by the commission on Feb. 3 reads.

Sharp and seven other Canadians face civil charges related to a fictitious offshore scheme that facilitated more than $1 billion in gross proceeds from illegal trading through hundreds of US corporations. Sharp, a West Vancouver resident, is the suspected mastermind, authorities say.

The SEC was authorized to amend its complaint by U.S. District Judge William G. Young of the District of Massachusetts in January after several of the defendants argued against the charges, citing insufficient evidence against them in the original complaint.

A hearing was held on January 20 to iron out the details of motions to dismiss from alleged co-conspirators Jackson Friesen, Graham Taylor, Paul Sexton, Zhiying Yvonne Gasarch, Courtney Kelln and Mike Veldhuis. All of the accused are believed to reside in Metro Vancouver. They are all presumed innocent until a court rules on the allegations.

Two co-defendants facing criminal charges are not filing motions, including former Vancouver lawyer Sharp and former B.C. cannabis company executive Avtar Dhillon.

For his part, Sharp did not respond to the commission, which filed a default judgment against him and is now seeking $52.9 million.

This is a significant case for the SEC, which it describes as “a sophisticated, multi-year, multinational attack on US capital markets and US retail investors by foreign and domestic actors.”

“Sharp Group deliberately concealed the identities of its clients through the range of services it offered, including the establishment and provision of offshore nominee companies which could hold shares for undisclosed controlling persons; the provision and administration of an encrypted communications network.” the committee said.

Sharp acted as liaison between the clients (responsible for the company) and the trading platforms such as Wintercap SA. According to intercepted communications submitted to the court, Sharp would tell its customers: “The service provided is comprehensive; it is not limited to trade. It includes payments [sic]loans, private placements and keeping clients out of jail.”

Someone who couldn’t avoid jail time was Wintercap SA owner and operator Roger “Rocket” Knox, who pleaded guilty to criminal securities fraud and conspiracy to commit securities fraud. Securities on January 13, 2020. Knox admitted that Wintercap SA engaged in a scheme to fraudulently sell shares of numerous public companies, among other methods, by concealing the identities of those controlling the company and concealing ownership of the shares. Knox opened “omnibus brokerage accounts” across Europe, America and Canada.

Controlling persons can be major shareholders and/or corporate officers who are required by law to be transparent about their stock market transactions.

Commission details allegations of false invoices, loans and false notary signatures

The commission’s more detailed complaint takes a closer look at Richmond resident Yvonne ‘Wires’ Gasarch (also known as Zhiying Chen), who asked the judge to dismiss her case.

Gasarch was nicknamed “Wires” by the group in some intercepted communications.

The commission alleges that it typically arranged wire transfers of proceeds from the sale of illegal shares. This included “regularly creating bogus invoices, loan and subscription agreements, and other documents purporting to be from Sharp Group-administered applicants, and which could serve as ‘backup’ to support these payments if they were being questioned by banks and brokerage firms whose revenues were being sent,” the commission alleges.

In an example provided by the commission, Gasarch created an invoice for $125,000 to a Sharp candidate called Quezon Group LLC from a home builder in Canada who was renovating a property for one of the Sharp Group’s clients. She sent this invoice from an email from Quezon Group to Wintercap SA to request payment. It was allegedly for a subscription of 500,000 shares.

Gasarch also allegedly altered an invoice from a law firm for a payment of $129,000 in connection with a company working with Veldhuis.

After citing other examples, the commission concludes: “Gasarch understood that his job was to obscure the source and destination of the distributions which Sharp Group clients derived from their fraudulent business income and which they laundered through of the Sharp group.”

The commission reveals text communications between Gasarch and Sharp showing concerns about money laundering and concealment of their operation.

“On August 12, you wrote a draft for large yachts for cash. Please explain to me how this is a legitimate payment? My problem is money laundering: Hell’s angels give us money, we give them a draft to buy a boat. Later, the boat is seized, the police investigate, find out that the charterhouse paid for it; visit us and ask why. What will you say?” Sharp says to Gasarch.

“Can we lend them money? Thomas asks them to sign a loan agreement for us. Thomas will call me back,” Gasarch replies.

“Who are they,” Sharp asks. “Yes, but who? A person, a company, what job?”

The commission provides no context for the text, so it’s unclear whether or not Sharp was using the Hells Angels as an example of risk by providing a draft without fully vetting a client.

In another example, Sharp orders Gasarch via text message to forge a notary’s signature.

“Sharp chided Gasarch: “Of course you do; his name is on the stamp!”, thus telling Gasarch to sign for the notary,” the complaint reads.

The commission alleges that “Gasarch was also involved in the transfer of Sharp Group clients’ shares to Wintercap SA” and that it was “recklessly or negligently unaware” that its clients were paying promotions for the shares they were involved in. sale and therefore had to separate the nominees who paid for the promotions and the candidates who held the stock.

And, the commission alleges, Gasarch wrote a memo to users of Sharp network phones on how to remove secure chats when crossing borders.

“Buy a boat [expletive]. rich mother [expletive]”

The commission also focused on Graham Taylor, who appeared to work closely with Dhillon. Among Taylor’s charges are aiding and abetting.

The complaint shows how parts of the scheme were orchestrated in Vancouver.

“In or around early 2011, Taylor introduced Dhillon and the then-CEO (the “CEO”) of Dhillon’s private company to certain Taylor contacts in China and to a lawyer in Vancouver,” the statement said. complaint.

The complaint shows how Dhillon carried out a reverse takeover of a company called Stevia First, raising tens of millions of shares under its control only to allegedly sell millions illegally by failing to disclose its nominee companies of interest from actual property arranged by Taylor.

“In particular, between approximately April and June 2012, the Veldhuis control group used the Sharp group to make eight telegraph payments, all financed by the proceeds of the sale of Stevia First shares, and totaling more than 4.2 million dollars, to the Swiss bank account of an offshore shell company that Taylor controlled; and Taylor, in turn, promptly transferred more than 60% of that money to Dhillon,” according to the complaint.

On March 6, 2014, Veldhuis sent an encrypted text message to Friesen, who was also in on it: “You get 173,000 today… Buy a boat [expletive]. rich mother [expletive].”

In one instance, the 91-page complaint detailing the transactions of just four companies shows Taylor using a trust account at an unnamed Canadian law firm to move $65,000.

And, to allegedly “obscure his role in the scheme”, Taylor “signed a fraudulent, backdated option agreement that purported to justify his payments to Dhillon as purchases of interests in a parcel of land owned by Dhillon”.

The amended complaint concludes by reiterating the charges against the group, all accused of “fraud in the offer or sale of securities”.

The commission has yet to get the judge to approve a motion to formally file the amended complaint.

Friesen, Sexton, Taylor, Gasarch, Kelln and Veldhuis filed for dismissal.

Gasarch’s Boston attorney, Karen Pickett, maintained her opposition to the lawsuit on the grounds that the allegations are time-limited to five years for someone who resides outside the United States.

Further, “nothing new alleged by the SEC binds Ms. Gasarch to the alleged scheme such that it was prima facie evidence that she ‘knew’ of a securities law violation and provided substantial assistance to the wrongdoer(s).”

Instead, “the allegations place her largely in an administrative role, making wire transfers and sending emails.”

In a March 3 filing, Pickett told the court that many of the allegations lacked specifics, such as whether Gasarch wrote some of the emails in question and how the commission failed to show a specific purpose for some transfers.

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