The judgment in the critical case for securities lenders ends a decades-long legal saga and places legal limits on market watchdogs’ enforcement power
Pump-and-dump scammers can avoid paying multimillion-dollar penalties by declaring bankruptcy, the Supreme Court of Canada has ruled.
Thal and Sharon Poonian were previously ordered by the B.C. Securities Commission to pay more than $19-million after the regulator learned they had manipulated the price of a TSX Venture Exchange-listed oil and gas stock called OSE Corp. in 2008, the BCSC found in a 2015 decision, “leaving hundreds of investors financially devastated.”
“The disgorgement orders were made under the Securities Act and represent the value of the bankrupts’ fraud – the funds that they gained as a result of their market manipulation,” Justice Suzanne Côtéon behalf of the majority. “There is therefore a direct link between the fraudulent conduct of the bankrupts and the Commission’s disgorgement orders.”
Using pseudonyms and multiple accounts, the Poonians artificially inflated the share price of OSE between late 2007 and early 2009 from roughly 10 cents to nearly $2 per share. Then, working with Ontario credit counseling firm Phoenix Credit Risk Management, the Poonians found their victims. Mr. Poonian deliberately tried to disguise his involvement by using an alias, “Tim Jenson,” in his communications with Phoenix, Supreme Court of British Columbia Justice David CrerarIn 2011, Phoenix directors Jawad Rathore and Vince Petrozza agreed to pay $3-million in fines to the Ontario Securities Commission for their role in the scheme.
“There is also considerable doubt in this case whether the Poonians have been rehabilitated,” the 2020 decision said. “They say they have learned a ‘very hard lesson’; however, they attribute their bankruptcy, in Mr. Poonian’s words, to an ‘outlandish fine’, ‘bureaucracy’ and a tax reassessment that ‘makes no sense.’ Their own evidence demonstrates that the Poonians refuse to take responsibility for their actions or the consequences of those actions for others.
Bankruptcy Ruling Decision Poonian Debt Phoenix Court Supreme Court Of Canada CRA Commission
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