B.C.’s top securities cop is alleging a corrupt, made-in-B.C. share distribution scheme that has left retail investors holding on to a significant amount of depreciated cannabis, cryptocurrency, mining and alternative energy stocks listed on the highly-speculative Canadian Securities Exchange (CSE).

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In the midst of an ongoing B.C. Securities Commission (BCSC) investigation, more than two dozen purported consultants and 11 CSE-listed companies are facing a hearing Friday to extend limited and temporary orders and trading bans, until a full hearing can be set to address possible violations and sanctions.

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, it raises serious questions about the credibility of those other companies and how the exchanges are monitored.

“There’s a lot of money involved in this,” said John Woods, editor of StockWatch, a Vancouver-based stock market information service.

The 25 so-called consultants and their 26 associated firms — collectively dubbed the BridgeMark Group — are alleged by BCSC to have entered into dubious consulting agreements with 11 CSE-listed companies.

BCSC has alleged that, between February and August, the BridgeMark members (the hearing respondents) privately bought at least $50.9 million worth of stock at pennies per share but had most of the money returned in alleged phoney consulting fees. Meanwhile, noted BCSC, the 11 companies (also respondents) publicly touted they had raised and secured all the money via the private placements (252 million shares), as evidence of investor interest.

The BridgeMark “consultants” then dumped the shares into the market, at a fraction of the original purchase price, where retail investors picked them up.

Considering CSE issuers raised a record $842 million in 2017, Woods said the sheer volume of issued shares from only 11 companies was a dead giveaway and the CSE, which flagged some of the companies’ activities in June, “doesn’t get any prizes for figuring it out.”

At the core of the case is the unproven allegation from BCSC that BridgeMark members are not actually consultants, defined by BCSC as those who spend “a significant amount of time and attention on the affairs and business of the issuer.”

BCSC executive director Peter Brady said, via a news release, he “is concerned that the BridgeMark Group’s members are not consultants, that they provided little or no consulting services to the issuing companies, and engaged in the scheme for their own profit.”

Thus, Brady alleges the sales were “illegal” under the Securities Act and the overall conduct was “abusive to the capital markets.”

That’s because, typically, in order to protect investors, a company must provide a detailed financial outlook called a prospectus. But the Securities Act provides for some exemptions to sell shares without disclosures to trusted, privileged or accredited investors. BridgeMark members were hired by the companies as consultants and were thus able to use the consultant exemption to buy shares without a prospectus.

As an example of what occurred, BCSC outlined how four of the 11 issuing companies (Green 2 Blue Energy Corp., Cryptobloc Technologies Corp., BLOK Technologies Inc. and New Point Exploration Corp.) raised nearly $18 million by privately placing (selling) shares directly to the various BridgeMark members.

The companies then returned $15.3 million to the BridgeMark members in so-called consulting fees, leaving them with $2.7 million. The members, now down $2.7 million, then sold their shares (which were originally issued on a free-trading basis) for $8.8 million, thus raising about $6.2 million in allegedly illicit profit.

“In addition to being quite bold, it’s quite clever. You get the money and back it goes. It’s simple enough, not overly complicated; but I guess that’s the charm,” said Woods of the allegations.

With no assets or viable business behind the shares, most of the stocks plummeted.

“Based on evidence obtained in respect of the other seven issuers (companies), Staff are concerned that members of the BridgeMark Group also executed the scheme with those issuers,” stated BCSC.

The other seven companies include: Kootenay Zinc Corp.; Affinor Growers Inc.; Beleave Inc.; Liht Cannabis Corp. (formerly known as Marapharm Ventures Inc.); PreveCeutical Medical Inc.; Speakeasy Cannabis Club Ltd.; and Abattis Bioceuticals Corp.

To date, BCSC has temporarily banned BridgeMark members from buying or selling shares of the 11 companies. It has also blocked all CSE-listed companies from using the consultant exemption to sell shares to BridgeMark members.

A temporary order also prohibits the 11 companies from using the consultant exemption to sell their shares. Citing the public’s interest, BCSC wants to extend the restrictions at Friday’s hearing in order to continue its investigation, which could eventually lead to a hearing to determine if there were securities law violations. If there was such a determination, sanctions, such as monetary penalties and market bans, could be applied.

BridgeMark members will have the opportunity to contest the extension, if they wish. It is expected there will be a packed house of lawyers, considering Brady “may apply to have questions of liability and sanction heard at the same time and determinations adverse to the Respondents may be made” should the respondents not appear.

BCSC would not provide any further details of the case, including why the group is dubbed BridgeMark.

But a central figure in the case appears to be Anthony Kevin Jackson of West Vancouver. Jackson is principal of BridgeMark Financial Corp., one of the 26 associated firms. He is also sole director of another BridgeMark Group firm, Jackson and Company. Jackson also doubled as CFO for several of the 11 companies.

The chartered accountant’s receptionist Danilen Villaneuva is sole director of Detona Capital Corp., also a BridgeMark member. Jackson’s brother-in-law Ryan Peter Vernier is sole director of BridgeMark member Altitude Marketing Corp.

Some of the members have had run-ins with the law.

One is Aly Babu Husein Mawji, a resident of Coquitlam who, according to BCSC, provides consulting services to public companies through BridgeMark member Northwest Marketing and Management, which was issued millions of dollars worth of shares.

Mawji is facing another BCSC hearing of his own, after being found guilty in Germany of illegal market manipulation in 2012 and jailed for more than three years. Mawji stood to earn 25.7 million Euros before his pump and dump scheme was uncovered.

BCSC is seeking to ban Mawji from trading, promoting, consulting and acting as a director or officer with any issuing company or registrant.

In 2006, BCSC imposed a cease-trade order against De Beira Goldfields Inc., which was promoted by Mawji, according to the Vancouver Sun.

Another big player listed as a respondent is Justin Edgar Liu, of Lukor Capital Corp., who bought $2.25 million in shares from Abattis Bioceuticals under the consultant exemption, according to CSE filings.

Liu is listed as residing at a palatial mansion on Groveland Road in West Vancouver, the same reported address of his mother May Joan Liu (Yee), an infamous penny stock player at the Vancouver Stock Exchange, according to past reports

Justin Liu operates cannabis stores, like his mother. He was a director of Green Tree Dispensary Society in North Vancouver when the municipality filed a lawsuit against it for violating bylaws.

May Joan Liu is director of WeeMedical Dispensary Society, which has run afoul with numerous municipalities (Delta, Richmond and Prince George among others), also for illegally operating a business.

On Feb. 2, according to CSE filings, mining company Kootenay Zinc Corp. dispersed 4.9 million 27-cent shares; about 4.5 million of which were issued to BridgeMark members named in the BCSC orders.

Justin Liu, Detona Capital (Villaneuva), and Cameron Paddock Enterprises Inc. (now Rockshore Advisors) bought 900,000 shares each, as consultants. Likewise, Northwest (Mawji) bought 880,000. Jackson, as Kootenay’s CFO, also bought 900,000 shares.

Kootenay has the same Vancouver address as BridgeMark Financial, much like many other of the BridgeMark Group firms. Kootenay’s shares went from about 55 cents in February to about eight cents by Nov. 1.

“Its all very circular,” said Woods.

Liu and Paddock (both of whom are the largest players alongside Villaneuva, Liu and Mawji) also each bought over $1 million in Speakeasy Cannabis Club Ltd. shares.

SpeakEasy and a number of the other 11 named companies have distanced themselves from the BCSC allegations since the orders were made public last week.

“SpeakEasy also wishes to reassure stakeholders that the Company has undergone several changes over the past number of months, including significant changes to its management team. As previously announced, Anthony Jackson ceased to be a Director and the Chief Financial Officer of the Company on September 10, 2018,” noted a company statement.

Kelowna-based Liht Cannabis Corp. (previously Marapharm), whose stocks have dropped 50 % since its shares were sold, claimed it welcomes a BCSC investigation and “had undertaken its own internal investigation and fact-finding, to reconcile the contracts and services rendered to the Company.”

Cannabis drink company Koios Beverage Corp. was quick to turf Jackson as its CFO, as well as another BridgeMark member, Von Rowell Torres, as director.

Jackson did not reply to a request for comment.

The other BridgeMark members include: Simran Singh Gill; JCN Capital Corp., John Rosarino Bevilacqua; Essos Corporate Services Inc., Sway Capital Corp., Von Rowell Torres, David Matthew Schmidt; Natasha Jon Emami; Altitude Marketing Corp., Ryan Peter Venier; Platinum Capital Corp., 658111 B.C. Ltd., Jason Christopher Shull; Tryton Financial Corp., Abeir Haddad; Tavistock Capital Corp., Robert John Lawrence; Jarman Capital Inc., Scott Jason Jarman; Rufiza Babu Husein Mawji-Esmail and Denise Marie Trainor (Northwest); Randy White, Escher Invest SA, Hunton Advisory Ltd.; Kendl Capital Limited; 1153307 B.C. Ltd., Russell Grant Van Skiver; Bertho Holdings Ltd., Robert William Boswell; Haight-Ashbury Media Consultants Ltd., Ashkan Shahrokhi; Saiya Capital Corporation, Tara Kerry Haddad; Keir Paul MacPherson; Tollstam & Company Chartered Accountants, Albert Kenneth Tollstam; 727 Capital, David Raymond Duggan; Viral Stocks Inc.; and 10X Capital.

Here is a list of the private placements that occurred (with CSE filing links):

February

Kootenay

$1,209,600

4,480,000 shares

March

Affinor

$3,999,667

24,997,916 shares

April

Green 2 Blue Energy Corp.

$4,280,000

14,266,665 shares

April

Beleave

$5,000,004

2,857,145 shares

May

Marapharm

$4,500,002

7,500,003 shares

June

BLOK Technologies

$4,500,000

22,500,000 shares

June

Cryptobloc Technologies Corp.

$4,500,000

30,000,002 shares

June

Marapharm

$4,575,000

9,150,000 shares

June

Beleave

$5,000,000

2,500,000 shares

June

PreveCeutical

$4,000,000

80,000,000 shares

July

Abattis

$2,250,000

13,235,294 shares

July

Speakeasy

$2,417,001

3,452,858 shares

August

New Point

$4,651,000

37,208,000 shares