Four Lower Mainland residents are facing a grand jury indictment for criminal securities fraud, for their alleged role in a complex offshore network to defraud American investors between 2012 and 2020.
Assistant U.S. Attorney James Drabick of the District of Massachusetts issued the criminal indictment Jan. 9 against Fred Sharp, 71, of West 91原创; Courtney Kelln, 43, of Surrey; Paul Sexton, 55, of Anmore; and Mike K.G. Veldhuis, 43, of 91原创.
All four have already been found liable for fraud in a parallel civil claim against them brought by the U.S. Securities and Exchange Commission (SEC) in August 2021. Specifically, Sharp was found liable in a summary judgment after not responding to the U.S. courts; Kelln and Veldhuis admitted their parts in the scheme last June; and a trial jury found Sexton liable last September.
The four collectively face nearly $100 million in repayment and penalty orders. The largest monetary order is against Sharp, whom the SEC called the “mastermind” of the operations. Sharp is a former lawyer and last year was barred from investment markets in this province by the B.C. Securities Commission.
Sharp and Kelln are charged with two counts each of securities fraud and conspiracy to commit securities fraud. Sexton and Veldhuis are charged with one count each of securities fraud and conspiracy to commit securities fraud.
Officials noted Jan. 11 in a statement the defendants are presumed innocent unless and until proven guilty beyond a reasonable doubt in a court of law.
Officials claim the group “sold millions of shares in multiple microcap—or ‘penny’—stock companies during pump-and-dumps, generating at least tens of millions of dollars in illicit proceeds.”
The indictment states Sharp “operated a sophisticated platform that provided a variety of services to control persons seeking to conceal their identities when selling large quantities of penny-stock companies’ shares in contravention of securities laws.”
According to officials, Sharp wrote to clients that his services were “comprehensive” and included “payments, loans, private placements and keeping clients out of jail.”
The indictment states Sharp operated an encrypted communications network, calling himself “Bond” while using “X phones.”
Veldhuis was known as “Acco,” Sexton was known as “Hear,” and Kelln was known as “Celt” or “Esquire,” according to the indictment.
The indictment summarizes the alleged criminal scheme as follows: First, the “control persons” would acquire nearly all the shares of a company (hence, controlling the company). Then they would transfer shares to nominees controlled by Sharp or themselves. The shares would then be transferred to a Swiss-based asset management firm called Wintercap SA. With the assistance of two men named Roger Knox and his co-conspirator Richard Targett-Adams, the shares were spread out across multiple brokerage accounts around the world. Along the way, false representations were made about the nominees. Finally, the shares were “dumped” into the securities markets and sold to retail investors following promotional campaigns that lifted, or “pumped,” their sale price.
Alleged co-conspirator Luis Carillo of Mexico allegedly orchestrated a boiler room (call centre) from Medellin, Colombia to generate demand for the stocks. Carillo also controlled and manipulated shares of companies, allegedly.
Last year, Knox, the founder of Wintercap, was sentenced to 36 months in prison.
Officials claim Kelln worked under Sharp and often communicated with Knox to facilitate share transfers of less than 5 per cent of the companies’ total shares to evade scrutiny from brokers.
The indictment lists several companies officials claim were part of the alleged scheme: Garmatx Holdings Ltd., Pure Snax, OneLife Technologies and Vitality Biopharma Inc., previously known as Stevia First.
The indictment lists a number of unnamed co-conspirators, two of whom reside in B.C.
Sharp is also facing civil claims from the SEC north of the border for some of his assets.
His counsel in the case is 91原创 criminal defence lawyer Joven Narwal KC, who issued the following statement to Glacier Media on behalf of Sharp with respect to the indictment:
“The 91原创 and American justice systems are both grounded in the principle that every individual is presumed innocent until proven guilty. This fundamental principle of justice transcends the border and seeks to uphold the dignity and rights of individuals facing criminal allegations. Mr. Sharp, who faces charges in the United States, is entitled to this fundamental right, just as he would be in Canada. My submissions about the fairness and the merits of the allegations will be made in court at the appropriate time.”
In order to face the U.S. charges, it's understood the 91原创s would first need to be extradited — a process that could take years.
