Khodjaiants and Dubinsky (sanctions decision) – On January 14, 2014, the OSC levied significant penalties against two individuals it had concluded were guilty of a so-called “corporate hijacking” scheme whereby they reincorporated dormant or defunct companies that had previously traded on the over-the-counter market and issued a significant number of shares in those companies to themselves which were then liquidated for a profit. The respondents were found guilty of breaching the fraud provisions in the Securities Act. In leveling the penalties, the Commission noted that fraud is “one of the most egregious securities regulatory violations.” In addition to administrative penalties and bans from participating in the capital markets for 15 years, the respondents were ordered to disgorge more than $1 million.
HumeniukandAurora– The RCMP has charged two individuals with fraud and theft for allegedly bilking investors out of $23 million by inducing investments in a land development project in Mexico through their company, Concrete Equities. The two accused allegedly promised investors as much as a 500% return on their investments. In a related decision released on September 23, 2011, the ASC concluded the two had mislead investors, including by representing to investors in the Offering Memoranda that funds from each venture would be used solely for the purposes of that venture when in fact those funds were at times used to pay the expenses of other ventures under the Concrete Equities umbrella such as distributions to investors of those other ventures. After a sanction hearing, ASC levied administrative fines of $3.3 million (against the accused Humeniuk) and $500,000 (against the accused Aurora).
The ASC decisions on liability can be found here, and the sanction decision here. The criminal charges brought by the RCMP relate only to the development project in Mexico whereas the ASC proceedings were broader and considered various real estate ventures in which Concrete Equities was involved.