A B.C. Supreme Court judge has frozen the assets of Fred Sharp, the former Vancouver lawyer found liable in the United States for being the mastermind of a $1-billion stock market fraud scheme.
Justice Amy Francis issued a Mareva injunction against Sharp on June 26, according to a written decision issued Aug. 12.
A Mareva injunction freezes assets to prevent a defendant from hiding them when faced with forfeiture proceedings. In this case, the U.S. Securities and Exchange Commission sought the injunction, plus a list of Sharp’s assets, after Sharp was found liable in civil proceedings on May 12, 2022, for orchestrating a network of pump-and-dump arrangements via offshore shell companies.
The SEC had alleged “Sharp masterminded a complex scheme” from 2011 to 2019 in which he and his associates — including several B.C. residents — enabled so-called "control persons" of penny stock companies, whose stock was publicly traded in the U.S. securities markets, to conceal their control and ownership of huge amounts of shares and then surreptitiously sell those shares into the U.S. markets, in violation of federal securities laws.
A judge ordered Sharp to pay the commission US$52.9 million for disgorgement of ill-gotten gains, interest and penalties.
Sharp had also been criminally charged in parallel proceedings by the U.S. Attorney’s Office, which issued a new criminal indictment against Sharp last January. Sharp is presumed innocent of those charges until a court rules on them. As such, Sharp has an outstanding arrest warrant from the U.S. Department of Justice, which has also frozen numerous bank and brokerage accounts.
With assistance of criminal defence lawyer Joven Narwal KC, Sharp contested the Mareva injunction on grounds that producing a list of assets would violate his Charter and Fifth Amendment rights ahead of a criminal trial.
Last March, Narwal contested Sharp was never properly served by the commission, in his argument to have the injunction application against his client dismissed.
Narwal told the court Sharp can’t provide an affidavit because he’s under indictment in the U.S., prompting B.C. Supreme Court Justice Neena Sharma to note “he’s in a pickle.”
It’s unclear what assets Sharp may have, although about US$2.2 million is secured by B.C. Securities Commission preservation orders, according to Francis. Sharp’s address for service was a West Vancouver home owned by Teresa Sharp, who Narwal described in court as an “alleged wife.”
Francis outlined her legal analysis of Sharp’s position in her ruling, ultimately dismissing his initial application to stay proceedings and approving the injunction (freeze order).
Francis sided with lead U.S. prosecutor James Drabick, who testified that prosecuting authorities are prohibited from using compelled evidence (such as that produced by the injunction) in a U.S. criminal prosecution. Additionally, Drabick deposed he has no interest in seeing the asset list and requested that the court include a term in the injunction order that the SEC is prohibited from sharing the information with law enforcement.
Francis’ order includes such provisions and also states that counsel for the commission may only use the asset list and other sealed material for the purposes of the civil forfeiture proceedings here in B.C.
Another key requirement of a Mareva injunction is proving there is a risk of assets being disposed of; in this case, Francis found such a risk exists with Sharp, who denied such a risk.
Francis noted “the fraud alleged in this case is very serious” and that both the U.S. and B.C. courts “have now found Mr. Sharp liable on the facts as alleged in the initial complaint, namely that he was a mastermind of [a] complex securities fraud scheme that, as I noted in my prior judgment, involved shell companies, secret encrypted communication and a clear pattern of deceptive behaviour.
“Given Mr. Sharp's unique role at the helm of this fraudulent operation and given that he has now been found liable in this court for such behaviour, in my view, this is clearly a case in which it is appropriate to infer that there is a risk of dissipation of assets.”
Francis was referring to a prior granting of Mareva injunctions against Sharp’s associates. In that case, the asset lists have also been sealed to guard against self-incrimination by those who face likewise criminal charges.
No stranger to court proceedings, Sharp was called to the B.C. bar in May 1981.
In 1995, his name first became publicly linked to improper activity, when he was suspended by the Law Society of BC for one year.
In 1997, Sharp relinquished his licence to practice law and went on to incorporate the Vancouver office of Panama investment firm Mossack Fonseca the following year. Although it dissolved in April 1999, Sharp carried on business under different corporate entities elsewhere.
In May 2016, Sharp became more widely known across the country as a Canadian face of the Panama Papers — a massive leak of documents of Panamanian company Mossack Fonseca that revealed a vast network of offshore companies acting as tax havens. He helped register 1,167 offshore entities from his Vancouver office, according to the documents.
Sharp is also presently responding to Canada Revenue Agency investigations via court proceedings.
Last year, Sharp lost an appeal at the Supreme Court of Canada in an attempt to discharge unrelated pump-and-dump allegations from Quebec’s securities commission.
