The U.S. Securities and Exchange Commission is seeking to order Canada to pay back $37 million in ill-gotten gains against a West Vancouver man for financial fraud. Fotolia

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The U.S. Securities and Exchange Commission is seeking to order Canada to pay back $37 million in ill-gotten gains against a West Vancouver man for financial fraud.

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A U.S. District Court for Massachusetts entered a default judgment against Frederick L. Sharp, 69, earlier this year after he failed to respond to allegations that he masterminded a long-running “sophisticated” scheme to facilitate stock fraud on hundreds of companies with gross sales of more than US$1 billion. Sign up to receive daily headline news from the Vancouver Sun, a division of Postmedia Network Inc. By clicking the subscribe button you consent to receive the above newsletter from Postmedia Network Inc. You can unsubscribe at any time by clicking the unsubscribe link at the bottom of our emails. Postmedia Network Inc. | 365 Bloor Street East, Toronto, Ontario, M4W 3L4 | 416-383-2300

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The US civil judgment resulted in fines and an order to pay back ill-gotten gains totaling $68 million. The $37 million the SEC is seeking is the ill-gotten gains component of the judgment and accrued interest. The SEC filed a petition earlier this month in the BC Supreme Court. for summary judgment without a trial, arguing that there is no way Sharpe can defend. “Sharp is certain to lose, based on the undisputed material facts and legal issues that exist,” the SEC filing said.

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The application noted that a foreign judgment can be enforced in BC either at common law or if the judgment originates in a reciprocal jurisdiction. The petition said the default judgment is “final and conclusive” and finds the allegations against Sharp to be true and not appealable. Sharp filed a response this month to the SEC’s legal enforcement effort in which it denies all of the SEC’s allegations. Sharp contends that he was denied “procedural justice,” was improperly served with the US court process, and that the US court action lacks jurisdiction over him. The default judgment offends “Canadian notions of fundamental justice and principles of natural justice” and execution should be refused, Sharp’s response says.

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Other Canadians accused in the US SEC case who live in Metro Vancouver, including Zhiying Yvonne Gasarch, 49, and Courtney Kelln, 41, have responded and are fighting the charges. Sharp and others are accused of violating the anti-fraud, registration and reporting provisions of the US Securities Act. In an affidavit filed in BC Superior Court, the SEC noted that Sharp was served with the allegations, a subpoena and a temporary restraining order on an email his wife later said was not his. The SEC also sent court documents to his West Van home address. Multiple attempts to serve personal documents on Sharp at his West Van home were unsuccessful “despite the fact that the lights were on at the residence, a car was in the driveway and the window was open,” documents filed with the SEC state.

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It is unclear exactly what assets the SEC could seek if it is successful in enforcing payment here. The SEC filings outline information about past frozen financial accounts linked to Sharp, including at the Bank of Montreal and Cannaccord Genuity Corp. No amount was reported for the amount of money in these accounts. A search of the property records of B.C. shows no holdings by Frederick L. Sharp. The home Sharpe and his wife Teresa have lived in in West Van since the mid-1990s was purchased solely in his wife’s name, according to BC Land Title documents. Its value today is $2.54 million, according to BC Assessment Authority records. In a written decision issued May 12, U.S. District Court Judge William G. Young said that since Sharp failed to answer or respond to the SEC’s complaint, “the court accepts as true the factual allegations of the complaint against him… Sharp”. As a result of the default judgment, Sharp is also prohibited from engaging in issuances, purchases, offers or sales in the US markets. This prohibition includes any involvement in penny stocks, which are considered stocks below US$5. Sharp also faces criminal charges in the US over the alleged scheme.

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