U.S. regulators charge British Columbians in alleged stock fraud with 'illicit' profits of US$77 million

The U.S. Securities Commission has charged three British Columbians in an alleged pump-and-dump stock fraud the commission says generated profits of at least US$77 million and left investors with nearly worthless shares.

Named in the suit are Jay Scott Kirk Lee, 38, believed to be living in Vancouver; Geoffrey Allen Wall, 49, believed to be living in Saanich; and Benjamin Thompson Kirk, 43, believed to be living in Hope.

In a complaint filed in the U.S. District Court in Massachusetts, the trio are accused, between 2011 and 2016, of using a network of offshore shell companies to conceal their control of shares in penny stocks, unloading those shares on unsuspecting retail investors and then disbursing the profits of the fraud via bank accounts throughout the world, including in The Bahamas and the tiny island country of Mauritius in the Indian Ocean.

The trio have not responded to the complaint, which was filed on Dec. 9, and the allegations have not been proven in court.

In a news release, the SEC said the trio were some of the more prolific clients of Frederick L. Sharp, 69, of West Vancouver, who operated an alleged offshore platform which was “essentially a complete service provider for all the illicit needs of those dedicated to committing penny stock fraud.”

The SEC filed charges earlier this year against Sharp and his associates for violations of fraud and securities laws. Sharp has also been charged criminally in relation to the allegations, including for conspiracy to commit securities fraud. In the civil action filed in August, Sharp had not responded and the SEC filed a default judgment application against him, which was accepted on Nov. 15 by the U.S. District Court in Massachusetts.

According to the SEC complaint, Sharp and his associates facilitated more than one billion dollars in gross sales in hundreds of penny stock companies.

“(Lee, Wall and Kirk) apparently believed that by joining Sharp’s network of clandestine accounts and cloak-and-dagger communications they would have the tools at their disposal to commit fraud without accountability,” Melissa Hodgman, associate director of the enforcement division of the SEC, said in a written statement.

The SEC is seeking to have the trio banned from participating in any involvement in penny stocks, pay back the allegedly ill-gotten gains and pay civil penalties.

According to the complaint, the trio controlled the majority of the stocks of Nutranomics Inc., a Nevada corporation headquartered in Salt Lake City, Utah, that was “purportedly” involved in nutritional food product research, development and sales. The stock traded on the OTC Markets in the U.S. — or over the counter market — where most penny stocks trade.

The trio bought the company for US$500,000 from Sharp, who controlled all of its 20 million unrestricted shares, although they were held in other individuals’ names, according to the complaint.

The defendants then organized an increase in the stock price by buying some of those shares through entities they controlled, communicating with code names and through an encrypted phone system created by Sharp, according to a description of the scheme outlined in the SEC’s court filing.

One of the code names Lee was known as was BIGBLUE, Wall as BAHAMAS and Kirk as ELGI.

Sharp used the handle Bond, styling himself after the fictional character James Bond, says the complaint.

The defendants also spent money on promotional campaigns, hiding that spending in another shell company, eventually selling all of the 20 million shares in 2013.

The gross proceeds of the scheme were US$16.35 million, with an estimated “illicit” profit of US$15.2 million, according to the SEC’s court filing.

Of the proceeds of the Nutranomics pump-and-dump stock scheme, US$7.9 million went to Lee and US$7.5 million to Wall, with Lee providing US$2.4 million of the proceeds to Kirk, according to the complaint.

The complaint outlined 10 stock schemes with estimated “illicit” profits of US$77.3 million.

The SEC said the list was not an exhaustive overview of the trio’s scheme.