The Ontario Securities Commission secured its first fraud conviction in quasi-criminal proceedings after Vadim Tsatskin pled guilty to one count of securities fraud in the Ontario Court of Justice on April 4, the OSC said Tuesday.
Tsatskin was charged in relation to his role with a company known as Global Energy Group Ltd., which operated an unregistered securities sales office, trading units of limited partnerships called New Gold LLP to members of the public. Tsatskin was one of the persons controlling the operations of Global Energy in Ontario.
OSC staff alleged that between June 2007 and June 2008 approximately US$14.75 million worth of New Gold securities were sold to the public, the majority of whom lived in Western Canada. In his plea, Tsatskin admitted that the New Gold securities were fraudulently represented to constitute ownership interests in Kentucky oil and gas leases.
The OSC said this is the first finding of guilt for fraud in quasi-criminal proceedings brought by the commission before the Ontario Court of Justice.
A new provision of the Securities Act dealing with fraud took effect in 2006, enabling the OSC to also bring fraud allegations in cases involving illegal distributions and other sorts of misconduct. Of the 35 proceedings commenced by the OSC in 2010, involving 108 individuals and 69 companies, over half included allegations of fraud, the commission said.
The results of cases brought under the new provision are now starting to see the light. In 2010, the OSC released decisions relating to the first four proceedings concluded under the fraud provision, finding that acts constituting fraud included non-disclosure of important facts in offering memoranda, use of investor funds for personal expenses, misrepresentation of background and experience in the securities industry, and unauthorized diversion of funds.
In the OSC’s latest enforcement report, Howard Wetston, chair of the commission, pledged that cases involving market manipulation and insider trading, as well as fraud and illegal distributions, will be enforcement priorities for the commission in 2011.
He also said that the OSC “intends to make more use of [its] powers to pursue cases in provincial court and will request that the courts impose jail terms to send a strong message to deter those who try to exploit investors.”
In the Tsatkin case, OSC staff are seeking a three and a half year prison term. In court, counsel for Tsatskin submitted that a three-year term would be appropriate. Sentencing is scheduled to take place on November 24 in Toronto.
In addition to the Global Energy case, Tsatskin also faces OSC proceedings as part of enforcement actions in two other cases. He is also accused of fraud, unregistered trading and illegally distributing securities of limited partnership units being sold by Ameron Oil & Gas Ltd.
In addition, Tstaskin faces allegations in a case involving alleged unregistered trading and illegal distribution, in a foreign currency trading scheme conducted by QuantFX Asset Management Inc. None of the allegations in either of these cases have been proven.
The OSC recently reached settlement agreements with two of Tsatskin’s co-accused in the QuantFX case.
Back in June 2010, the OSC also settled with one of his co-respondents in the Global Energy case. There remain enforcement proceedings outstanding against various people in all three cases, including quasi-criminal charges against another defendant in the Global Energy case.
IE