The Supreme Court of British Columbia has certified a proposed class action against a long list of companies, issuers and individuals in connection with an alleged scheme of deceptive private placements.
The proposed class action on behalf of investors relates to a scheme that has been the subject in a couple of enforcement actions by the B.C. Securities Commission (BCSC) involving issuers allegedly raising millions of dollars from investors in private placements and funnelling proceeds to purported consultants as part of “sham” consulting deals.
“The scheme allegedly benefited the issuers by enabling them to retain a portion of the private placement proceeds, while falsely informing the market … that there was over-subscribed investor interest in the issuers, and that the issuers had greater capital for use in their operations than was truly the case,” the court said.
The purported consultants also benefited from the proceeds of the private placements, while investors were harmed by overpaying for the issuers’ shares or participating in deals they wouldn’t otherwise have bought into had it not been for the false impression created by the scheme, the plaintiffs allege.
The court certified the case as a class action against a long list of issuers, consultants, and officers and directors of the various companies on behalf of investors globally, alleging liability for various claims including conspiracy, secondary market misrepresentation and fraudulent or negligent misrepresentation.
The court also ruled that the various requirements for a proceeding to be certified as a class action were met in this case, including that the claims against various companies and individuals all relate to the same basic conduct.
“The fact that the scheme ultimately involved 12 different private placements, with some involving different participants, does not change the nature of the alleged overarching conspiracy into 12 separate conspiracies,” the court said in its decision.
“There is a strong basis in fact which indicates that trying the proposed claims in a single proceeding, rather than in separate proceedings for each issuer, would achieve considerable judicial economy by avoiding a substantial repetition in fact-finding and legal analysis,” it said.
None of the allegations detailed in the class action has been proven.