This week, the Securities and Exchange Commission (“SEC“) filed applications for default judgement against several companies, including several shells incorporated in tax havens with nominee control persons, that the SEC alleges were used to generate US$35 million in illegal sales of shares.
Six individuals, including three Canadians, at least one from Vancouver, were charged in the case. The three Canadians are Steve M. Bajic, Rajesh Taneja and Christopher McKnight. McKnight is alleged to have been the money mover in the alleged scheme.
The SEC alleges that Bajic and Taneja took control of shares of issuers on behalf of others, paid money to have those shares pumped to jack up the prices, and then dumped the shares. They allegedly earned a cut from the proceeds of the alleged scheme. With respect to the shell companies, they are alleged to have concocted a scheme to manufacture beneficial ownership to obfuscate who the actual control persons were behind the offshore entities.
The SEC application for default judgment states that none of the corporate defendants responded to the claim by the SEC. The default judgements seek over US$16 million from the entities.
Before the default applications, the SEC obtained a double-barrelled order for a mareva injunction and asset forfeiture against all of the defendants, effectively depriving them each and collectively of funds to hire lawyers. Banks, including BMO, CIBC and TD Bank, who provided banking to the defendants, and lawyers of the defendants, were ordered to patriate the proceeds of the alleged fraud to the Court in the US where the claim was filed.
The application for the asset seizure and patriation order was based on affidavit evidence that showed that over US$42 million in trading proceeds were handled by the defendants and on statements made to the RCMP about Bajic and Taneja, records seized during a search of Bajic’s home in Vancouver and WeChat text messages of Bajic obtained by law enforcement.