Tuesday, August 13, 2019

B.C. government seeks to seize properties allegedly linked to $165-million stock fraud

B.C. Civil Forfeiture Office alleges a $1.6-million house on Mission Ridge Road in Kelowna and a $524,000 condo at nearby Big White ski resort are the proceeds of crime

The B.C. government is suing to seize properties in the B.C. Interior that it alleges were linked to a $200-million-plus international stock fraud.
In a lawsuit filed in B.C. Supreme Court this month, the B.C. Civil Forfeiture Office alleges a $1.6-million house on Mission Ridge Road in Kelowna and a $524,000 condo at nearby Big White ski resort are proceeds of crime and should be forfeited.
The properties are owned by Cuatro Cienagas Inversiones Ltd., incorporated in Hong Kong in January 2017 and registered in B.C. three months later as an extraprovincial company.
Named in the suit are Benjamin Thomas Kirk; Kayley Tyne Johnson, the current or former spouse of Kirk; and Carlos Gomez Brana. Kirk and Johnson’s last known address was at the Mission Ridge home and Brana is believed to live in Mexico.
None of the defendants has responded to the civil lawsuit. It contains allegations that have not been proven in court.
Among the allegations of unlawful activity against the trio are breaches of the U.S. Securities Act and the B.C. Securities Act, possession of proceeds of crime, fraud, manipulating stock prices, laundering money and tax evasion, according to court documents.
The forfeiture office alleges that Cuatro Cienagas Inversiones is owned and operated by one or more of Kirk, Johnson and Brana and was set up in B.C. to receive and distribute money from a stock fraud investigated by the U.S. Securities and Exchange Commission.
In the fall of 2018, the SEC said it halted the penny stock fraud scheme by freezing assets of two individuals, including a British citizen, Roger Knox, and their companies.
The SEC said the scheme generated more than US$165 million in illegal sales of shares of at least 50 micro-cap companies, those with a value of $50 million to $300 million. Knox, and his Swiss-firm Wintercap SA, formerly Silverton SA, concealed stock ownership, allowing stocks to be pumped up in price and dumped for a profit, according to the SEC.
Knox faces criminal charges in the United States for the scheme.
The SEC’s complaint alleges Michael T. Gastauer aided the fraud by establishing several U.S. companies, including virtual financial firms, and allowing Knox to use the bank accounts to disburse the proceeds of his illegal stock sales.
According to the forfeiture office’s court filings, proceeds from the scheme were transferred to or on behalf of one or more of Cuatro Cienagas Inversiones, Kirk, Johnson and Brana.
Cuatro Cienagas then used that money to buy the properties in the Interior, according to the civil forfeiture office’s claim.
On March 22, 2017, Cuatro Cienagas used accounts set up by Gastauer to transfer $101,000 to Norwich Real Estate Services Inc. in Kelowna. On May 10 and 11, another $1.529 million was transferred in three instalments to an unnamed Kelowna law firm.
On May 18, Cuatro Cienagas bought the Mission Ridge home for $1.6 million in cash.
From May 30 to Oct. 23, 2017, Cuatro Cienagas transferred in three instalments $250,500 to a Bank of Montreal account. In December, Cuatro Cienagas also directed the Swiss firm, formerly known as Silverton, to transfer in three instalments $548,000 from another Bank of Montreal account to the unnamed Kelowna law firm.
On Jan. 10, 2018, Cuatro Cienagas bought the condo at Big White ski hill.
The unnamed law firm acted as Cuatro’s lawyer in the property purchases, according to the court filings.
According to the civil claim, Kirk was charged in 2013 of violations of the U.S. Securities Act. In 2015, Kirk admitted to breaches of the Alberta Securities Act and agreed to pay a fine of $100,000.

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