Peter Brady, Executive Director of the British Columbia Securities Commission, is temporarily blocking certain CSE-listed companies from using the BridgeMark Group consultant firm pending further investigation into an alleged scheme that netted over $6 million for the firm. The so-called consultants are under investigation over transactions with eleven different companies in the cannabis, cryptocurrency, mining, and alternative energy industries.
The BCSC Executive Director is alleging a scheme where the consultant exemption was misused to sell shares without a prospectus, netting the firm millions of dollars. In total, four companies, sold over $17 million worth of shares to members of the BridgeMark Group, and then returned over $15 million to those same group members. They then sold those securities at a discount on the open market, generating over $6 million in profit for themselves.
Press releases were then issued by the four companies stating that money was raised, even though that money went back to Bridgemark, allegedly.
The BCSC Executive Director alleges that the four issuing companies appear to have used the consultants to avoid filing a prospectus, thus keeping their activities secret from the commission and investors. These claims raise concerns regarding the legitimacy of Bridgemark as a consulting firm, arguing that they “provided little to no consulting services to the issuing companies” at the time the transactions took place.
Amid speculation that BridgeMark Group completed similar transactions with seven other companies, the Executive Director’s temporary order prohibits a total of eleven CSE-listed companies from using BridgeMark Group or other consultant exemptions to sell their shares. The list includes Liht Cannabis (CSE: LIHT) (OTCQX: LIHTF), BeLeave (CSE: BE) (OTCMTKS:BLEVF), Abattis (CSE:ATT) (OTC:ATTBF), Speakeasy Cannabis Club (CSE:EASY) (OTCMKTS: SPBBF), PreveCeutical (CSE:PREV) (OTC:PRVCF), and Affinor Growers (CSE:AFI) (OTCMKTS:RSSFF).
Acting in the best interest of shareholders
On Tuesday, Abattis commented on the BCSC investigation and their current relationship with the BridgeMark Group. In July, the cannabis company completed a $2.25 million private placement with the consulting firm. In a statement, Abattis CEO Robert Abenante explained that the private investment went on to fund the company’s research and development of new product lines, laboratories, and cultivation facilities.
“[Our] team has and continues to act in the best interest of all its shareholders, with the primary objective to build value by creating a fully-integrated medicinal marijuana company…The use of proceeds of our private placements have gone towards building a diversified cannabis company with divisions in cultivation, services, and products,” Abenante said in the statement. “We firmly believe this temporary order will be a small blip in the Company’s drive to build shareholder wealth in the coming months.”
Liht Cannabis released a statement two days after the temporary ban was announced. Before the BCSC investigation, Liht had started their own internal investigation into the BridgeMark Group, and it is still underway. In the meantime, Liht admits to using members of the BridgeMark Group in a consulting capacity, and the cannabis company confirms that they will be attending the hearing on December 7.
What can investors expect from the BCSC investigation?
The first hearing is dated next Friday, December 7. The companies will remain under temporary block until then, and the hearing will determine if the block needs to be extended. In the meantime, the investigation is anticipated to continue. It is within the right of the BCSC to continue their investigation up to and past the date of the official hearing, which has yet to be announced.
Once the date of that hearing is announced, each company will have their opportunity to present their cases to the panel of BCSC commissioners. The panel then has ninety days to issue their findings. If found guilty, the companies can have their security shares restricted, suspended, or canceled. There are also fines of up to $1 million per transgression, and guilty parties can be held responsible for any legal or administrative fees accrued during the investigation.
Cannabis investors can expect pot stock prices to continue to fluctuate as the investigation continues. There is some speculation that trading halts are on the horizon for some of these companies, but no official announcements have been made, and all eleven companies are still trading on the CSE and OTC markets. Liht Cannabis jumped 26 percent on Wednesday on the OTC, and Abattis was up over seven percent.