David and Natasha Sharpe of Bridging Finance Inc. photographed in April, 2019.Fred Lum/The Globe and Mail
David and Natasha Sharpe, the husband and wife who ran Bridging Finance Inc., were found guilty of fraud by Ontario’s Capital Markets Tribunal after adjudicators ruled the executives received kickbacks and other benefits from underwriting loans with investor money.
The tribunal also found the Sharpes obstructed the Ontario Securities Commission’s investigation by making false or misleading statements during their compelled examinations, and that Mr. Sharpe attempted to intimidate witnesses by sending “profanity-laden, insulting and threatening” text messages and voicemails.
The tribunal is an independent division of the OSC and can impose penalties under the Ontario Securities Act. A hearing to consider costs and sanctions against the Sharpes, as well as against Andrew Mushore, Bridging Finance’s former chief compliance officer who “indirectly participated” in the fraud, will be held no later than Dec. 6.
Mr. Sharpe said in an e-mailed statement he will appeal the decision, alleging the tribunal violated his rights under the Canadian Charter of Rights and Freedoms through unlawful disclosure and use of his compelled interview transcripts.
Bridging Finance specialized in making short-term loans to high-risk borrowers and every major bank and independent brokerage in Canada sold its funds, but the private lender was put under a court-ordered receivership in April, 2021. At the time, the OSC alleged that Bridging improperly used investor funds to benefit Mr. Sharpe, the former chief executive officer, and Ms. Sharpe, the former chief investment officer.
Bridging managed $2.09-billion on behalf of 26,000 investors, many of them retail investors, and the fund’s receiver, PricewaterhouseCoopers, has estimated investor losses at $1.3-billion – close to two-thirds of all money put in.
The OSC took formal action against the Sharpes and Mr. Mushore in March, 2022, and the tribunal’s hearings into these allegations started in June, 2023.
The OSC centred its case on three business dealings: Loans made to Sean McCoshen, a leading Bridging borrower; a loan used to buy out a co-manager of Bridging Finance’s flagship fund; and multiple loans made to businessman Gary Ng, who ultimately became a co-owner of Bridging Finance.
Mr. McCoshen was a Winnipeg businessman whom Mr. Sharpe met in 2015. Over the years, Bridging lent more than $150-million to Mr. McCoshen’s company, Alaska-Alberta Railway Development Corporation (A2A), which was supposed to build a railway from Fort McMurray, Alta., to the ports of Alaska.
Mr. Sharpe publicly supported the project, claiming it would spur economic development for Indigenous communities along its route, but until the receivership hardly anyone knew that A2A owed Bridging $208-million after accounting for interest, making it the largest loan in the lender’s portfolio.
The OSC alleged Mr. McCoshen sent Mr. Sharpe $19.5-million between 2016 and 2019 in the form of kickbacks, and that Mr. McCoshen also transferred $250,000 to Ms. Sharpe. Of the $19.5-million sent to Mr. Sharpe, $18.2-million could be traced to investor funds.
The tribunal found Mr. Sharpe guilty of fraud in this matter.
The second business dealing involved a loan used to fund a $35-million payment to Bay Street money manager Ninepoint Partners LP. Bridging and Ninepoint used to co-manage Bridging’s main investment fund, but they had a falling out in 2017 and the Sharpes wanted to buy back Ninepoint’s stake.
The Sharpes needed money to do so, and instead of getting an external loan, they devised a way to borrow from investors – without telling them. The OSC alleged the Sharpes authorized a $40-million loan to one of Bridging Finance’s existing clients, then had the money transferred to them.
The tribunal found Mr. and Ms. Sharpe guilty of fraud in this matter, and also found that Mr. Mushore, the former chief compliance officer, indirectly participated in it.
The final business dealing related to Mr. Ng’s purchase of a 50-per-cent stake in Bridging Finance in 2019. The regulator alleged that a month after Mr. Ng agreed to invest, Bridging lent one of his companies $32-million. After that transaction closed, Bridging lent Mr. Ng’s companies $47-million more.
The OSC alleged the funds included a $35-million loan that the Sharpes signed off on without approval from Bridging’s credit committee, and that Mr. Ng paid the Sharpes $1-million.
The tribunal found Ms. Sharpe guilty of fraud in this matter.
Because the tribunal can only impose rulings under the Ontario Securities Act, any criminal charges must come from the RCMP. In November, 2022, The Globe and Mail reported that the RCMP’s Integrated Market Enforcement Team in Toronto had been interviewing witnesses and seeking records, but no charges have been laid.
Bridging also remains entangled in a number of lawsuits, including a legal battle over The One luxury condo tower in Toronto. The project’s major lender has alleged that Ms. Sharpe and former road paving magnate Jenny Coco, who co-owned Bridging Finance alongside Ms. Sharpe, pledged investor money as collateral to get the condo developed. Ms. Sharpe and Ms. Coco are also investors in The One.
As for Bridging’s investors, they are still estimated to lose more than $1-billion collectively, and they are still waiting for their first payment from the funds that have been recouped.
With reports from Alexandra Posadzki