Kelowna Properties Tied to Alleged $220M In Stock Fraud

Kelowna Properties Tied to Alleged $220M In Stock Fraud Aug 11, 2019, Grant Robertson

The B.C. government is looking to seize a $1.6 million Kelowna home and a $524,000 Big White condo, claiming they're proceeds of an international $165-million USD stock fraud scheme.

In a suit filed earlier this month, the Director of Civil Forfeiture says the Southeast Kelowna home on Mission Ridge Road and the condo on Big White Road were purchased in 2017 and 2018 by Cuatro Cienega’s Inversions Ltd., a Hong Kong-incorporated company that the government claims were set up to receive and distribute the proceeds from stock fraud.

The suit names as defendants Benjamin Thomas Kirk, who was last known to live in the Mission Ridge home, Kirk's former or current spouse Kaylee Tyne Johnson, and Carlos Gomez Brana, who's believed to live in Mexico. The B.C. Civil Forfeiture Office says Cuatro Cienagas Inversiones Ltd. is owned and operated by one or more of the three defendants.

None of the allegations against the three has been proven in court and none of them has filed a response to the Director of Civil Forfeiture's suit.

Prior to October 2018, the United States Securities and Exchange Commission investigated a Swiss asset manager that had been used to circumvent securities laws.

The SEC charged France's Richard Targett Adams, one of the operators of the Swiss asset manager, and several others with engaging in “pump-and-dump” schemes of various penny stocks, along with other forms of market manipulation, between 2013 and October 2018.

A “pump-and-dump” generally involves the artificial inflation of a stock price of a publicly traded company through promotional materials containing false or exaggerated claims (the pump), so those who control a significant amount of the stock can sell their shares once the price has risen (the dump).

The SEC says the fraud involved people, companies and bank accounts around the world, including the U.S., France, Canada, Malta, Switzerland and the U.K. In June of this year, Targett-Adams pleaded guilty in the United States to securities fraud and conspiracy to commit securities fraud and money laundering. He's scheduled to be sentenced in April 2020.

The suit claims the two Kelowna properties, purchased with cash in 2017 and 2018, were used to launder some of the proceeds of the stock fraud. Additionally, it claims Cuatro Cienagas Inversiones Ltd. transferred more than $2 million to an undisclosed Kelowna law firm between May and December of 2017 along with more than $250,000 to a BMO bank account that same year.

The B.C. Director of Civil Forfeiture alleges the two properties are proceeds of several crimes, which include breaches of the US Securities Act, the BC Securities Act, fraud over $5,000, laundering proceeds of crime, and failure to declare taxable income.

While Kirk, Johnson and Brana haven't been charged with regards to the current fraudulent scheme, Kirk was charged with violating the US Securities Act back in 2013, and in 2015, he paid a $100,000 fine after breaching Alberta's Securities Act.

The civil forfeiture office accuses the trio of violations of the U.S. Securities Act and B.C. Securities Act, possession of the proceeds of crime, fraud over $5,000, money laundering, tax fraud, and stock fraud.

The U.S. Securities and Exchange Commission determined the scheme generated $165 million USD in illegal sales of shares of at least 50 micro-cap companies (valued between $50 million and $300 million) between June 2015 and September 2018.

The commission claims the scheme was set up by Roger Knox of the United Kingdom, who operated a Swiss asset manager called Wintercap SA. Michael Gastauer of Germany helped Knox establish several companies and unregistered virtual financial firms located in the U.S. for Wintercap SA to disburse the money, the lawsuit claims.

Some or all of the proceeds were then transferred to CCIL and one or more of Kirk, Johnson, and Brana.

CCIL, incorporated in Hong Kong and registered as extraprovincial in B.C., then allegedly used that money to buy the Mission Ridge Road home and the Big White Ski Resort condo.

A $1.6-million home in Kelowna on Mission Ridge Road and a $524,000 condo at Big White Ski Resort are alleged to have been bought with money from a stock fraud scheme that garnered nearly $220 million.

In a lawsuit filed in B.C. Supreme Court, the B.C. Civil Forfeiture Office claims the properties are “proceeds and instruments of unlawful activity” and should be forfeited.