A central figure in one of the biggest frauds in Canadian history has been cited by US securities regulators for allegedly trading worthless penny stocks through a Medellin ‘boiler room’ , in Colombia.
On Tuesday, the United States Securities and Exchange Commission (SEC) charged Frank Biller with charges of civil securities fraud.
SEC alleges Biller operated a call center in Medellin that defrauded investors in Canada and the United States of more than $58 million in a scheme involving at least 18 companies, including one formerly based in the Fraser Valley .
Canadians Raymond Dove and Troy Gran-Brooks have also been charged in the alleged scheme, also known as a ‘boiler room’ operation in which phone calls are made using high-pressure sales tactics and misleading information to convince potential investors to buy shares in near- worthless companies.
“These scammers have gone to great lengths – using fake companies, pseudonyms and spoofing their phone numbers – to defraud and mislead investors in a pump and dump scheme,” said Paul Levenson, director from the SEC’s Boston regional office, in a statement.
Biller, now 52, is presumed innocent until a judge rules on his charges.
Biller was convicted of felony fraud and theft for his part in the highly publicized Eron Mortgage Corp. Ponzi scheme. based in British Columbia until the late 1990s.
The Eron Mortgage saga is one of, if not the biggest, financial fraud cases in British Columbia’s history. It attracted media attention given the huge number of casualties.
Eron Mortgage has promised more than 3,300 BC investors big returns on syndicated mortgages, according to the BC Securities Commission (BCSC); in reality, it was a Ponzi scheme in which new investments were used to pay the returns of older ones, while much of the money was for personal use by the fraudsters, including bill. In total, investors lost over $170 million.
In 2000, a BC Securities Commission (BCSC) panel of commissioners granted Biller some leniency by not banning him from the securities industry for life, unlike Eron’s chairman, Brian Slobogian. Instead, Biller was given a 10-year suspension and a $300,000 fine for his role as vice president. The fine remains unpaid.
“Although his conduct requires his removal from the markets for an extended period, we are not convinced that Biller poses a permanent risk to the markets. Biller is a young man and we do not believe that he will serve the public interest of him. permanently deprive of career opportunities that will put him in contact with actors in the public markets”, declared the panel in 2000.
The panel’s decision was criticized publicly, in the media, by Eron’s investors.
It turned out that Biller didn’t follow his orders, and in 2002 he was caught promoting stocks and engaging in investor relations after taking part in a boiler room in Vancouver.
Biller was later convicted of criminal fraud and theft in 2005 for his role with Eron Mortgage. He was sentenced to three years in prison.
The BCSC reached a settlement with Biller in 2007, ultimately banning him from markets (at least in BC) for life.
At the time the Eron mortgage program ran, the sale of syndicated mortgages was only loosely regulated by the British Columbia Mortgage Brokers Registrar. Now, such investments require offering memoranda (filings explaining the investment, including the risks) overseen by the BCSC.
These changes were described in a March 2005 study by criminologist Neil Boyd of Simon Fraser University.
“The [B.C.] The Securities Commission has, following Eron, removed any doubt as to whether an Eron-style syndicated mortgage is a security; it clearly is,” Boyd said in his report.
Boyd also studied the damage among investors, who lost savings and retirement assets.
“The effects of the Eron Mortgage losses have been literally devastating to hundreds of Eron investors,” Boyd wrote. “More than half of those who lost more than $50,000 reported extreme or major harm to their emotional well-being, current financial situation, and retirement security. Between 20 and 30 percent of these investors also reported extreme or major damage to their marital relationships, friendships, and physical health.
Fast forward to 2016, Biller reportedly started the Colombian boiler room with Dove, according to the SEC.
There, Biller and others allegedly marketed or “pumped” the shares controlled by company insiders, who formed so-called “control groups” of nominee shareholders who would sell or “empty” the shares to investors. unwitting individuals.
“The control groups illegally concealed their control of the float [of shares]by dividing their shares into small blocks belonging to designated foreign companies which they ran, and by failing to file information which would have revealed that all these small blocks were under their common control.
“The control groups wanted to sell the shares they owned in order to make a significant profit. The Control Groups used the Defendants’ Boiler Room both to create demand from investors to have buyers for their shares, and to drive up the price of the stock, thereby increasing their profits,” he said. said the SEC complaint against Biller and others.
Among the companies involved is Garmatex Holdings Ltd., a Nevada-incorporated fabric technology company that formerly had a subsidiary in Chilliwack and Surrey. The SEC says 88% of Garmatex Holdings Ltd. were held by Luis Carillo, who faces fraud charges in a separate but related case.
Garmatex is among hundreds of companies whose insider actions were allegedly covered up by offshore shell company facilitator and former Vancouver lawyer Fred Sharp. The SEC alleges that Carillo used nominee shells created by Sharp and transferred shares through the Swiss trading platform Wintercap SA, operated by convicted fraudster Roger Knox.
Sharp faces securities fraud charges from the US Department of Justice.