Investigating a brew of inflated claims and unrelated expenditures

The pitch seemed promising: Taking advantage of the public’s thirst for craft brews, and the Fraser Valley’s superb conditions for growing the key ingredient, investors were offered a chance to own stakes in a 125-acre hops farm in Agassiz.

Investors raising questions

It helped that the two individuals behind Fraser Valley Hop Farms Inc. (FVHF) – CEO Alexander Bridges and Marketing Director Shane Harder-Toews – enthusiastically promoted it. They organized tours for potential investors, showing them the acreage where the hops would purportedly be grown. Images and videos showed a basic irrigation system and poles in the ground, presumably the beginning of a trellis system that would support the plants as they sprouted upwards. The hops, once harvested, would be sold to local craft breweries, with the profits shared among the investors, depending on how many “farm shares” they purchased. In their pitches, Bridges and Harder-Toews used the terms “shares” and “acres” seemingly interchangeably, but the kicker was the projected return: One investor was told that a $50,000 investment would yield $16,188 a year, or about a 32 per cent return.

But it was a sham. Or at least, it turned into one.

The scheme came to the attention of the BC Securities Commission (BCSC) when a woman who had invested $25,000 got in touch with the BCSC. She had questions about how investors’ money was being spent, and was concerned that there didn’t seem to be a lot of activity. Around the same time, a potential investor also contacted the Inquiries team – he had done some research and found that FVHF hadn’t filed a prospectus (a formal document that provides details of an investment), an offering memorandum (a less detailed version of a prospectus), or a notice of exempt distribution, which is generally required if shares are being sold to the public without a prospectus. The calls were forwarded to the BCSC’s investigations team, and the more they delved into it, the more red flags appeared.

B.C.'s Securities Act requires people to attend interviews when summoned, but Bridges evaded the investigators' attempts to speak with him; he also used an alias, “Alex Blackwell.” Many investors were also reluctant to speak with investigators, citing non-disclosure agreements they signed with FVHF, and the ones who did acknowledged that FVHF had coached them to say they were friends of the company owners, and thus qualified to buy shares even though the company didn’t file a prospectus. One investor said she had made an unannounced visit to the farm site and was upset by the lack of apparent activity. Most investors didn’t know much about hops farming, or even farming in general, and some had invested over $100,000.

The investigators also learned that FVHF didn’t have any processing facilities – a key step if the hops were to be sold to breweries. Some investors said they were urged to put in more money, on top of their original investment, with Bridges and Harder-Toews blaming theft of equipment, a fire that destroyed a processing facility, expiration of the farmland lease and the departure of a farm manager. As far as investigators could tell, some hops were planted, but none was ever harvested.

As the investigators realized that FVHF had raised about $2 million with little to show for it, they started looking at the company’s accounts.

Geolocating expenses

An interview with Harder-Toews revealed little – he acknowledged that neither he nor Bridges had any farming experience, and he was able to provide only a smattering of records. So the BCSC investigators recreated the company’s finances from bank records, some payroll records, the lease agreement, and a few invoices for farm-related services like irrigation, trying to understand where the investors’ money went.

One place it went: lease payments for a house/condo in Furry Creek that investigators determined was Bridges’ residence. That was a sign that investor funds were being diverted to purposes other than what investors were told.

Investigators also looked at purchases made with FVHF’s debit and credit cards. Sometimes, the nature of the purchase was enough of a giveaway that it wasn’t for the hops operation – for example, charges at a Whistler restaurant, a high-end department store, a pet store, optical store and nail salon. Other purchases could be plausibly explained away as business expenses, so the investigators, including a forensic accountant, took note of where, geographically, the purchases were made and then made conservative assumptions about their purpose. Purchases in the vicinity of the farm were considered business expenses; purchases in the area of Bridges’ home were considered non-business expenses.

The case comes together

In May 2023, a BCSC panel of commissioners convened to evaluate the allegations of BCSC staff:

• The panel agreed with those allegations, ordering $1.1 million in financial sanctions against them. Neither Bridges, Harder-Toews nor any other company representative attended the three-day hearing, and neither the individuals nor the company have paid any portion of the financial sanctions, some of which could be used to pay back investors.
• The panel also permanently prohibited Bridges from participating in B.C.’s investment market except as an investor, and Harder-Toews was banned for at least six years, and for as long as he doesn’t pay the penalty.

"Even though we ran into roadblocks at the start of our investigation, with the CEO evading us, the lack of cooperation from many victims, and the lack of records, it did ultimately come together,” one of the investigators, Ryan Jung, said. "We were able to convince enough investors to cooperate, which was crucial to bringing the case to a hearing and proving our allegations to the panel. I still get emails from one of the investors, following up, asking ‘Any chance I’m getting my money back?’”