The BCSC uncovers a B.C. ring of pump-and-dump schemers
As 2007 rolled into 2008, the stock of an obscure oil and gas company called OSE Corp. went to the moon. Despite the absence of any news about its business, its share price climbed 417 per cent over 20 days.
Then, about a year later, OSE’s stock tanked – leaving hundreds of investors financially devastated. But a small circle of people in B.C. came out winners.
Tipped off to the mysterious volatility by the Ontario Securities Commission, an investigator at the BC Securities Commission began contacting some of the unfortunate investors to get to the bottom of it.
Targeting people in debt
He found a disturbing pattern. The investors had been following the advice of an Ontario credit counseling firm, which urged them to tap their locked-in Registered Retirement Savings Plans to settle their debts – and to use any remaining funds to buy OSE stock.
Three years of painstaking investigation revealed that the spectacular rise and fall of OSE’s stock was an elaborate pump-and-dump scheme orchestrated by Thalbinder Singh Poonian.
Conspiring with his wife and three others, they bought enough OSE stock to effectively control the company, then traded it back and forth among themselves and several other associates to give the illusion that the stock was in high demand. Working with the Ontario credit counseling firm, Poonian off-loaded the inflated stock onto a pool of unsuspecting investors – many of them living paycheck to paycheck. Most of them had no idea they were victims of misconduct, until they were contacted by the BCSC.
Stuck in bankruptcy
To make their case against Poonian, BCSC investigators analyzed 200,000 phone call records and over 100 bank and brokerage accounts, creating a detailed timeline to show how stock trades and bank transfers corresponded with communications among the conspirators. Offices were searched, and the scheme’s participants were brought in for questioning.
A panel of BCSC commissioners ordered the Poonians to pay a combined $13.5 million in administrative penalties and a combined $5.5 million disgorgement of their ill-gotten gains.
The Poonians, who declared bankruptcy, have not paid any portion of those sanctions. They tried to get discharged from bankruptcy, a move that would have extinguished the sanctions, but the BCSC successfully argued that it would be contrary to the public interest. So they remain in bankruptcy, and their debt to the BCSC – and to the victims – must still be paid.