Bridging Finance Inc.

Bridging Finance Inc. was a Canadian private lender based in Toronto, Ontario, Canada that was placed in receivership by the Ontario Court of Justice following an investigation by the Ontario Securities Commission (OSC). Investors in the firm's funds are expected to lose approximately 58-66% of their capital. That is one of the "largest collapses of an investment fund in Canadian history." In 2023, the Ontario Securities Commission (OSC) alleged that former CEO David Sharpe, former Chief Investment Officer Natasha Sharpe and former Chief Compliance Officer, Andrew Mushore "committed fraud, misappropriated funds, made misleading and untrue statements and misled investigators." On October 29th 2024, the Ontario Securities Commission Tribunal ruled that Bridging Finance executives David and Natasha Sharpe committed fraud, and that Andrew Mushore "indirectly participated" in the fraudulent activities.

History and ownership

Bridging is owned by Natasha and David Sharpe. In 2019, Natasha Sharpe and other shareholders agreed to sell 50% of Bridging's equity to Gary Ng for $50 million. It was later revealed that Ng paid for the investment with the proceeds of a $32 million loan that he received from one of Bridging's credit funds. This use of client money to fund a capital transaction that benefited Bridging's owners is one of the transactions listed by the OSC as being under investigation

Conflicts of interest and misuse of client funds

The principal conflicts of interest being investigated by the OSC:

* Payments from Sean McCoshen related to loans made to McCoshen's company Alaska-Alberta Railway Development Corporation. The OSC alleges that following the funding of loans to various McCoshen companies, McCoshen funnelled a total of $19.5 million to David Sharpe, largely through his personal chequing account. The OSC discovered that Natasha Sharpe received $250,000 from one of McCoshen's companies.
* Use of Bridging client funds to pay for purchase of Ninepoint Partners LP's management interest in Sprott Bridging Income Fund LP. With the cooperation of Rishi Gautam, who was a Bridging borrower at the time, the OSC discovered that the Sharpes and Mushore misappropriated $40 million to pay for the purchase, which ultimately benefited Bridging's shareholders.
* The OSC has discovered that Mr. Sharpe was able to facilitate their misappropriation by a false loan invoice by using the signature of one of their borrowers from a completely different loan document. This made it appear as though the money came from elsewhere. This action by Mr. Sharpe wrongfully implicated Mr. Gautam who was the CEO of MJardin Group Inc. at the time.
* The use of Bridging client funds to enable Gary Ng to purchase 50% of Bridging's shares from Natasha Sharpe. After Ng was the majority shareholder of Bridging, Bridging provided additional loans to various Ng-controlled companies. The OSC also states that Ng paid $500,000 to each of David and Natasha Sharpe in November 2019. According to the OSC, "neither payment served a legitimate commercial purpose".

Receivership and financial recovery for investors

Bridging was placed into receivership by the Ontario Court of Justice on 30 April 2021. PwC terminated David Sharpe and Natasha Sharpe within days of taking over as receiver.

In its role as receiver, PricewaterhouseCoopers (PwC) launched a process to sell Bridging's debt portfolio. The proceeds of the sale would be used to partially repay investors in Bridging's private credit funds. In April 2022, PwC stated that the bids that it received for the portfolio were below the likely value of an orderly liquidation. PwC then recommended to the court that the portfolio be allowed run-off over a five-year period. PwC's estimates of likely recoveries were between 34% and 42%, that would lead to total losses of approximately $1.3 billion out of the peak assets of $2.09 billion.

In April 2023 PwC launched a series of lawsuits against Bridging's former auditor, KMPG, Bridging insiders and external borrowers implicated in the fraud cases outlined by the OSC:
* PWC filed suit against KPMG on 12 April 2023 for CAD$1.4 billion. PwC alleges that "throughout KPMG’s tenure, the Bridging funds materially misrepresented the value of their assets and financial performance. KPMG negligently failed to detect and report on these misstatements.”
* As the investigations have continued, it has become clear that Rishi Gautam was a victim of the principal of Bridging Finance and their fraudulent activities who was wrongly accused and is no longer being investigated by the OSC. As a result, most of the lawsuits in which he was included as one of the defendants have discontinued and withdrawn the claims against him.

PWC has also disclosed that they, as the receiver, are actively trying to track down "funds transferred by certain former principals of Bridging Finance to, among other jurisdictions, Liechtenstein and the Cayman Islands.”

OSC Tribunal finds bridging finance executives guilty of fraud

On October 29, 2024, Ontario Securities Commission (OSC) Tribunal ruled that Bridging Finance Inc. (BFI) founders David and Natasha Sharpe engaged in fraud, leading to over $1 billion in investor losses.

The tribunal found that the Sharpes conflicted transactions and securities violations, including channeling millions in loans to companies tied to businessman Sean McCoshen, who paid kickbacks to the Sharpes. The tribunal also found that $40 million was used to benefit BFI and the Sharpes in a deal with Ninepoint Partners LP, and loans were also transferred to Gary Ng, who used fake collateral to buy a stake in BFI.

Natasha Sharpe was also implicated in approving $32 million in loans to Gary Ng's companies, with Mr. Ng paying the Sharpes $1 million. David Sharpe received $19.5 million in kickbacks from Sean McCoshen, with $18.2 million traced to investor funds.

The tribunal found the Sharpes guilty of fraud, document forgery, and misleading investigators. It further noted that David Sharpe attempted to intimidate former employees, business associates, and borrowers, while wrongfully implicating others in their fraudulent schemes. BFI’s former compliance officer Andrew Mushore was also found to have indirectly participated in the misconduct.

References

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Financial services companies based in Toronto
Financial services companies established in 2012
2012 establishments in Ontario
Fraud in Canada
Corporate scandals