Bridging Finance executives must pay more than $27-million for investment fraud, Ontario tribunal says

David and Natasha Sharpe, the architects of Bridging Finance Inc., must pay more than $27-million for their role in defrauding investors at the company, the Ontario Capital Markets Tribunal said Wednesday in a ruling that described Mr. Sharpe’s conduct as possibly the most egregious it had seen.

The Sharpes, a husband-and-wife team who were chief executive officer and chief investment officer of Bridging, were found guilty of fraud by the tribunal in October, 2024, alongside Andrew Mushore, Bridging’s former chief compliance officer.

The tribunal, an independent division of the Ontario Securities Commission, is not a criminal court. It ordered Mr. Sharpe, Ms. Sharpe and Mr. Mushore to pay administrative penalties of $3.6-million, $1.95-million and $50,000 respectively.

The Sharpes must also surrender $20,803,770.27 in funds they received as a result of their fraud to the OSC, the tribunal said in what is known as a disgorgement order. Most of that amount – $18,053,770.26 – is attributed to Mr. Sharpe.

Mr. and Ms. Sharpe must also pay $784,648.64 and $422,503.10, respectively, to cover the costs of the regulator’s investigation, the tribunal said.

Mr. Sharpe’s misconduct in particular “may be the most egregious the Tribunal has ever encountered,” the order said.

His actions were described as being “among the most serious frauds to come before the Tribunal” in part because Mr. Sharpe has decades of experience in the financial-services industry. That included a stint managing the investigative arm of the Mutual Fund Dealers Association, a self-regulatory body that became part of the Canadian Investment Regulatory Organization in 2023.

“David’s background makes his conduct particularly galling,” the tribunal said. “His experience could only have served to amplify his apparent trustworthiness and to help Bridging attract investors. His misconduct was a fundamental betrayal of that trust and was an abuse of the investors.”

Mr. Sharpe will be appealing the decision, his lawyer, Alistair Crawley of Crawley MacKewn Brush LLP, said in an e-mail. Mr. Crawley said his client did not attend the tribunal’s penalty hearing, which took place on April 28 and 29, “due to his concerns about the fairness of the process.”

Ms. Sharpe did attend the hearing, where she asked that “her inability to pay” be factored into determining financial penalties. While the tribunal did see evidence that Ms. Sharpe “owed significant sums to her counsel for legal fees,” it said no evidence of financial hardship was provided.

The OSC has long struggled to collect the fines it issues. In its most recent fiscal year, the regulator’s collections rate was just 4.5 per cent, meaning it received just $4.50 for every $100 in penalties levied.

“Collections are challenging when respondents have dissipated, hidden their assets or are otherwise insolvent,” the OSC said in its 2024 annual report. “Collections actions can generally be commenced only after all appeals have been concluded, and they often take time to produce results.”

At its peak, Bridging managed $2.09-billion on behalf of 26,000 investors.

According to an estimate from PricewaterhouseCoopers, nearly two-thirds of that money – roughly $1.3-billion – was lost by the time Bridging was put into receivership in 2021.

The OSC first alleged in March, 2022, that the Sharpes had orchestrated a multimillion-dollar fraud against their own investors.

Bridging Finance functioned as a private lender, offering high-interest short-term loans to borrowers deemed too risky for traditional financing options. Virtually every Canadian retail investor was able to buy into Bridging Finance as its funds were sold by all of Canada’s largest banks and major brokerage firms.

All three individuals also obstructed the OSC investigation to varying degrees and in different ways, the tribunal said.

Mr. Sharpe gave investigators “false or misleading answers” and pressed Bridging employees to lie to the OSC. He also sent witnesses “intimidating texts and menacing voicemail messages,” the tribunal said.

The Sharpes are also permanently banned from participating in Ontario capital markets, including the buying and selling of securities, the tribunal ruled. However, the order added that Ms. Sharpe will be allowed to trade in registered accounts through a registered investment dealer once her fines are paid.

The OSC investigation focused on three sets of loans made from two Bridging funds. According to the tribunal, the fraud involved a total of 15 kickback payments ranging from $20,000 in July, 2016, to $8.8-million in June, 2019.

In one instance, the tribunal found Mr. Sharpe had arranged to personally receive almost $20-million in kickbacks through Bridging loans made to entities associated with Winnipeg businessman Sean McCoshen.

Mr. McCoshen filed for personal bankruptcy protection in July, 2021, citing $222-million in debt. At the time, his filings showed $204-million owed to Bridging, though Mr. McCoshen is connected to more than $500-million worth of Bridging loans in total as either recipient, guarantor or broker.

The second loan cited in the OSC investigation involved a $35-million payment made by the Sharpes to Ninepoint Partners LP to buy back the Bay Street investment manager’s stake in Bridging. Ninepoint was co-manager of Bridging’s main investment fund until 2017.

The Sharpes obtained that money by authorizing a $40-million loan to an existing Bridging client and transferring the full amount to themselves without ever informing the client that the transaction occurred, the OSC investigation found. The tribunal found Mr. Mushore indirectly participated in that instance of fraud.

The third set of loans cited by the OSC investigation involved the diversion of $30-million worth of Bridging investor funds as loans to businessman Gary Ng, who used the money to purchase his 50-per-cent ownership stake in Bridging.

While the penalties totalling roughly $27.6-million represent a fraction of the money the Sharpes were found to have obtained through fraud, they are nonetheless among the largest fines ever issued in a single case. In its most recent fiscal year, for example, the tribunal issued a total of $81.6-million worth of administrative penalties, disgorgement orders and settlement amounts.