The British Columbia Securities Commission (BCSC) announced Nov. 6 that it has issued a notice of hearing alleging that three leaders of an insurance group committed fraud by getting hundreds of people to purchase unsecured loan agreements.
The BCSC alleges that Aik Guan "Frankie" Lim and Scott Thomas Low, the directors and founders of FS Financial Strategies Inc. and related companies in the FS insurance group, “dishonestly raised over $47 million between 2012 and 2017 by failing to disclose to investors that the company wasn't profitable, its financial situation was deteriorating, and it survived by raising money from investors to cover its expenses.”
The notice says that Darrell Wayne Wiebe, the company's general manager, “was aware of the FS insurance group's true financial condition and contributed to the fraud by routinely advising Lim and Low how much the company needed to raise from investors to stay afloat.”
Interest payments of 10 to 12 per cent
According to the BCSC, investors were promised interest payments of 10 per cent to 12 per cent, payable monthly.
The regulator says Lim and Low "created an illusion of profitability" by opening new offices in rapid succession; donating money to charities; telling customers that they planned to take the insurance group public; and hosting parties for clients and staff at expensive hotels.
The notice of hearing names six additional people – Chun Ying "Jim" Pan, Chung-Sheng "Johnson" Kao, George Lay, Gagan Deep Bachra, Chi Kay "Dixon" Wong and Meng Cher "Philip" Tsai – who were appointed by Lim and Low as directors of related companies in the FS insurance group that also sold the unsecured loans. “The related companies are alleged to have sold securities without a prospectus and without being registered to do so,” says the regulator.
The BCSC also alleges that Lim and Low, in addition to committing fraud, selling securities without a prospectus and selling securities without being registered, also violated the B.C. Securities Act by continuing to trade and sell securities after making a legal promise to the BCSC's executive director, in 2014, that they would stop.
The hearing will be held Dec. 4.