British Columbia court allows class action lawsuit against “bogus consultants”

“The scheme allegedly benefited the issuers by allowing them to retain a portion of the proceeds from the private placement while falsely informing the market that there was an oversupply of investor interest in the issuers and that the issuers had more capital to operate their businesses than was actually the case,” the court said.

The alleged advisers also profited from the proceeds of the private placements, while investors were harmed by paying too much for the issuers’ shares or by participating in transactions in which they would not have participated without the false impression created by the system, the plaintiffs claim.

The court recognized the case as a class action on behalf of investors from around the world and brought against a long list of issuers, advisors, and officers and directors of the various companies. The suit found liability for various claims, including conspiracy, false statements in the secondary market, and fraudulent or negligent misrepresentation.

The court also ruled that the various requirements for classifying a case as a class action were met in this case, including that the claims against different companies and individuals all relate to the same fundamental conduct.

“The fact that the conspiracy ultimately involved twelve separate private placements, some of which involved different participants, does not change the nature of the alleged overarching conspiracy into twelve separate conspiracies,” the court said in its decision.

“There is a strong factual basis indicating that litigating the proposed claims in a single proceeding rather than in separate proceedings for each issuer would achieve significant litigation economy by avoiding substantial repetition of fact-finding and legal analysis,” it said.

None of the allegations in the class action lawsuit could be proven.