OSC allowed to use evidence collected in criminal case, panel finds

Ontario’s Capital Markets Tribunal rejected a claim that staff of the Ontario Securities Commission (OSC) should be restricted from using evidence already used in a criminal prosecution.

The tribunal dismissed a motion brought by Edward Gong seeking restrictions on the use of evidence in the OSC’s enforcement case against him.

The case followed a criminal prosecution against Gong and the company he controlled, Edward Enterprise International Group Inc. That prosecution was based on evidence collected in an investigation by OSC staff and the Joint Serious Offences Team (JSOT), a group of white-collar crime investigators from the RCMP that operates out of the OSC’s enforcement branch.

In 2017, criminal charges were brought against Gong and the company, but the Crown dropped the charges against Gong himself after the company pleaded guilty to offences “related to operating a pyramid scheme and using forged documents” in 2021.

The court imposed a fine and a victim surcharge of almost $1 million, and ordered the release of $14.9 million to the Canada Revenue Agency in accordance with a joint submission between the Crown and the Edward Group.

In 2022, the OSC brought its own proceeding against Gong, based on the same activities that led to the criminal charges, alleging that he engaged in securities fraud and unregistered trading.

“Gong operated a fraudulent pyramid scheme involving over 40,000 investors and hundreds of millions of dollars,” the OSC said in its statement of allegations against him.

Those allegations have not been proven.

Gong brought a motion seeking curbs on the regulator’s use of evidence “gathered in relation to the criminal proceeding,” the panel said.

However, the tribunal dismissed his motion. It ruled that the evidence being challenged by Gong wasn’t collected in a separate criminal investigation but came through the OSC’s own investigation.

“Gong challenged whether it was indeed [OSC] staff that obtained the subject documents,” the tribunal said.

Based on an affidavit declaring that all of the evidence was collected by OSC staff, or by RCMP officers seconded to the regulator’s enforcement branch, the tribunal concluded that the evidence was collected by OSC staff.

“Gong did adduce evidence by which he attempted to establish that the Joint Securities Offences Team (JSOT), the group that conducted the investigation, was independent of the OSC,” the tribunal said.

However, it concluded that there’s no evidence to establish that the JSOT is independent of the OSC.

James Langton

James is a senior reporter for Advisor.ca and its sister publication, Investment Executive. He has been reporting on regulation, securities law, industry news and more since 1994.