Consultant sanctioned in private placement scheme

A purported consultant to venture issuers has been sanctioned for engaging in a private placement scheme that regulators allege was abusive.

In a settlement with the British Columbia Securities Commission (BCSC), Justin Liu of Vancouver and a pair of companies he controlled — Lukor Capital Corp. and Asiatic Management Consultants Ltd. —paid $950,000 to the BCSC and are banned for 10 years.

According to the settlement, Liu, his companies and other consultants had deals with various issuers listed on the Canadian Securities Exchange (CSE). Those deals raised a combined $50.9 million through private placements, but the issuers only retained $7.9 million of that, with the rest going to the consultants as prepaid consulting fees.

The consultants, who regulators alleged “did little or no consulting work,” then generally sold their shares at prices below the private placement price.

These arrangements were “abusive to the capital markets,” the settlement said.

According to the settlement, Liu and Lukor purchased $5.6 million in shares from two issuers in private placements under the consultant exemption, and quickly sold them.

At the same time, Liu and his companies received $4.5 million in prepaid consulting fees, and paid $12.4 million to others who used that money to buy other private placement shares as part of the scheme, the settlement said.

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.