Tribunal asked to pause OSC’s Bridging case

Next week, Ontario’s Capital Markets Tribunal will consider whether to pause the Ontario Securities Commission’s (OSC) enforcement case against the founders of failed fund manager Bridging Finance Inc. (BFI).

The application for a pause in the proceeding — which involve allegations of misconduct and regulatory violations against former Bridging executives David Sharpe, Natasha Sharpe and Andrew Mushore — comes from Natasha Sharpe’s lawyers.

The lawyers say they haven’t been paid in almost a year and are owed approximately $900,000.

In April 2021, the Ontario Superior Court of Justice placed Bridging, an alternative fund manager, into receivership at the request of the OSC amid concerns about suspected misconduct at the firm.

Since then, the firm’s receiver, PricewaterhouseCoopers Inc. (PwC), has estimated that investors in the Bridging funds will lose around $1 billion.

The case has prompted a flurry of litigation, including the regulatory proceeding brought by the OSC against Bridging’s co-founders, the Sharpes, and former chief compliance officer Mushore.

None of the allegations have been proven.

The enforcement hearing has been underway since June 2023, and was originally scheduled to wrap up in February. Witness testimony is complete, but several hearing days are scheduled for closing arguments from the OSC and counsel for Natasha Sharpe and Mushore.

David Sharpe has refused to participate in the regulator’s proceeding against him, and is suing the OSC in connection with alleged improper disclosure of his compelled testimony in court filings.

Natasha Sharpe’s lawyers are now seeking a pause in the OSC’s proceeding, which is scheduled to resume May 24, while they try to resolve their large unpaid legal bill — and before they begin preparing closing arguments.

Previously, the Sharpes’ legal bills were paid from accounts controlled by Bridging’s receiver.

Under a consent preservation order covering all of the Sharpes’ assets, which was imposed as part of the receivership, the Sharpes were allowed to access funds for reasonable living expenses and legal fees. The receiver’s counsel routinely approved the payment of their legal bills until May 2023, when the accounts ran out of money.

Since then, the receiver has denied requests to fund their legal bills and asked the Sharpes to identify other sources of funding.

According to the court, the Sharpes identified sources including a $5-million trust fund set up for their only child, a $1.1-million life insurance policy and about $60,000 in their lawyers’ trust account.

Earlier this month, an Ontario court heard arguments seeking access to $1.5 million of the money in the trust fund. However, the court denied that effort, ruling that the terms of the trust didn’t allow it.

On April 22, the court found the outstanding legal bills “are reasonable in light of the volume, urgency and complexity of the work performed by Natasha and David Sharpe’s legal counsel. However, the issue as to the source of funds to pay the legal fees is still outstanding.”