201634

BC  

Metadata catches fraudsters who bilked B.C. investors of $360K

Metadata catches fraudsters

A fraudulent investment venture devised by three B.C. residents was, in part, unravelled by securities investigators by analyzing metadata of investment documents, according to findings by a B.C. Securities Commission panel.

John Sand, Karol Achs and Jolyon Charles Christopher Gulston were found to have committed fraud against two other B.C. residents, who believed the trio would use their $600,000 to develop a fuel cell battery product, according to an Aug. 8 decision by commissioners Gordon Johnson, Audry Ho and James Kershaw.

Instead, the trio — who purported to operate their nascent battery business in North Vancouver — used more than $360,000 for personal purposes, including cash withdrawals, credit card payments, loan payments to themselves and relatives, cellphone and grocery bills and legal fees with no ties to the proposed venture, according to panel estimates.

In fall of 2014, Gulston approached “Investor K” and “Investor P” about a proposed battery product, according to the ruling, which anonymized the victims.

Achs, of North Vancouver, was the purported scientist for the battery business; Sand, of West Vancouver, was supposedly responsible for sales and Gulston, also of West Vancouver, was an investor who was seeking to attract other investors, the ruling explained.

Investor K is an insurance broker who was once registered to sell mutual funds. Investor K and Investor P had a pre-existing business relationship in joint real estate investments, including a commercial site for Investor P’s medical practice, documents show.

A coffee shop meeting took place where Achs unveiled a blue plastic box purported to be the battery, according to the ruling. Seemingly convinced, the investors wrote cheques for $600,000 by April 30, 2015.

When the investors lodged a complaint with the commission a year later investigators found the trio had used falsified documents as part of their plan. One set of documents created by Achs was post-dated, according to metadata. It had purported to be from the Namibian Ministry of Trade and Industry showing interest in the fuel cells but it turned out to be altered in Photoshop, according to the digital time stamp in the metadata. Investigators rooted out other false documents, the ruling stated.

Investigators’ analysis of bank documents revealed that some of the investors’ funds were initially paid to companies that were connected to the trio.

Gulston was asked about $100,000 paid to a related company.

“Gulston gave contradictory answers regarding whether he personally benefited from those funds, eventually admitting that he did receive some of the money. Gulston was also somewhat contradictory about the justification for the payment, at times suggesting that the funds represented repayment for expenses, at times saying that he was being paid for his time and at times agreeing that the funds could be called a commission for fundraising,” stated the ruling.

The investors did get $200,000 returned to them.

The ruling shows the trio attempted to explain the venture was going to operate in Washington State, but never did.

“When asked about activities in Washington State, Achs said that they looked into operating a manufacturing facility in Blaine in order to minimize costs relative to operating in North Vancouver, but they never did sign a lease or open a facility in Blaine. He said they stored some materials, mainly zinc, in a friend’s home garage in Blaine,” states the ruling.

The commissioners ultimately determined the trio intentionally misled the investors and used the money for their personal benefit.

“The respondents knew that there were no purchase orders and not having any reasonable prospects of revenue (especially for an untried technology) would put the investors’ pecuniary interest at risk. The respondents told lies to gain access to funds of the investors. All of the elements of fraud under [Section 57 of the B.C. Securities Act] have been proven.”

In addition, Gulston violated the act for securities misrepresentations granted he engaged in investor relations while making false statements of material facts to sell securities to investors.

Next for the trio will be a sanctions hearing where they may have fines and repayment orders imposed on them.

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