09/10/2014 07:47 EDT | Updated 11/10/2014 05:59 EST

B.C. regulators say stock manipulation of Venture Exchange company netted $7M

VANCOUVER - British Columbia's securities regulator has found that five B.C. residents manipulated the stock price of a company that traded on the TSX Venture Exchange in a scheme that netted about $7 million and left investors holding worthless shares.

Many of the victims were clients of Phoenix Credit Risk Management Consulting Inc., a credit counselling agency based in Richmond Hill, Ont.

The panel found that between September 2007 and March 2009, Thalbinder Singh Poonian, his wife Shailu Sharon Poonian, longtime friend Robert Joseph Leyk, and Manjit Singh Sihota and his wife Perminder Sihota co-ordinated their activities for the purpose of manipulating the share price of OSE Corp.

OSE had its head office at a property owned by Perminder Sihota in Delta, B.C.

In its decision, the panel found that the respondents and certain relatives, friends and associates of Thalbinder and Sharon Poonian acquired a dominant share position in OSE at between 10 and 17 cents per share through private placement purchase of shares and warrants.

By trading through brokerage accounts in their own names and controlling the trades in accounts in the names of family and friends, the respondents manipulated OSE's share price to a high of near $2 per share before crash to just a few pennies, it said.

The panel found that the respondents obtained approximately $7 million by selling OSE shares to unsuspecting buyers, including Phoenix clients. Phoenix and its principals were paid commissions ranging from 10 to 20 per cent and in some cases as high as 28 per cent each time they arranged for a Phoenix client to buy OSE shares.

The panel described Phoneix clients who purchased the shares as "generally unsophisticated investors (who were) facing financial duress," many of them referred toil Phoenix by collection agencies or creditors.

"In essence, Phoenix arranged for them to unlock their locked-in RRSPs or retirement accounts and put the money into self-directed RRSP accounts to invest and generate much need returns."

In December 2011, Phoenix and Jawad Rathore, Vincenzo Petrozza and Omar Maloney entered into a settlement agreement with Ontario Securities Commission in relation to this matter. The company and three officials agreed to pay more than $3.3 million in penalties, costs and return of gains.

In its decision, released Wednesday, a panel of the British Columbia Scurities Commission described Thalbinder Poonian as the "mastermind" of the scheme, adding that he "knew, or should have known, that his conduct resulted in or contributed to a misleading appearance of trading activity in, or an artificial price for, OSE shares.

It said that between Sept. 10, 2007, and March 31, 2009, the respondents and secondary participants accounted for more than 64 per cent of overall buying volume of OSE shares on the Venture Exchange. The share price rose from 21 cents on Sept. 7, 2007, to near $2 by the summer of 2008 before dropping to eight cents on March 31, 2009, falling to an average closing price of less than five cents for the balance of 2009 and to 3.5 cents in 2010.

The panel has directed the parties to make submissions on sanctions.