Brothers from Langley and Surrey are the central figures in an upcoming BC Securities Commission (BCSC) hearing that claims a merchant banking firm ran a series of pump and dump stock schemes netting $46 million and leaving investors holding the bag.
Kamaldeep Thindal of Langley and brother Amaldeep Thindal of Surrey are, respectively, the managing partner and chief financial officer (CFO) of Core Capital Partners, a Vancouver-based firm. Also named in the BCSC action announced in July are Yazan Al Homsi, Mani Chopra, Pardeep Luddu, and Aarun Kumar, all of whom worked for Core Capital.
The BCSC announced in a July 21 filing it will hold a hearing to put forward evidence and apply for orders against Core and the six respondents.
The agency, which prosecutes securities fraud in B.C., claims Core Capital ran a “pump and dump scheme” that artificially raised the price of three firms between 2015 and 2018.
In a pump and dump scheme, the participants buy a company or gain control of a significant portion of its stock, then use a number of tactics to artificially make the stock seem more valuable.
Core Capital released a statement saying all the allegations were “without merit” and said they look forward to “defending them vigorously.”
The BCSC claims begin with Reliq Health Technologies, a firm that traded on the TSX Venture exchange, and on over-the-counter stock markets in the U.S.
The commission alleges that the Thindals, Core Capital, and the other respondents began gaining control of Reliq in 2015. They replaced Reliq’s existing CEO and board of directors with people “under their control,” and Amaldeep Thindal became the company’s CFO and a director.
By Sept. 5, 2017, the Core Capital group controlled about 25 per cent of all Reliq stock either directly or via ownership through family members and corporations.
Between Aug. 2017 and Oct. 31, 2018, the BCSC alleges that the respondents issued a series of misleading news releases, investor campaigns, and promotional materials.
Among other things, the slew of promotions claimed that paying subscribers to Reliq’s patient monitoring platform leaped from 1,000 to 6,000 in just a few months. Monthly revenue was claimed to jump from $50,000 to $300,000 over the same time.
On Jan. 11, 2018, Reliq send out a press release saying it had “achieved profitability.”
“This news release was false and misleading as Reliq had not achieved profitability as of that date,” said the BCSC’s claim. In fact, the company was never profitable during the period when the Core Capital group was promoting it.
“Reliq reported about $2 million in revenue from its patient monitoring platform during the Reliq promotional period,” the BCSC claim says. “In fact, it only collected $51,540 or about 2.6 per cent of that amount.”
Meanwhile, paid promotions via email and newsletters were singing the praises of Reliq, and Al Homsi tweeted about the company hundreds of times, calling it a future billion dollar company.
Before the promotional blitz, Reliq was a rarely-traded penny stock, with a closing price of $0.105 on July 31, 2017.
By March 1, 2018, the stock price had gone up more than 2,000 per cent, to $2.62 a share, despite the company’s lack of real profits.
The BCSC claim says the Core Capital group unloaded 23 million Reliq shares while they were promoting the stock, netting about $20 million. Kamaldeep Thindal, Al Homsi, Luddu, and Kumar all sold millions of shares during that time.
By the end of 2018, Reliq stock had crashed, and was worth $0.355 a share.
The BCSC claim goes on to detail two more similar pump and dump schemes.
The next target was Essex Angel Capital. The Core Capital group allegedly began buying up shares in Essex from 2014, and by November, 2017, they transformed the company into Block One Capital, installing their own nominees as officers and directors.
The re-named company was subject to the same treatment as Reliq, with promotional campaigns and effusive tweets about its rising value.
This time, the firm was allegedly getting into the then-hot cryptocurrency mining sector, with a claim that Block One was buying a crypto mining company called TG12 Ventures.
Press releases said that TG12 Ventures would have annual revenues of US$7.8 million once all its mining rig computers were running.
What Core Capital didn’t tell investors was that TG12 had been incorporated by the Core group just two weeks earlier, was not mining any cryptocurrency, and had no funds.
Press releases and promotions claimed that Block One was making money from crypto mining, but this never took place.
“For the year ended Aug. 31, 2018, Block One did not generate any revenue from its cryptocurrency mining investment and lost over $10 million,” said the BCSC claim.
As with Reliq, the Core Capital group sold stock as its price rose during the promotional period.
Before promotion began, Block One’s shares were going for $0.24 on Nov. 3, 2017, but reached a high of $1.85 on Dec. 5, of that year, a 671 per cent increase.
When promotions ceased, the share price crashed to $0.13 by the end of 2018.
The final target company named in the BCSC claim was a mining company, originally known as CNRP Mining.
The Core Capital group again bought up stock in the thinly-traded firm, gaining 49 per cent of the outstanding shares, and then pivoted it to an entirely different industry, in this case renaming it Integrated Cannabis Company.
Again, members of the Core Capital group allegedly took over key positions with the firm.
This time, the big announcement was that Integrated Cannabis was buying up a numbered company that held the worldwide rights to a product called X-Sprays.
However, the numbered firm had been incorporated by a nominee of the Core Capital group, and it acquired a license to distribute X-Sprays for just $10.
Promotional campaigns in 2017 touted Integrated Cannabis with headlines such as “This Pot Stock Just Keep Going” and Marijuana stocks become a top priority on Wall Street: One Stands Out.”
The $0.05 Integrated stock shot up to a high of $2.02 on Oct. 16, 2018, a 405 per cent increase, despite Integrated never making a profit.
As in the other cases, the BCSC alleges that members of the Core Capital group dumped stuck as its price soared, making millions.
In total, the three schemes netted the six members of the group $46 million, the BCSC alleges, leaving investors who bought the inflated stocks to take the losses as their value plummeted.
Core Capital said the investigation that led to the charges has been lengthy, spanning five years, and has seen the company’s assets frozen for more than four years before the allegations were published.
“We have been working with the commission openly and transparently throughout their investigation, which has now spanned over five years,” said the statement, from consultant Alistair Morton. “For personal and professional reasons, we had hoped to conclude this matter without the need for a public spectacle.”
Morton’s statement also said the BCSC has “largely unchecked powers” and gave several dates for a conclusion of the investigation, that then passed without a resolution.
All the respondents are now required to attend an Oct. 12 hearing before the BCSC in its Vancouver offices, where they can be represented by lawyers and tender evidence of their own.
A panel of BCSC commissioners will hear evidence and may lay down fines and ban people from participating in securities markets in B.C., if they are found to have violated the B.C. Securities Act.
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