B.C.’s securities regulator alleges $47-million fraud by insurance group
A Lower Mainland insurance group’s top officers fraudulently raised $47 million in unsecured loan agreements from nearly 400 investors, the B.C. Securities Commission has alleged in a notice of hearing released Tuesday.
The BCSC alleges that Aik Guan (Frankie) Lim and Scott Thomas Low, directors and founders of FS Financial Strategies Inc. and related companies in the FS Insurance Group, “dishonestly” raised millions between 2012 and 2017 by failing to disclose to investors the company wasn’t profitable, its financial situation was deteriorating and it survived by raising money from investors to cover its expenses.
A hearing is set for Dec. 4. Under B.C.’s Securities Act, Lim and Low face charges of fraud, selling securities without a prospectus (a legal document that details a business and its risks) and without being licensed to sell securities.
There was no response Tuesday to calls to FS Financial Strategies Inc. where after two rings the phone went to dead air.
The allegations by the BCSC also involve Darrell Wayne Wiebe, the company’s general manager, who the securities regulator says was aware of the FS Insurance Group’s true financial condition and contributed to the fraud by routinely advising Lim and Low how much the company needed to raise from investors to stay afloat.
The BCSC says investors were promised interest payments of 10 per cent to 12 per cent, payable monthly. Lim and Low “created an illusion of profitability” by opening new offices in rapid succession; donating money to charities; telling customers that they planned to take the insurance group public; and hosting parties for clients and staff at expensive hotels, says the BCSC.
The six-page notice of hearing also alleges that in 2015, Lim and Low diverted $770,000 of the $47 million to help fund a movie production featuring Lim’s son. They did so, said the BCSC, after telling investors the FS Group would use the money for its insurance business.
The notice of hearing names six additional people — Chun Ying (Jim) Pan, Chung-Sheng (Johnson) Kao, George Lay, Gagan Deep Bachra, Chi Kay (Dixon) Wong and Meng Cher (Phillip) Tsai — who were appointed by Lim and Low as directors of related companies in the FS insurance group that also sold the unsecured loans. The related companies are alleged to have sold securities without a prospectus.
The FS Group of companies first came to the BCSC’s attention in 2014 when Lim and Low promised the regulator to cease trading and distributing securities, according to the notice of hearing.
However, the pair continued their fund raising activities for the FS Group until 2017, raising an additional $29.34 million using unsecured loan agreements, says the BCSC.
Lim and Low also ran afoul of the B.C. Insurance Council in 2016.
At least three investors have filed civil suits in B.C. Supreme Court against Lim and Low and FS Financial Services, seeking to recover hundreds of thousands of dollars in lost investments.
One investor’s claim includes certificates of pending litigation — under which an owner cannot get a mortgage or sell a property — on two homes co-owed by Lim valued at $2.58 million according to B.C. Assessment figures.