REASONS FOR JUDGMENT

M. Dambrot J.

[1] David Holden is being tried by me, without a jury, on two counts in an indictment in which the Crown alleges that from the beginning of 2005 to the end of 2012, he committed the offences of fraud and money laundering. In count one, the Crown alleges that Mr. Holden defrauded investors in Seaquest Corporation (“SC”) and Seaquest Capital Corporation (“SCC”) of monies having a value exceeding $5,000. In count two, the Crown alleges that Mr. Holden dealt with monies invested in SC and SCC with the intent to conceal or convert those monies knowing that all of part of them was derived from the commission of the offence of fraud. I will begin this judgment with a consideration of count one, following which I will consider count two.

Count 1: Fraud

The Nature of the Alleged Fraud

[2] Mr. Holden was the owner of SC and SCC, which were often referred to collectively throughout this trial as the Seaquest companies, or simply Seaquest. The Crown alleges that Mr. Holden, through these companies, committed an overarching fraud of the kind generally referred to as a Ponzi scheme.

[3] A “Ponzi scheme” is a fraudulent investment scheme in which money contributed by later investors generates artificially high rates of return for the original investors, whose example attracts additional, often larger investments. Money from the new investors, rather than being used to make the promised investment on their behalf, is instead misappropriated, and used directly to repay or pay interest to old investors, usually without any revenue-producing activity other than the continual raising of new funds. (See R. v. Schoer, 2019 ONCA 105, [2019] O.J. No. 818 at paras. 101-102). The scheme is named after Charles Ponzi, who certainly did not invent this technique, but who became notorious for employing it in the 1920s.

[4] In this case, stripped to its essentials, the Crown alleges that Mr. Holden personally solicited funds from investors in SC and SCC by: (1) making false, deceitful and fraudulent representations to them about the nature of their investments, what would be done with their funds, and about the security for their investments; and (2) directing that money contributed by later investors be used, in whole or in part, not for the intended purpose, but instead to repay or pay interest to earlier investors at artificially high rates of return and to cover the operating costs of SC and SCC, all with minimal revenue-producing activity other than the continual raising of new funds.

The Case for the Crown

[5] The Crown led evidence in an effort to establish, in particular, the following important elements of its case:

Mr. Holden was in control of the Seaquest companies and their activities, including:

Controlling the bank accounts of SC and SCC
Dealing with virtually all the investors
Directing how investor funds were used

SC and SCC had minimal revenue.
Mr. Holden engineered numerous transactions with investors in which he solicited their funds with promises of exceptionally high rates of interest on the basis of representations about the nature of each investment, what would be done with the funds, and about the security for each investment.
The soliciting of new investments, and efforts to have large investors roll over their existing investments rather than cashing out, was constant, and necessarily so, because SC and SCC had minimal revenue, and did not otherwise have the ability to repay the principal at the maturity of at least the larger investments.
Funds received from investors were used to repay principal and interest to earlier investors, and to pay the operating costs of SC and SCC.
When one large investor, Brian Tucker, demanded the return of his investments, Mr. Holden attempted to make up the shortfall by obtaining funds from one of his own associates as well as by soliciting new investments. Ultimately, his inability to satisfy Mr. Tucker’s demands brought the scheme to an end.
The individual transactions with investors, as well as the overall investment scheme, were fraudulent, and Mr. Holden intended to defraud the investors.

[6] In order to prove these things, the Crown meticulously drew together a web of largely uncontroverted evidence. Items 2 to 6 were proved overwhelmingly. The defence did not seriously dispute most of what is asserted in those items. While the defence did dispute the extent of Mr. Holden’s control of the Seaquest companies and their activities (item 1), the primary controversies between the Crown and defence relate to the honesty of the representations made to investors, and whether or not Mr. Holden intended to defraud the investors (item 7). I will discuss the evidence relating to each of these issues in turn and make some findings of fact in relation to contested matters.

1. Mr. Holden Was in Control of the Seaquest Companies and their Activities

(a) The Origin of SC and SCC

[7] The evidence of the Crown’s witnesses about the origin of SC and SCC is somewhat confusing. Mr. Holden, who is the owner, and, by his own admission, the directing mind of both companies, is best placed to speak to this issue. He testified in his own defence and described how the two companies came into existence. While much of Mr. Holden’s evidence is challenged, it is useful to begin, out of turn, with his account of the formation of SC and SCC.

[8] Mr. Holden incorporated SC on March 30, 2005. He described SC as a discretionary pool, special purpose brokerage company. Friends and family were the original investors. He said that he brought about $1.7 million in assets and $200,000 in cash into the business. Other people then began investing into the pool. He said that it was explained to investors that the pool would be used to do multiple things, and that its management would be highly discretionary. The pool was used for high-risk investments. As SC began employing other people, Mr. Holden’s job came to be the raising of investment money. SC was involved in a hodgepodge of investments, including equity, loans, and investing in potential turnarounds.

[9] On April 15, 2009, Mr. Holden incorporated SCC, intending it to be a vehicle for raising capital to fund investments. He provided initial resources for SCC by taking corporate loans out of SC and placing them into SCC. He testified that $11-12 million in loans were transferred from SC to SCC at that time. The plan was to move beyond offering opportunities solely to family and friends, and to do full information packages and raise money in the marketplace by offering interest rates of 12%, 18%, 20%, or even more, mostly on a short-term basis, to invest in corporate opportunities.

[10] The activities of SC and SCC were overlapping, and at times indistinct and blurred. SC and SCC shared office space, ownership, leadership, and staff. As a result, in the course of these reasons, I will sometimes speak of them collectively as Seaquest, or the Seaquest companies.

[11] In the remainder of this part of my reasons, I will discuss the evidence that relates to Mr. Holden’s control of the Seaquest companies generally, and specifically in relation to banking, soliciting funds from investors, and directing how investor funds were used.

(b) The Inner Workings of the Companies and Mr. Holden’s Controlling Role

[12] The Crown called virtually all of the persons who worked at SC and SCC in positions of any significance as witnesses. I will sometimes refer to these witnesses collectively as the inside witnesses. These witnesses were all implicated in implementing the alleged fraud, but many of them held positions that were clerical or administrative, and obviously did not understand, far less have any decision-making responsibility, in relation to the allegedly fraudulent activities at Seaquest. Others of them were more deeply implicated in those activities and would have at least been aware of red flags indicative of possible fraud. Three of them, Ed So, Tony Cosentino, and Andrew Gaudet, were originally co-accused with Mr. Holden, and agreed to cooperate with the Crown in exchange for the charges against them being withdrawn. I will treat all of the inside witnesses as Vetrovec witnesses (Vetrovec v. The Queen, 1982 CanLII 20 (SCC), [1982] 1 S.C.R. 811), treat their evidence with caution, and look for independent confirmation of the salient aspects of their evidence where possible. I point out, however, that much of what they had to say was neither challenged in cross-examination, nor disputed by the evidence of Mr. Holden, and there was ample confirmation of the evidence of each of them.

[13] As will be seen, much of what is alleged to be the fraudulent activity in this case is established by the evidence of the investors, the documents created by SC and SCC, and the forensic accounting evidence. But the evidence of the insiders is important because it sheds light on questions of control, and in turn knowledge and responsibility. The Crown argues that the evidence of the insiders establishes that “Mr. Holden was in complete control of the Seaquest group of companies.” Importantly, the Crown says, Mr. Holden dealt with the investors, controlled the bank accounts, and directed how investor funds were to be used.

[14] It is essential to the proof of Mr. Holden’s guilt on the charge of fraud that: (1) in the course of soliciting funds from investors, he either made or directed the making of the representations to them about the nature of their investments, what would be done with their funds, and about the security for their investments, all of which the Crown alleges were fraudulent; and (2) he directed how investor funds were to be used. The evidence of the inside witnesses, together with the documentary evidence, sheds light on both issues.

[15] I begin an examination of the evidence about the inner workings of the company by noting that Mr. Holden made a formal admission that he was the directing mind of SC and SCC. In addition, the inside witnesses all testified that Mr. Holden was in control of the Seaquest companies, and the documentary evidence overwhelmingly confirms that he was in charge of everything.

[16] I will refer first to the documents. These consist of corporate records, banking records, and government records. They were all tendered by the Crown, admitted into evidence without objection, and were conceded to be authentic. Paul Coort, the forensic accountant who testified for the Crown, compiled a list of Mr. Holden’s roles and responsibilities in the Seaquest companies contained in these records. To say that the list is lengthy is an understatement. Mr. Holden is variously identified as:

The president of SC on November 30, 2009
The president of SCC on September 1, 2011
A signatory on SC’s Canadian dollar bank account at TD Bank as of November 22, 2007 and its American dollar account as of September 1, 2011
A signatory on SCC’s bank accounts at TD Bank
The Trading Authority on TD Waterhouse accounts of SC and SCC
The president and managing director of Seaquest Global Corporation, a company I heard little evidence about, that was apparently created to do offshore investing
One or more of: owner, majority shareholder, president, senior vice-president, vice-president, general partner, managing director, director, banking signatory, and senior advisor of a large number of entities in which the Seaquest companies invested, including: American Capital Partners Limited (“ACPL”), Alliance Building Products Inc., American Telematics Corporation (“ATC”), Baystreet Investment Club (“BSIC”), Comvest Corporation (“Comvest”), Enviromatrix Technologies Inc. (“ETI”), Emedia Networks Corporation, GTA Concrete Pumps Inc. (“GTA Concrete”), Harris Brown & Partners Limited (“HBPL”), Holloro Corporation (“Holloro”), Icon Global Corporation (“Icon”), Intercon Precast Concrete Inc., Loy Investment Corporation, Monocrete Corporation (“Monocrete”), Multicorp Management Inc. (“Multicorp”), Natrapharm Corporation (“Natrapharm”), Northstar Capital Partners Inc. (“NCPI”), Onsite Ready-Mix (2009) Corp. (“Onsite 2009”), Regional Road Construction Inc., Regional Ready-Mix Concrete Inc., Strata Technologies Corporation (“Strata”), and Valucap

[17] Mr. Holden also authored documents in which he asserted that he was in control of the Seaquest companies. For example, on January 17, 2010, Mr. Holden sent an email to Tony Cosentino, a corporate officer of SCC and some associated companies, in which he wrote, “I am actually holding the whole organization back with my centralized management style with all of our operating companies …”, and further, that he needed to “[b]asically kill the bottleneck that I have become” and that he was “getting bogged down from doing other people’s work as I am trying to do too many things too quickly.” In addition, in a 2011 document entitled “Seaquest group of Companies: 2011 Objectives & Strategies”, he wrote that he “was slowly transitioning authority to our senior management team members as I will continue to delay action and activity with my previous centralized management style.”

[18] Counsel for the accused argues that the letter of January 17, 2010 and the 2011 document actually show that Mr. Holden was taking on too much, and as a result not everything that the company needed to do was being done. While that may be so, it hardly undermines the Crown’s point that Mr. Holden controlled the Seaquest companies. They are not, as the defence argues, indicative of a lack of control.

[19] I turn next to the inside witnesses who testified that Mr. Holden was in control of the Seaquest companies.

[20] Tony Cosentino, who was a corporate officer of SCC and some associated companies, and who also personally loaned a very large amount of money to the Seaquest companies, testified that Mr. Holden controlled SC and SCC. Although Mr. Cosentino was asked by Mr. Holden to serve as president of SCC for a period of time, he said that Mr. Holden “was really in control of both companies.” Mr. Cosentino testified that: “I was just there as a figurehead. I was there on a temporary basis. I had no say in where the money went, or what money came in and how it was dispersed.” Those decisions were made by Mr. Holden. Mr. Cosentino’s evidence was not undermined in cross-examination, and his assertion that Mr. Holden controlled SCC was confirmed by documents and other witnesses.

[21] Christine De Leon was employed in the Seaquest accounting office. She testified that Mr. Holden was in control of SC and SCC. He was “our boss. … He was in charge of stating what rate any investor would get and what terms and was in charge of dealing with certain investors that he liked to deal with personally.”

[22] Ed So was employed by Mr. Holden at Seaquest. He acted as Mr. Holden’s assistant, and for a time he managed the accounting staff. He testified that Mr. Holden was in charge of SC and SCC. When Mr. So first started working for Seaquest, his job was to pick up investor cheques and documents and deliver post-dated cheques for principal and interest, and to find out what investors wished to do with their investment as the maturity date approached. He acted on Mr. Holden’s instructions. As time went on, Mr. So came to understand his role within the business and did not always have to ask for direction, “but at the end of the day” all business decisions were still made by Mr. Holden.

[23] Ali Hemani was also employed in the Seaquest accounting office. He testified that Mr. Holden was the “one managing and arranging everything, he’s the main person who’s running … all the companies.” Mr. Hemani also said that despite Mr. Cosentino’s title as President of SCC, Mr. Holden was actually in control of SCC. This evidence is amply confirmed by other evidence.

[24] In addition to the inside employees, Peter Plastina, who, together with his brother and their companies, was one of Mr. Holden’s largest clients, testified that Mr. Holden told him that he owned SC and SCC.

[25] Finally, in a police interview, Mr. Holden said that he was very involved in Seaquest every day and there was probably nothing that he didn’t know about. In relation to investments, not much money moved around Seaquest that he wasn’t aware of. His role with respect to investor funds in both SC and SCC was to direct where loans and investments were to go. While other people wrote cheques, he directed where the money went – not expenses, but 90% of the money and loans.

[26] In cross-examination, Mr. Holden confirmed that he brought all monies and most of the capital into Seaquest, and that he controlled the funds and approved where the money went.

[27] There can be no doubt that Mr. Holden was not only the directing mind of SC and SCC, but he also maintained tight control over them and their activities.

(c) Mr. Holden’s Control of the Banking of the Seaquest Companies

[28] The evidence establishes that Mr. Holden controlled the bank accounts, and the banking, of both SC and SCC. He was a signatory on all four of the main TD accounts. Ed So, Tony Cosentino, and later Ali Hemani were also made signatories on these accounts so that they could perform transactions. However their evidence, which was not undermined in cross-examination, was that Mr. Holden exercised control over the accounts. I will briefly summarize their evidence in respect of this issue.

[29] Mr. So testified that Mr. Holden added him as a signatory to the bank accounts so that he could do transfers, get bank drafts, or do whatever else was needed. However, Mr. Holden retained control of the bank accounts. Mr. So had no decision-making power regarding withdrawals, deposits or transfers. Mr. Holden made all of those decisions.

[30] Mr. Cosentino testified that he probably was a signing authority on the SC bank accounts, but it would not have been common for him to have access to or write cheques. He transferred money into the accounts on a regular basis but never transferred funds out or otherwise controlled the funds in the account. Mr. Holden made all the decisions about what was done with the funds in the SC bank accounts. With respect to the SCC bank accounts, Mr. Cosentino acknowledged that he had signing authority but once again said that Mr. Holden controlled the funds in those accounts.

[31] Mr. Hemani testified that he was a signatory on the bank accounts of SC and SCC and would sign cheques. Mr. Holden and Mr. Cosentino also had signing authority, but it was Mr. Holden who was ultimately in control of the funds in the bank account.

[32] Mr. Holden did not challenge the banking evidence of these three witnesses, and I accept it.

(d) Mr. Holden Personally Dealt with Virtually All Investors and Was in Charge of Soliciting Funds from Investors

[33] The evidence adduced by the Crown strongly supports the Crown’s position that Mr. Holden was in charge of soliciting funds from investors. The Seaquest insiders all testified that he was the only person who spoke to investors to try to persuade them to roll over their investments. The only other person involved in raising funds was Ed So, who brought in a few investors from the Asian community, but nothing more than that.

[34] Tony Cosentino testified that he did not bring in any investments other than his own money. Vince Bulbrook testified that he had no involvement in raising funds, which was done by Mr. Holden and Ed So. Andrew Gaudet testified that he did not bring in any new investors. Ali Hemani and Sukaina Alibhai testified that they never solicited investments from anyone.

[35] Mr. Hemani, Ms. Alibhai, and Christine De Leon all testified that Mr. Holden would regularly bring cheques from investors into the office. While other Seaquest employees interacted with investors at times, these interactions were limited to picking up and dropping off cheques and paperwork, sending out boilerplate emails, and making follow-up phone calls to inform investors of upcoming maturity dates and to ask how they wanted to proceed. These interactions did not involve soliciting investments.

[36] More specifically, Ms. De Leon, Ms. Alibhai, and Mr. Hemani all gave evidence that the accounting staff would send out boilerplate emails to investors to inform them of upcoming maturity dates and ask how they wanted to proceed. They conveyed the terms of a roll over upon the instructions of Mr. Holden. If the investor did not respond, they would ask Mr. Holden to follow-up personally. Accounting staff required Mr. Holden’s approval before “cashing out” an investor (i.e. paying back principal instead of rolling over the investment). If an investor wished to cash out, Mr. Holden would contact the investor in an effort to persuade them to roll the investment over. This process is confirmed by emails from accounting staff to investors and in other documents. These same witnesses also testified that only Mr. Holden had the authority to decide what interest rates and terms to offer investors. Emails confirm this evidence as well.

[37] The Crown called three of the outside investors as witnesses: Angel Variyski, Brian Tucker, and Peter Plastina. Mr. Variyski was a “small” investor. He invested $250,000 with Seaquest. Brian Tucker invested a total of $6,200,000 with Seaquest on behalf of himself, his wife, and his family trust. Peter Plastina and his family invested many millions of dollars with Seaquest. Mr. Plastina has never recovered $26,000,000 of his investments.

[38] The evidence of these three witnesses provides confirmation of the evidence of the insider witnesses that Mr. Holden was in charge of soliciting funds. For example, Mr. Variyski testified that he dealt only with Mr. Holden regarding his $250,000 investment. Peter Plastina testified that in all of Mr. Plastina’s many dealings with Seaquest, Mr. Holden was always his point of contact. Mr. Plastina considered Ed So to be Mr. Holden’s assistant or “pick-up boy”. Brian Tucker testified that Mr. Holden was the one who solicited his investments. He dealt first with Sukaina Alibhai when seeking security documents relating to his investments in June 2011, but quickly escalated the situation to Mr. Holden’s attention when Ms. Alibhai could not produce the documents he was seeking. In addition, there are a number of emails in evidence in which Mr. Holden solicited new investments from Mr. Tucker.

[39] Mr. Holden confirmed this evidence in his police interview and his evidence at trial. As I have already noted, Mr. Holden told the police that he was very involved in Seaquest every day and that there was probably nothing that he didn’t know about. In cross-examination, he said that he brought all monies into Seaquest. To the extent that Mr. Holden may have resiled from this position to some small degree in his evidence at trial, I do not accept it.

(e) Mr. Holden Directed How Investor Funds Were Used

[40] The Crown adduced a body of evidence to establish that Mr. Holden directed how investor funds were to be used. I have already referred to the evidence that Mr. Holden controlled the bank accounts of SC and SCC and that he made all the decisions about what was done with the funds in the SC and SCC bank accounts. Investor funds were all deposited into these accounts, and as a result, through his control of Seaquest’s banking, Mr. Holden directed all transfers of investor funds out of the bank accounts to their ultimate destinations. In addition, there is specific evidence that Mr. Holden directed Ali Hemani on the use of incoming investor funds.

[41] Mr. Hemani testified that he had regular discussions with Mr. Holden about bills that were coming due and cheques that needed to be issued to existing investors. Mr. Holden would respond by either telling Mr. Hemani about new money that was coming in from investors, or telling him that he would arrange to get the funding from investors. An example of this process is documented in a June 2011 email exchange, in which Mr. Holden directed Mr. Hemani to use a large portion of $3,500,000 received from Brian Tucker to make interest and principal payments to earlier investors, to make payments to Tony Cosentino, and to make payments on a Hawker aircraft.

[42] I accept the evidence that Mr. Holden was in complete control of the bank accounts of SC and SCC, and that he directed how all investor funds were used. I reject any suggestion that funds were used in any way not known to and approved of by him. I note that at one point in his evidence, when shown what appeared to be his signature on a document, he said that Ms. De Leon might have signed it, and that she signed his name a number of times. I do not believe this assertion, but if Ms. De Leon ever did sign Mr. Holden’s name, it would undoubtedly be with his knowledge and at his direction.

[43] It is true that many of the documents provided to investors as security for their investments were not signed by Mr. Holden. That was inevitable, since, for example, he would not logically have signed security documents provided by a company being invested in. But again I have no doubt that these signatures were affixed at his direction. Some of them were prepared as a matter of routine by administrative staff, but again, it would never have been a staff decision to provide such security. It was always done, at the very least, based on general directions from Mr. Holden.

(f) The Defence Position about Control

[44] In their written argument, Crown counsel devoted 20 of 134 pages to the issue of Mr. Holden’s control of the Seaquest companies to set the stage for their overall position that he is guilty of fraud. In the first sentence of this part of their argument, they said, “The evidence established beyond any doubt that Mr. Holden was in complete control of the Seaquest group of companies”) (emphasis added). In response, counsel for Mr. Holden devoted the first 12 pages of his 59-page written submissions to argue that Mr. Holden’s control of the Seaquest companies was not complete. While conceding that Mr. Holden was the directing mind of SC and SCC, counsel argued that Mr. Holden’s “actions, knowledge and actual control over the entire Seaquest group of companies” was far less than the Crown suggests.

[45] Counsel for Mr. Holden acknowledged Mr. Holden’s role in “raising funds through investors and the duties that were related to that task, such as locating new investment opportunities, setting interest rates and dealing with some investors directly”. He acknowledged that Mr. Holden gave “some” directions as to what companies would be invested in, how assets were operating, how to bring in more investor money, and other broad interests of the Seaquest group. But, he said, the evidence does not show Mr. Holden “micromanaging the majority of all Seaquest operations.”

[46] The defence goes on to point to evidence that Mr. Holden was often out of Seaquest’s office; seldom actually signed cheques; got bogged down with other people’s work; tried to do too many things too quickly; and caused delays with his centralized management style. The defence said that all of this demonstrates not that Mr. Holden was in complete control of the companies, but that there was a lack of control.

[47] Counsel for the accused also pointed to evidence that Mr. Cosentino had a greater role in the company than he testified to, pointing in particular to Mr. Cosentino pressing for lowering the interest rates being paid to investors and hiring a controller, as well as his operation of certain companies that Seaquest invested in. However, counsel points to no evidence that Mr. Cosentino had any involvement in soliciting investor funds or directing how those funds would be used.

[48] Counsel also pointed to Mr. So advising some investors of investment maturity dates, speaking to them about what they wanted to do with their investments, specifically whether they wanted to roll them over, cash them out or invest more, and then reporting back to Mr. Holden about their wishes. In the end, however, counsel acknowledged that while Mr. So was more than a document runner, he did not have the ability to exert authority over important decisions or directions of Seaquest, and he did not do so.

[49] In addition, counsel pointed out that although Mr. Bulbrook denied being the Chief Financial Officer of Seaquest, some employees understood that he was in fact the Chief Financial Officer.

[50] Counsel pointed to evidence that Mr. Holden relied a great deal on accounting staff and did not interfere with their work. They generated investor documents from templates, and then brought those documents to Mr. Holden for signature. In reliance on this sort of evidence, the defence argued that despite Mr. Holden being the directing mind of Seaquest, and clearly being “the authority to make final decisions on important matters within Seaquest”, Mr. Holden relied on others to provide him with the requisite information to make those decisions and to carry out a wide variety of duties.

(g) My Analysis of the Issue of Control

[51] In my view, as is apparent from some of the comments I have already made, the defence misconceives the point of the discussion of control. The Crown attempted to show that if there was a fraud perpetrated on Seaquest investors, Mr. Holden was inevitably responsible for it. The Seaquest companies were his. He was the directing mind of both companies. He personally solicited most of the investments. He determined the terms of the investments. He determined where the invested funds went and how they were used. This is not, of itself, proof of fraud. But if there was fraud in the soliciting and subsequent use of investment funds, Mr. Holden was at the heart of it.

[52] Nothing in what the defence points to detracts in the slightest from the Crown’s position on this issue. It makes no difference whether Mr. Holden is properly described as a micromanager. It makes no difference how much of the time he was physically in the office. It makes no difference if he accepted and acted on advice from Mr. Cosentino. It makes no difference if Mr. So was more than a document runner and consulted investors about their wishes upon the maturity of their investments, given, as the defence concedes, that he simply reported the information to Mr. Holden, and did not exert authority over important decisions and directions. It makes no difference whether or not Mr. Bulbrook was actually the CFO of Seaquest. And it certainly makes no difference that Mr. Holden relied on accounting staff and others to carry out his wishes. The simple fact is that Mr. Holden made all significant decisions. If there was fraud in the solicitation and subsequent use of investment funds, then it is hard to imagine how Mr. Holden could not have committed the actus reus of fraud.

2. SC and SCC had minimal revenue

[53] Based on his review of the records of the Seaquest companies, Mr. Coort demonstrated that the Seaquest companies had minimal revenue throughout their existence. None of this evidence was challenged. He made the following observations:

None of the non-arm’s length entities to which SC or SCC advanced money provided a positive return to SC or SCC as a result of business operations.
SC received no or minimal return from the non-arm’s length entities to which it advanced money, resulting in net losses of $11,537,727.
SCC received no or minimal return from the non-arm’s length entities to which it advanced money, resulting in net losses of $15,859,336.
SC and SCC received no or minimal return from a number of third-party entities to which they advanced money, resulting in total net losses of $6,676,636.
If losses from the Gateway Green Energy Holdings deal are excluded (about which, more later – Mr. Coort very fairly excluded these losses on the assumption that GGEH’s repayment of the loans would have been completed but for the bankruptcy of Seaquest), SC and SCC made a total profit of $934,336 on several loans made to third party entities. This amount was not even sufficient to cover SC’s operating costs of $2,344,885 (which includes payroll, corporate credit cards, commissions/referral fees, and rent/utilities), much less interest payments to investors.

[54] In addition, a large body of evidence clearly demonstrates the Mr. Holden was acutely aware that Seaquest had minimal revenue and serious cash-flow issues. He devoted much of his time to ensuring that the many balls Seaquest had in the air did not come crashing down. The Crown points to the following compelling evidence on this point.

[55] In a January 2010 email to Mr. Cosentino, Mr. Holden wrote that in 2009, “We survived 2 serious cash flow crisis” and “we were unsuccessful in achieving the revenues we should have achieved.”

[56] Mr. Cosentino testified that, especially after receiving that email, he “started getting nervous” and started to “worry not only for [his own] investment but for the investment of all the investors.” He expressed his concerns to Mr. Holden, who would “constantly assure [him] that [they] had 90,000,000 shares of Process Capital and once that came to fruition everybody would be whole and everything would be great and wonderful again.” He made this claim in the face of the fact that shares in Process Capital were trading at 2 to 3 cents at the time and may even have been delisted.

[57] Ed So testified that he did not “see that much revenue coming in . . . or income into the business, that mainly money coming in was investor dollars but the outflows, as far as expenses for the office and interest payments always a large number so there was always cash shortfalls in the business.” He spoke to Mr. Holden about these shortfalls and said that Seaquest needed to “get out of this” cycle. Mr. Holden told him that “part of the strategy and the plan” was that once the companies in which Seaquest owned positions went public or otherwise began to succeed, their share price would increase. Seaquest would then be able to sell its position in these companies and use the funds to pay out its investors and no longer have a cash shortfall.

[58] Ali Hemani testified that he saw the bank statements and did not see any revenue coming into Seaquest. He first raised his concerns about lack of revenue with Mr. Holden in August 2010, telling him, “I’ve been here for almost 2-3 months, I don’t see any revenue coming in.” Mr. Holden responded by explaining that, in the investment industry, you “don’t expect revenue straight away” but rather must wait for 2-3 years until projects mature. I note that Mr. Holden did not deny that this conversation took place.

[59] Of course, that SC and SCC had minimal revenue is dispositive of nothing. On its own, it is consistent with a poorly run or simply unsuccessful enterprise. But in combination with the elements that follow in my discussion of the case, and in the overall context, it is the first brush stroke in the painting of a picture of a Ponzi scheme.

[60] In particular, having minimal revenue raises questions such as: how could a legitimate investment enterprise be offering rates of return far exceeding market rates without generating significant revenue, and how could new investment funds be solicited on the basis that they were earmarked for specific investments when the funds were desperately needed for other purposes to keep Seaquest afloat?

3. Mr. Holden Solicited Investments by Promising High Rates of Interest and by Making Representations about Each Investment’s Nature, Purpose, and Security

[61] There can be no doubt that the Seaquest companies were paying artificially high rates of interest to investors. James Catty, a witness called by the defence to give expert opinion evidence in the areas of corporate valuation, investment analysis, and management, testified that following the economic crisis in 2008, banks were paying about 3 to 4% interest. Yet some of SC and SCC’s older investors were receiving rates as high as 24% per year. Other long-time investors, including Mr. Plastina, received 18% per year on investments with terms as short as four months. Mr. Tucker received 15% per year. There is also no doubt that in soliciting those funds, Mr. Holden made representations about what would be done with the funds, and about the security for each investment.

[62] What remains to be decided is the question whether, in making representations about what would be done with the funds and about the security for each investment, Mr. Holden secured new investments for Seaquest by deceit, falsehood, or other fraudulent means. That requires an examination not only of what he said, but also what actually happened to the money invested, and what the security for each investment really was. This will require an examination of the whole of the evidence, and, in particular, the evidence reviewed under heading 5 below. I will undertake this task later in my reasons.

4. Of Necessity, Mr. Holden Constantly Solicited New Investments and Put Pressure on Existing Investors to Roll Over Funds

[63] Throughout the period of the alleged fraud, SC and SCC regularly made interest payments to their investors, and made some payouts of principal amounts as well. Some of these payments were quite large. But, as I have indicated, SC and SCC were not generating the revenue needed to cover these payments. As a result, the continued existence of SC and SCC depended entirely on Mr. Holden’s ability to persuade existing investors to “roll over” large investments instead of cashing out, and to solicit new investments from either new or existing investors.

[64] In particular, Mr. Holden needed to ensure that larger investors rolled over their investments because SC and SCC did not have anywhere near the funds to repay the principal amounts at maturity. This is clearly demonstrated by what was referred to in evidence as the “Plastina fiasco” at the end of 2010.

[65] During his time as a Seaquest investor, Mr. Plastina typically “rolled over” his investments at maturity. But the typical rollover process did not occur with respect to two investments that matured on December 31, 2010. As was customary with all of the Plastina investments, Seaquest had given post-dated cheques totalling $3,074,000 for the principal amounts due to be repaid on the December 31 maturity date. Mr. Plastina was away from his office on December 31, and inadvertently did not give instructions to roll over the investment. Instead, his office deposited the post-dated cheques, the bank honoured them, and they were cashed on December 31, 2010. As a result, SC’s bank account became overdrawn by nearly $3,000,000. Being unaware that Seaquest didn’t actually have the funds to pay him out, and having gotten paid, Mr. Plastina was prepared to immediately re-invest with Seaquest.

[66] It was only after Mr. Holden obtained three new investment cheques totalling $3,650,000 from Mr. Plastina at the beginning of January 2011 that SC had sufficient funds to cover the two December 31, 2010 cheques. In effect, Mr. Plastina had unwittingly paid himself. Without that injection of new funds from Mr. Plastina, SC would have been unable to satisfy its existing $3,074,000 obligation to him.

[67] Mr. Coort’s analysis demonstrated that in addition to its Canadian dollar account being nearly $3,000,000 overdrawn as of December 31, 2010, SC had only US$3,532 in its U.S. dollar bank account. Additionally, SCC had only $36,363 in its Canadian dollar bank account and only US$1,500 in its U.S. dollar bank account. Therefore, even if there had been some legitimate basis on which to transfer funds from SCC to SC to satisfy the SC’s obligation to Mr. Plastina, which there was not, no such funds were available. The “Plastina fiasco” clearly demonstrates that Seaquest was unable to meet its obligation to pay out even $3,000,000 in investments that were known to be maturing at the end of 2010. Mr. Holden was fully involved in the “Plastina fiasco” and well aware that Seaquest did not have sufficient funds to cover Mr. Plastina’s maturing investments.

[68] The “Plastina fiasco” was far from an anomaly. Mr. Catty was not aware of the “Plastina fiasco,” but he testified that he would not be surprised to learn that Seaquest would have had difficulty paying out maturing investments worth $3,000,000 at the end of 2010. In fact, he said that Seaquest might have had difficulty doing so at any time following the economic downturn in 2008. Mr. Catty acknowledged that the proximate cause of Seaquest’s bankruptcy in November 2011 was its inability to come up with the approximately $3,000,000 still owing to Brian Tucker pursuant to a settlement agreement.

[69] It is beyond dispute that Mr. Holden was aware that Seaquest’s continued existence depended on his ability to persuade existing investors to “roll over” their investments and to solicit new investments from either new or existing investors. The Seaquest staff prepared weekly “payout” emails for this very reason. These emails brought to Mr. Holden’s attention the money that would be required to “cash out” existing investors at maturity and to make interest payments to investors. Everyone involved in this process understood that Mr. Holden would deal with the anticipated shortfall outlined in each email by speaking to existing investors to convince them to roll their investments over, and/or by obtaining new investments. Ed So, Ali Hemani, and Sukaina Alibhai all confirmed this understanding in their evidence. In addition, the evidence established that Mr. Cosentino provided regular infusions of money to Seaquest, essentially on demand from Mr. Holden.

[70] Mr. Holden confirmed in cross-examination that when shortfalls were anticipated, he dealt with them by raising more money, persuading investors to roll over their investments, or borrowing money from Mr. Cosentino.

5. Funds received from investors were used to repay principal and interest to earlier investors, and to pay the operating costs of SC and SCC

[71] Much of the money received by Mr. Holden from investors was not used for its intended purpose. Instead, it was misappropriated and used: to repay principal and interest to existing investors; in the case of the Plastina fiasco, to pay an investor his own principal, unbeknownst to that investor, and to pay Seaquest’s operating costs. This consistent misappropriation is the heart of the fraud alleged by the Crown and is a classic feature of a Ponzi scheme. And, of course, Mr. Holden used some of the investors’ money to enrich himself.

[72] To repeat, Mr. Holden confirmed in cross-examination that when shortfalls were anticipated, he dealt with them by raising more money, persuading investors to roll over their investments, or borrowing money from Mr. Cosentino. He agreed that he used the new money, in part, to pay principal and interest to earlier investors.

[73] In addition, the Crown led specific examples of this misappropriation with respect to investments made by Mr. Plastina, in addition to the Plastina fiasco, as well as investments made by Mr. Tucker, Mr. Variyski, and Sauro Prioreschi. I will review some of this evidence briefly.

(a) Peter Plastina’s investments

[74] Peter Plastina and his brother Carlo Plastina own and operate a successful construction business. Carlo Plastina first met Mr. Holden, through Vito Galoro, Mr. Holden’s ex-brother-in-law. Peter Plastina met Mr. Holden through Carlo in 2006 or 2007. Mr. Plastina testified that Mr. Holden told him that he owned SC and SCC, and, he believed, based on his interactions with Mr. Holden, that Mr. Holden ran both companies. Mr. Holden told him that he was meeting with potential new investors and assured him that his investments were safe. If Mr. Plastina invested with him, he would certainly get his principal back.

[75] Mr. Plastina came to consider Mr. Holden to be “a friend” who “became more than family”. He trusted Mr. Holden “implicitly”, so much so that, he testified, “I took money that I had invested through BMO, through their Nesbitt Burns division . . . and gave it to Mr. Holden because I trusted him more than I did Nesbitt Burns.”

[76] I will say immediately that I could not imagine a more credible witness than Mr. Plastina. His evidence was confirmed to a significant extent by the documentary evidence and the testimony of other witnesses. He was candid about matters that made him look naïve. He was sorrowful about the enormous loss he and his family suffered by investing with Mr. Holden, but not vindictive. His evidence was completely undamaged by cross-examination.

[77] In all of Mr. Plastina’s dealings with his various investments in Seaquest, Mr. Holden was always his point of contact. Mr. Plastina would learn of new investment opportunities from Mr. Holden directly, via phone or in-person conversations or via email. A number of these email solicitations by Mr. Holden were adduced in evidence. Mr. Plastina understood other Seaquest employees to be Mr. Holden’s assistants.

[78] Mr. Coort provided a very detailed analysis of the Plastina investment documents, including both original investments and subsequent rollovers. As of the date of bankruptcy, the total amount owing to Mr. Plastina and the entities associated to him was $22,656,950 in Canadian funds and US$2,000,000, broken down by associated entity and transaction, as follows:

Grand Valley Building Supplies Co. to SC:

PP2 - $ 1,000,000.00

PP4 - $ 850,000.00 (includes accumulated interest of $100,000.00)

PP5-9 - $ 1,500,000.00 (includes accumulated interest of $85,000.00)

PP10 - $ 900,000.00 o PP11 $ 1,237,150.00 (includes accumulated interest of $102,150.00)

PP14 - $ 2,071,000.00 (includes accumulated interest of $171,000.00)

Total: $ 7,558,150.00 41

Grand Communities (Parker Hill) Corp. to SC:

PP16 - $ 545,000.00 (includes accumulated interest of $45,000.00)

Grand Valley (Credit Hills II) to SC

PP17 - $ 700,000.00

PP18 - $ 700,000.00

Total: $ 1,400,000.00

Tritina to SC:

PP19 - $ 1,250,000.00 (includes accumulated interest of $250,000.00)

Mapleview to SC:

PP20 - $ 530,000.00 (includes accumulated interest of $30,000.00)

PP22 - $ 893,800.00 (includes accumulated interest of $73,800.00)

PP23 - $ 4,000,000.00

PP24 - $ 500,000.00

PP25 - $ 500,000.00

Total: $ 6,423,800.00

Plastina Drain to SC:

PP29 - $ 1,600,000.00

PP30 - $ 1,350,000.00

Total: $ 2,950,000.00

Grand Total to SC: $20,126,950.00

Mapleview to SCC:

PP32 - $ 2,000,000.00

Grand Communities (Parker Hill) Corp. to SCC:

PP34 - $ 1,000,000.00 USD

Credit Hills II to SCC:

PP35 - $1,000,000.00 USD

Grand Total to SCC: $2,000,000.00 CAD + $2,000,000.00 USD

Mapleview to Comvest (another entity belonging to Mr. Holden)

PP36 - $530,000.00 (includes accumulated interest of $30,000.00)

[79] I propose next to briefly provide a sense of what these transactions were like. I acknowledge that the essence of these summaries comes from the written argument of the Crown. The Crown accurately and fairly summarized these transactions, and I can imagine no good reason to describe them in entirely different language. I reproduce the “PP” numbering of the transactions involving Mr. Plastina that the Crown used in its written submissions and follow this convention for other individuals as well.

PP2

[80] This was a $1,000,000 investment by Mr. Plastina that was purportedly secured by a debt of American Telematics Corporation to SC. Mr. Holden signed the Assignment of Debt and Security dated November 1, 2009, which stated that SC “has made loans and extended credit to [American Telematics Corporation] pursuant to a Promissory Note dated November 1, 2009,” and that “[American Telematics Corporation] is indebted and liable... in the sum of $1,000,000.”

[81] Mr. Coort’s analysis established that only $500, not $1,000,000, was ever advanced by SC to American Telematics Corporation.

[82] The Promissory Note dated November 1, 2009 from American Telematics Corporation to SC was “signed” by Tony Cosentino as President of American Telematics Corporation using a signature stamp. Mr. Cosentino testified that “he was aware of the name” American Telematics Corporation but did not know what the company did. He had “no involvement with the company”, did not see the Promissory Note at the time, was not aware that he was providing a Promissory Note for $1,000,000, and would have had no interest in doing so. He never gave permission for the signature stamp bearing his name to be used with respect to American Telematics. I accept his evidence on this issue. Although Mr. Cosentino was listed as an officer and director of American Telematics Corporation, he was not a signatory on the company’s bank account. Mr. Holden, on the other hand, was.

[83] In the result, this transaction was a non-arm’s length transaction involving a company, American Telematics Corporation, that Mr. Holden was clearly involved in. Mr. Plastina testified that when he made the $1,000,000 investment, he did not appreciate that the transaction involving SC and American Telematics Corporation was not arm’s length. Contrary to the Assignment of Debt and Security signed by Mr. Holden, SC appears to have only advanced $500 to American Telematics Corporation, and so the Assignment of Debt and Security signed by Mr. Holden was nearly worthless. Further undermining the value of the security is the fact that the Promissory Note bearing the Cosentino signature stamp appears to be a fraudulent document created without Mr. Cosentino’s knowledge or approval.

PP4

[84] This was a $750,000 investment by Mr. Plastina that was purportedly secured by a debt of Natrapharm Corporation to SC. Mr. Holden signed the Assignment of Debt and Security, dated October 16, 2009, which stated that SC “has made loans and extended credit to [Natrapharm Corporation] pursuant to a Promissory Note dated October 16, 2009,” and that “[Natrapharm Corporation] is indebted and liable . . . in the sum of $750,000.”

[85] Mr. Coort’s analysis established that only $274,350, not $750,000, was ever advanced by SC to Natrapharm Corporation.

[86] The Promissory Note dated October 16, 2009 from Natrapharm Corporation to SC, as well as a General Security Agreement dated October 16, 2009 and a subsequent Promissory Note and General Security Agreement, were signed by Andrew Gaudet, purportedly as President of Natrapharm. Although Mr. Gaudet signed these documents, his evidence was that he was given these documents by Mr. Holden and signed them because “I was asked to by my boss.” Mr. Gaudet’s evidence was not undermined in cross-examination, and I accept it.

[87] Corporation profile reports list Mr. Holden as a director of Natrapharm Corporation. As well, Mr. Holden was a signatory on Natrapharm Corporation’s bank account, and bank records list Mr. Holden as President of that company as of November 22, 2007. Mr. Gaudet’s name does not appear on any of the corporation profile reports or banking records.

[88] In the result, this transaction was a non-arm’s length transaction involving a company, Natrapharm Corporation, that Mr. Holden clearly controlled. Contrary to the Assignment of Debt and Security signed by Mr. Holden, SC appeared never to have advanced $750,000 to Natrapharm Corporation, so Mr. Plastina did not have good security. Further undermining the value of the security is the fact that the Promissory Note and General Security Agreements signed by Mr. Gaudet appear to be fraudulent documents signed by a puppet of Mr. Holden.

PP10

[89] This was a $900,000 investment by Mr. Plastina, which was to be used for a bridge loan from SC to Ingle Wright Benefits Inc. When Mr. Plastina inquired via email about security for the loan, Mr. Holden promised that the loan would be fully collateralized. The documents established, and Mr. Watts confirmed in his testimony, that the intended loan was in fact advanced to Ingle Wright. The investment from Mr. Plastina’s company was rolled over several times at Mr. Holden’s request. Ingle Wright paid back the loan in full and with interest as of February 28, 2011. However, Mr. Holden asked Mr. Plastina to roll over his investment after this date, when Ingle Wright had already paid back the loan in full. Mr. Holden signed a new promissory note, and personal and corporate guarantees, all dated May 11, 2011. Mr. Holden also signed a new Assignment of Debt and Security, also dated May 11, 2011, which asserted that Ingle Wright still had a debt of $900,000 to SC. Mr. Holden then purported to assign this debt to Mr. Plastina’s company as security for his investment. Mr. Holden did not tell Mr. Plastina that Ingle Wright had already paid back the loan in full in February 2011, more than two months earlier.

[90] While the original investment may have been solicited by Mr. Holden for bona fide reasons, the May 11, 2011 rollover appears to have been fraudulent. As of that date, Ingle Wright did not owe SC money, so there was no debt to be assigned to Mr. Plastina. Despite this, Mr. Holden signed a worthless Assignment of Debt and Security purporting to assign a non-existent debt to Mr. Plastina. Mr. Holden did not tell Mr. Plastina that Ingle Wright had already paid back the loan. The obvious inference to be drawn from these facts is that “cashing out” Mr. Plastina’s investment at maturity would have been financially difficult for SC, so Mr. Holden hid the truth in order to ensure that Mr. Plastina would “rollover” his investment, allowing the scheme to continue.

PP11

[91] This was a $1,135,000 investment by Mr. Plastina, which was purportedly secured by a debt of Strata Technologies Corporation to SC. Mr. Holden signed the Assignment of Debt and Security, dated January 27, 2010, which stated that SC “has made loans and extended credit to [Strata Technologies Corporation] pursuant to a Promissory Note dated January 27, 2010,” and that “[Strata Technologies Corporation] is indebted and liable . . . in the sum of $1,135,000.” According to Mr. Holden’s email soliciting this investment, Mr. Plastina’s funds were to be used for a “Bridge Loan”.

[92] Mr. Coort’s analysis established that, as of January 2010, only $685,000, not $1,135,000, had been advanced by SC to Strata Technologies Corporation.

[93] A Promissory Note dated February 1, 2010 from Strata Technologies Corporation to SC was signed by Mr. Holden as President of Strata Technologies Corporation. It purported that Strata Technologies Corporation was indebted to SC in the amount of $1,135,000.

[94] Corporation profile reports and banking records show Mr. Holden was an officer and director of Strata Technologies Corporation, and a signatory on the company’s bank account.

[95] In the result, this transaction was a non-arm’s length transaction involving a company, Strata Technologies Corporation, that Mr. Holden clearly controlled. Mr. Plastina testified that, at the time he made the $1,135,000 investment, he did not appreciate that the transaction involving SC and Strata Technologies Corporation was not arm’s length. I accepted his evidence on this point.

[96] Contrary to the Assignment of Debt and Security and Promissory Note signed by Mr. Holden, SC had not advanced $1,135,000 to Strata Technologies, so those documents appear to be fraudulent.

PP14

[97] This was a $1,900,000 investment by Mr. Plastina that was purportedly secured by a debt of Enviromatrix Technologies Inc. to SC. Mr. Holden signed the Assignment of Debt and Security, dated July 6, 2010, which stated that SC “has made loans and extended credit to [Enviromatrix Technologies Inc.] pursuant to a Promissory Note dated July 6, 2010,” and that “[Enviromatrix Technologies Inc.] is indebted and liable . . . in the sum of $1,900,000.”

[98] A Promissory Note dated July 6, 2010 from Enviromatrix Technologies Inc. to SC was “signed” using the signature stamp of Tony Cosentino, who was President of Enviromatrix Technologies Inc. Also signed using this stamp were a subsequent Promissory Note and a General Security Agreement dated July 6, 2011. Mr. Cosentino testified that he was not aware of these documents and never gave anyone permission to stamp these documents on his behalf. Again, I accept his evidence on this point.

[99] Corporation profile reports and banking records show Mr. Holden as a director and officer of Enviromatrix Technologies Inc. and a signatory on bank account.

[100] In the result, this transaction was a non-arm’s length transaction involving a company, Enviromatrix Technologies Inc., that Mr. Holden clearly controlled. Mr. Plastina testified that at the time he made the $1,900,000 investment, he did not appreciate that the transaction involving SC and Enviromatrix Technologies Inc. was not at arm’s length, or that Mr. Cosentino was the President of Enviromatrix Technologies Inc. I accept his evidence on this issue.

PP16

[101] This was a $500,000 investment by Mr. Plastina that was purportedly secured by a debt of Enviromatrix Technologies Inc. to SC. Mr. Holden signed the Assignment of Debt and Security, dated July 6, 2010, which stated that SC “has made loans and extended credit to [Enviromatrix Technologies Inc.] pursuant to a Promissory Note dated July 6, 2010,” and that “[Enviromatrix Technologies Inc.] is indebted and liable . . . in the sum of $500,000.”

[102] A Promissory Note dated July 6, 2010 from Enviromatrix Technologies Inc. to SC was “signed” using the signature stamp of Tony Cosentino, who was President of Enviromatrix Technologies Inc. Also signed using this signature stamp were a subsequent Promissory Note and General Security Agreement dated July 6, 2011. Mr. Cosentino testified that he “did not authorize anyone to use the stamp with respect to the company Enviromatrix.” I accept his evidence on this issue.

[103] Corporation profile reports and banking records show Mr. Holden as a director and officer of Enviromatrix Technologies Inc. and a signatory on the company’s bank account.

[104] In the result, this transaction was a non-arm’s length transaction involving a company, Enviromatrix Technologies Inc., which Mr. Holden clearly controlled. Mr. Plastina testified that at the time he made the $500,000 investment, he was not told that the transaction involving SC and Enviromatrix Technologies Inc. was not at arm’s length.

PP18

[105] This was a $700,000 investment by Mr. Plastina that was purportedly secured by a debt of Natrapharm Corporation to SC. Mr. Holden signed the Assignment of Debt and Security, dated January 1, 2011, which stated that SC “has made loans and extended credit to [Natrapharm Corporation] pursuant to a Promissory Note dated January 1, 2011”, and that “[Natrapharm Corporation] is indebted and liable . . . in the sum of $700,000.” According to Mr. Holden’s email soliciting this investment, Mr. Plastina’s funds were to be used for a “private placement deal with NatraPharm.”

[106] Mr. Coort’s analysis established that only $274,350, not $700,000, was ever advanced by SC to Natrapharm Corporation.

[107] The Promissory Note dated January 1, 2011 from Natrapharm Corporation to SC was signed by Mr. Gaudet, purportedly as President of Natrapharm. Although Mr. Gaudet signed this document, his evidence was that he was given documents relating to this transaction by Mr. Holden and signed them because “I was asked to by my boss.” Mr. Gaudet’s evidence was not undermined in cross-examination, and I accept it.

[108] Corporation profile reports list Mr. Holden as a director of Natrapharm Corporation. As well, Mr. Holden was a signatory on Natrapharm’s bank account, and bank records list Mr. Holden as the President of the company as of November 22, 2007. Mr. Gaudet’s name does not appear on the corporation profile reports or banking records.

[109] In the result, this transaction was a non-arm’s length transaction involving a company, Natrapharm Corporation, which Mr. Holden clearly controlled. Contrary to the Assignment of Debt and Security signed by Mr. Holden, SC never advanced $700,000 to Natrapharm Corporation, so Mr. Plastina did not have good security. Further undermining the value of the security is the fact that the Promissory Note signed by Mr. Gaudet appears to be a fraudulent document signed by a puppet of Mr. Holden.

[110] In addition, Mr. Plastina’s investment of $700,000 formed part of the “Plastina fiasco”. Mr. Plastina’s $700,000 investment cheque was one of the three investment cheques totalling $3,650,000 that Mr. Holden obtained from Mr. Plastina in early January 2011. It was only when these three cheques were deposited that SC had sufficient funds to cover the massive overdraft in its account. The obvious inference that I draw is that Mr. Holden invented the $700,000 Natrapharm investment in order to obtain funds from Mr. Plastina to keep his investment scheme afloat.

PP19

[111] This was a $1,000,000 investment by Mr. Plastina, the cheque for which cleared on March 7, 2011. A handwritten notation on the back of the cheque indicates that the money was intended to be used for the “Bennett Environmental Stock Pool.” This notation corresponds to the information contained in an email from Mr. Holden soliciting the investment.

[112] Mr. Coort’s analysis established that, the same day that Mr. Plastina’s cheque cleared, $416,505 went to Edwin T. Nobbs Q.C. to purchase a Hawker aircraft for Seaquest. Most of the remainder of the $1,000,000 was used to make interest payments to other investors, interest payments to various Plastina companies, and payments to Mr. Holden’s wife Rose Holden, among other payments. In other words, Mr. Plastina’s $1,000,000 investment was not segregated or held in trust for use in the Bennett Environmental Stock Pool deal, but rather was immediately used for completely unrelated purposes. Mr. Plastina testified that, when he invested his $1,000,000, it was “absolutely not” his intention or understanding that his funds would be used to purchase an airplane for Seaquest, and he did not know that $416,505 funds would be advanced to Edwin T. Nobbs for that purpose.

[113] In the result, Mr. Holden, who controlled the Seaquest bank accounts and directed how funds should be used, misappropriated Mr. Plastina’s $1,000,000.

PP20

[114] This was a $500,000 investment by Mr. Plastina, the cheque for which cleared on July 24, 2011. A typewritten notation on the front of the cheque indicates that the money was intended to be used for the “Medical Technologies Standby Fund.” This notation corresponds to the information contained in an email from Mr. Holden soliciting the investment.

[115] Mr. Coort’s analysis established that, on July 27, 2011, three days after Mr. Plastina’s cheque cleared, $355,000 was wired to Mr. Holden’s First Ontario Credit Union account, from which $350,000 was subsequently paid by cheque to Mr. Cosentino. Most of the remainder of Mr. Plastina’s original $500,000 was used to pay interest and principal to other investors. Mr. Plastina’s $500,000 investment was not segregated or held in trust for use in the Medical Technologies Standby Fund, but rather was immediately used for completely unrelated purposes.

[116] Mr. Plastina testified that, when he invested his $500,000, he did not expect that his money would be used to make interest payments to other Seaquest investors, to repay principal to other Seaquest investors, or to pay Mr. Cosentino.

[117] In the result, Mr. Holden, who controlled the Seaquest bank accounts and directed how funds should be used, misappropriated Mr. Plastina’s $500,000 investment.

[118] PP22

[119] This was an $820,000 investment made by Mr. Plastina that was purportedly secured by a debt of American Telematics Corporation to SC. Mr. Holden signed the Assignment of Debt and Security, dated January 29, 2010, which stated that SC “has made loans and extended credit to [American Telematics Corporation] pursuant to a Promissory Note dated January 29, 2010”, and that “[American Telematics Corporation] is indebted and liable . . . in the sum of $1,000,000.” According to Mr. Holden’s email soliciting this investment, Mr. Plastina’s funds were to be used for a “short-term Bridge Loan deal”.

[120] Mr. Coort’s analysis established that only $500, not $1,000,000, was ever advanced by SC to American Telematics Corporation.

[121] The Promissory Note dated January 29, 2010 from American Telematics Corporation to SC was “signed” using the signature stamp of Tony Cosentino, who was President of American Telematics Corporation. A General Security Agreement also dated January 29, 2010 was also “signed” using this signature stamp. Mr. Cosentino testified that “he was aware of the name” American Telematics Corporation but did not know what the company did. He had “no involvement with the company”. Mr. Cosentino also testified he was unaware of the General Security Agreement dated January 29, 2010, and would have had no reason to have signed it. He never gave permission for the signature stamp bearing his name to be used with respect to American Telematics.

[122] Although Mr. Cosentino was listed as an officer and director of American Telematics Corporation, he was not a signatory on the company’s bank account. Mr. Holden, on the other hand, was.

[123] In the result, this transaction was a non-arm’s length transaction involving a company, American Telematics Corporation, in which Mr. Holden was fully involved. It was Mr. Holden who solicited Mr. Plastina’s investment via email. In that email correspondence, Mr. Holden wrote: “I am personally managing this transaction personally.” Contrary to the Assignment of Debt and Security signed by Mr. Holden, SC only ever advanced $500 to American Telematics Corporation, and so the Assignment of Debt and Security signed by Mr. Holden was essentially worthless. Further undermining the value of the security is the fact that the Promissory Note and General Security Agreement bearing the Cosentino signature stamp apparently was a fraudulent document created without Mr. Cosentino’s knowledge or approval.

[124] Mr. Plastina testified that, when he invested $820,000, he was not told by Mr. Holden or anybody else that only $500 would flow to American Telematics Corporation. His response when asked about this in examination-in-chief was: “you’re scaring me.”

PP23

[125] This was a $4,000,000 investment by Mr. Plastina that was purportedly secured by a debt of MMI Capital Corporation to SC. Mr. Holden signed the Assignment of Debt and Security, dated May 4, 2010, which stated that SC “has made loans and extended credit to [MMI Capital Corporation] pursuant to a Promissory Note dated May 4, 2010,” and that “[MMI Capital Corporation] is indebted and liable . . . in the sum of $4,000,000.” According to Mr. Holden’s email soliciting this investment, Mr. Plastina’s funds were to be used for a “180 Bridge Loan Opportunity”.

[126] Mr. Coort’s evidence established that, as of May 4, 2010, SC had advanced only $805,750 to MMI Capital Corporation, not $4,000,000. In fact, during the entire period that SC’s bank account was active (2006-2012), SC advanced a total of only $835,750 to MMI Capital Corporation.

[127] The Promissory Note dated May 4, 2010 from MMI Capital Corporation to SC was “signed” using the signature stamp of Tony Cosentino, who was President of MMI Capital Corporation. A General Security Agreement also dated May 4, 2010 was also “signed” using that signature stamp. A subsequent Promissory Note and General Security Agreement, both dated May 4, 2011, were also “signed” using the Tony Cosentino signature stamp. Mr. Cosentino testified that he was aware of the company MMI Capital Corporation but was not aware of these promissory notes or general security agreements, nor did he authorize anybody to place his stamp on those documents. I accept this evidence.

[128] In the result, this transaction was a non-arm’s length transaction. Mr. Holden solicited Mr. Plastina’s $4,000,000 investment, and so was fully involved in this transaction. Contrary to the Assignment of Debt and Security signed by Mr. Holden, SC never advanced $4,000,000 to MMI Capital Corporation, and so Mr. Plastina did not have good security. Further undermining the value of the security is the fact that the Promissory Notes and General Security Agreements bearing the Cosentino signature stamp appear to have been fraudulent documents created without Mr. Cosentino’s knowledge or approval.

PP24

[129] This was a $500,000 investment by Mr. Plastina that was used to make a bridge loan from SC to Northcore Technologies Inc. The typewritten notation on Mr. Plastina’s investment cheque indicates “NORTHCORE 180 DAYS”. Mr. Plastina’s cheque was made out to SCC, but Mr. Coort testified that it was in fact deposited into SC’s bank account. Mr. Coort also testified that SC did in fact make a loan to Northcore Technologies Inc., an arm’s length company. Northcore had paid back the loan in full, and with interest by May 3, 2011. However, Mr. Holden asked Mr. Plastina to roll over his investment after Northcore had paid back the loan in full. Mr. Holden signed a new promissory note, dated May 22, 2011, and a new Assignment of Debt and Security, also dated May 22, 2011. That assignment asserted that Northcore Technologies Inc. still had an outstanding debt to SCC of $500,000 and purported to assign that debt to Mr. Plastina as security for his investment.

[130] While the original investment may have been solicited by Mr. Holden for bona fide reasons, the May 22, 2011 rollover was apparently fraudulent. As of that date, Northcore Technologies Inc. did not owe SC money, and so there was no debt to be assigned.

[131] Despite this, Mr. Holden signed a worthless Assignment of Debt and Security purporting to assign a non-existent debt to Mr. Plastina. The obvious inference to be drawn is, and I find, that “cashing out” Mr. Plastina’s investment at maturity would have been financially difficult for SC, and so Mr. Holden hid the truth in order to ensure that Mr. Plastina would “rollover” his investment, allowing the investment scheme to continue.

[132] PP25

[133] This was a $500,000 investment by Mr. Plastina, whose investment cheque was dated April 15, 2011. Mr. Plastina could not recall the intended purpose of this investment, but testified that when he made the investment, he did not know that his money would be used to make interest payments to other Seaquest investors, or to make interest payments to him on some of his other investments, or to make payments to Rose Holden.

[134] This transaction appears to be fraudulent because Mr. Holden, who controlled the Seaquest bank accounts and directed how funds should be used, misappropriated Mr. Plastina’s $500,000. Mr. Coort traced the use of the $500,000 in a flowchart, which showed that large portions of the money went to pay other investors, and to cover operating and other expenses of Seaquest.

PP27

[135] This was a $1,600,000 investment by Mr. Plastina that was purportedly secured by a debt of American Capital Partners Limited to SC. Mr. Holden signed the Assignment of Debt and Security, dated August 31, 2010, which stated that SC “has made loans and extended credit to [American Capital Partners Limited] pursuant to a Promissory Note dated August 31, 2010,” and that “[American Capital Partners Limited] is indebted and liable . . . in the sum of $1,600,000.” According to Mr. Holden’s email soliciting this investment, Mr. Plastina’s funds were to be used for a “120 Day Bridge Loan Opportunity,” meaning the maturity date was December 31, 2010.

[136] The Promissory Note dated August 31, 2010 from American Capital Partners Limited to SC was signed by Mr. Holden as President of American Capital Partners Limited, and so it was clearly not an arm’s length transaction.

[137] Mr. Plastina testified that he was unaware at the time he invested that the loan from SC to American Capital Partners Limited was a non-arm’s length transaction. He also testified that he was not told that less than $1,600,000 would be advanced to American Capital Partners Limited. He thought that his entire $1,600,000 investment would be sent to American Capital Partners Limited. He was not told that the money would be used to make payments to other Seaquest investors or disbursed to companies other than American Capital Partners Limited.

[138] Mr. Coort’s analysis established that as of August 31, 2010, SC had already advanced $418,000 to American Capital Partners Limited. Additionally, Mr. Coort’s analysis established that during the entire period that American Capital Partners Limited’s bank account was active, SC advanced a total of only $438,000 to American Capital Partners Limited.

[139] Mr. Coort traced the use of the $1,600,000 in a flowchart, which showed that only $20,000 of that amount was transferred to American Capital Partners Limited. The other ways the money was used will be addressed when I analyze PP28. This $1,600,000 investment was part of the “Plastina fiasco”. Along with PP28, it matured on December 31, 2010. As I have noted above, when the two maturity cheques, which totalled $3,074,000, were deposited on December 31, 2010, SC’s bank account became overdrawn by nearly $3,000,000.

[140] In the result, this transaction appears to have been a fraudulent non-arm’s length transaction. Mr. Holden solicited Mr. Plastina’s $1,600,000 investment and was fully involved in this transaction. Contrary to the Assignment of Debt and Security signed by Mr. Holden, SC never advanced $1,600,000 to American Capital Partners Limited, and so Mr. Plastina did not have good security. The funds advanced by Mr. Plastina were not used for the purpose he intended. Unsurprisingly, given the misappropriation of the original investment, SC did not have funds in its bank account at the time of maturity to repay Mr. Plastina’s principal.

PP28

[141] This was a $1,300,000 investment by Mr. Plastina that was supposed to be advanced to Valucap Investments. According to Mr. Holden’s email soliciting this investment, Mr. Plastina’s funds were to be used for a “120 Day Bridge Loan Opportunity”, meaning the maturity date was December 31, 2010.

[142] Mr. Coort traced the use of the $1,300,000 in a flowchart, which showed that the funds were not used to make a bridge loan. Instead, together with the $1,600,000 from PP27, during the roughly three week period from August 30, 2010 to September 22, 2010, the funds were used to make a $2,000,000 transfer to SC’s TD Waterhouse trading account, to make a $650,000 transfer to Comvest Corporation (which in turn made payments relating to a condo where David and Rose Holden lived), and to make transfers to other companies, payments to employees, and interest payments to other Seaquest investors. As I have noted above, this $1,300,000 investment was part of the “Plastina fiasco”. Along with PP27, it matured on December 31, 2010. As noted above, when the two maturity cheques totalling $3,074,000 were cashed on December 31, 2010, SC’s bank account became overdrawn by nearly $3,000,000.

[143] In the result, this appears to have been a fraudulent transaction. Mr. Holden solicited Mr. Plastina’s $1,300,000 investment and was fully involved in this transaction. The funds advanced by Mr. Plastina were not used for a bridge loan as intended. Unsurprisingly, as with PP27, given the misappropriation of the original investment, SC did not have funds in its bank account at the time of maturity to repay Mr. Plastina’s principal.

PP29 and PP30

[144] These were two investments made by Mr. Plastina in the amounts of $1,600,000 and $1,350,000, respectively. The investments were made by way of two cheques, each dated January 4, 2011. These two cheques, together with a third investment cheque from Mr. Plastina in the amount of $700,000 (PP18 above), allowed SC to survive the “Plastina fiasco” because it was only after the three cheques totalling $3,650,000 were deposited that SC had sufficient funds to cover the massive overdraft in its account. Had Mr. Plastina not provided these three cheques, the investment scheme would have collapsed in early January 2011.

[145] The virtually irresistible inference to be drawn from the circumstances of these three investments, and that I do in fact draw, is that is that PP29 and PP30, like PP18, had nothing to do with actual business being conducted by SC, and everything to do with Mr. Holden’s desperate attempts to keep his investment scheme afloat. Mr. Plastina testified that he was not made aware at the time that he had effectively paid himself; on the contrary, he took comfort from his mistaken belief that SC had sufficient funds in its bank account to cover the two cheques that had been deposited when PP27 and PP28 matured on December 31, 2010, which together totalled $3,074,000. Had Mr. Holden informed him of the true state of affairs, Mr. Plastina would not have formed the mistaken belief that SC was solvent, when in fact it was not. Mr. Holden’s deceit establishes the fraudulent nature of these transactions.

PP32

[146] This was a $2,000,000 investment made by Mr. Plastina in the form of a bridge loan from SCC to GS Medical Packaging. This transaction stands out because, unlike every other investment that was examined in this trial, it was a legitimate loan to an arm’s length third party that was not only repaid in full, but actually turned a profit.

[147] On April 10, 2010, Mr. Holden sent an email to Mr. Plastina advising him of a “180 Day Bridge Loan Opportunity”. In the email, Mr. Holden wrote: “SeaQuest Capital Corporation has approved and committed to lend a $2,000,000. Bridge Loan to GS Medical Packaging Inc., a private Ontario company”. Mr. Holden went on to indicate that SCC was seeking $2,000,000 from investors in order to make the loan to GS Medical, and would pay investors 18% per annum, payable monthly, for a 180-day (6 month) term. As a result of Mr. Holden’s solicitation, Mr. Plastina invested $2,000,000 by way of a cheque dated April 14, 2010. Mr. Plastina’s $2,000,000 cheque was deposited into SCC’s bank account on April 15, 2010. SCC’s bank account had a balance of $11,433 prior to the deposit of Peter Plastina’s $2,000,000 cheque. Clearly, SCC did not have a pre-existing “pool” of funds from which to make the bridge loan to GS Medical.

[148] On April 16, 2010, SCC wired $2,000,000 to the law firm of Macdonald Sager Manis LLP in order to make the bridge loan to GS Medical, thereby returning SCC’s account balance to $11,433. Security for Mr. Plastina’s investment took the form of personal and corporate guarantees dated April 14, 2010 and signed by Mr. Holden, as well as a promissory note and an assignment of debt and security, both of which were dated April 14, 2010 and signed by Mr. Holden as “President” of SCC. Schedule “B” of the assignment of debt and security references an attached promissory note from GS Medical. A copy of that promissory note from GS Medical (from a subsequent rollover) is dated October 14, 2010 and signed by John Sherlock, President of GS Medical. The schedule recites: “This Promissory Note replaces the previous Promissory Note dated April 14, 2010 in the amount of $2,000,000.”

[149] Mr. Plastina’s investment was then rolled over twice, on October 14, 2010 and on April 14, 2011. After the latter rollover, the maturity date of Mr. Plastina’s investment became October 14, 2011.

[150] Mr. Coort testified that GS Medical repaid SCC in full, with interest, resulting in a $468,026 profit to SCC. Mr. Coort’s summary spreadsheet of the SCC Canadian dollar bank account indicates that the final payment was made on October 14, 2011. By that time, however, SCC was in the midst of bankruptcy proceedings, and so Mr. Plastina’s original investment, which matured on October 14, 2011, was never repaid, and the entire $2,000,000 in principal remained outstanding when Seaquest declared bankruptcy.

[151] Unlike the other transaction involving Mr. Plastina described in this part of the judgment, the Crown cannot, and does not argue that this transaction, of itself, is fraudulent. However the Crown argues that the legitimate nature of the GS Medical transaction does not remove it from the overarching Ponzi scheme. The Crown submits that the Ponzi scheme put all investments in Seaquest at risk. The Crown argues that the truth of this assertion is demonstrated by the fact that, even though GS Medical had repaid the $2,000,000 from SCC as of October 14, 2011, Mr. Plastina was never repaid by SCC. Even though the bridge loan to GS Medical was bona fide, Mr. Plastina’s investment was always at risk because the ongoing Ponzi scheme meant Seaquest as a whole was insolvent throughout the period in question. I leave until later in this judgment my analysis of that argument.

PP34 and PP35

[152] This was an investment by three Plastina-owned entities in the Gateway Green Energy Holdings (“GGEH”) deal in the total amount of US$3,000,000. US$2,000,000 came from two entities owned by Peter Plastina (PP34 and PP35), while US$1,000,000 came from an entity owned by Carlo Plastina (CP2). Like the GS Medical transaction, the GGEH transaction involved SCC advancing funds to a legitimate arm’s-length company. Unlike the GS Medical transaction, however, not all funds received from investors for the GGEH transaction were actually used for that transaction. Nor were investor funds properly secured.

[153] The GGEH transaction involved SCC providing a credit facility of up to US$6,000,000 to GGEH, with an interest rate of 10% per annum. The loan agreement was signed by Mr. Holden on behalf of SCC and by Jack White on behalf of GGEH. Mr. White also signed a Revolving Promissory Note, promising to repay SCC up to the amount of US$6,000,000, but no more than the amount of money that SCC had loaned to GGEH at any given date. Mr. Holden solicited investments in the GGEH deal from Mr. Plastina and from Brian Tucker. As I indicated, three Plastina-owned entities invested a total of US$3,000,000 in the GGEH deal, US$2,000,000 of which came from two entities owned by Peter Plastina while US$1,000,000 came from an entity owned by Carlo Plastina. In addition, Brian Tucker invested $500,000 (T4). The Plastinas were to receive interest of 18% per year on their investment, while Brian Tucker was to receive 15% per year. The US$3,000,000 invested by the Plastinas came in the form of three US$1,000,000 cheques, each dated March 4, 2011.

[154] Each of Peter Plastina’s two cheques bore on the front a handwritten notation that read, “Gateway Green Environmental Bridge Loan”. The cheque from Carlo Plastina had the identical notation, in the same handwriting, on the back of the cheque. In return, Mr. Holden signed three separate Assignments of Debt and Security, each of which included a Schedule B that referred to the Revolving Promissory Note from GGEH to SCC.

[155] The deal between SCC and GGEH also involved GGEH selling 45% of its shares (equity) to Enviromatrix Technologies Inc., a company in which Mr. Holden was involved, for the nominal amount of US$1000. The structure of the deal meant that the more GGEH’s share price increased in value, the more profitable the deal would eventually be for the Seaquest group of companies, including Enviromatrix. This arrangement is known as an “equity kicker”. Defence expert Mr. Catty testified that in reality the transaction was not a straight bridge loan, but rather a significantly riskier venture capital deal, in which profitability for the Seaquest group depended not only on GGEH’s repayment of the principal and interest on the loan, but also on an increase in the value of GGEH’s shares. Unless the “equity kicker” paid off, SCC would lose money on the deal, because it was paying 18% interest per annum to the Plastinas and 15% to Mr. Tucker, but only receiving 10% interest per annum from GGEH. Mr. Tucker testified that it likely would have affected his decision to invest had he known that SCC was paying out more interest than it was earning.

[156] GGEH’s first draw on the credit facility was on March 14, 2011, when SCC advanced US$765,500 to GGEH. Additional amounts were distributed to Harris Brown & Partners, and to SCC, apparently as commissions or fees. The total drawn on March 14, 2011 was US$1,257,000. GGEH began to make fairly regular interest payments to SCC a month later.

[157] The portion of the Plastinas’ $3,000,000 investment that was not used for the March 14, 2011 draw was not held in trust or segregated in any way. Instead, the rest of the money was disbursed by SCC to individuals and entities unrelated to GGEH. Mr. Coort’s analysis demonstrated that the US$3,000,000 received from the Plastinas was the only significant source of funds deposited into SCC’s US dollar account during the one-month period from February 28, 2011 to April 1, 2011. By April 1, 2011, virtually the entire US$3,000,000 had been spent, but only US$1,257,000 of it went to the GGEH deal. The rest was used to make payments to other Seaquest investors, to make payments to other companies, to pay Seaquest employees, to make payments related to the yacht “Osiana”, and to make other unrelated payments.

[158] GGEH made smaller draws on the credit facility in the subsequent months. Prior to Seaquest’s bankruptcy, GGEH had only drawn a total of US$2,107,000. As a result, because of the terms of the Revolving Promissory Note, GGEH never owed SCC more than US$2,107,000. This meant that the Revolving Promissory Note from GGEH to SCC did not fully secure the Plastinas’ US$3,000,000 investment or Mr. Tucker’s US$500,000 investment. In reality, much of the funds that the Plastinas and Brian Tucker invested remained completely unsecured by that Revolving Promissory Note, and, as I have already explained, the unsecured portion of their investments was not held in trust or otherwise segregated for safe-keeping until such time as GGEH needed to draw on it. Rather, it was used by Seaquest to make payments and cover expenses completely unrelated to the GGEH deal.

[159] Because the US$3,000,000 that SCC received from the Plastinas for the GGEH deal was all used up by April 1, 2011, SCC had to find other sources of funding to cover the subsequent draws that GGEH made on the credit facility. In fact, funds received from Mr. Tucker for a deal unrelated to GGEH were used to cover the US$350,000 draw in June 2011, and funds received from Sauro Prioreschi were used to cover the US$150,000 draw in September 2011.

[160] In the result, while there was a genuine, arm’s-length deal between SCC and GGEH, investor funds raised specifically for the GGEH transaction were not used exclusively for that transaction, but rather were also used to make payments and cover expenses completely unrelated to the GGEH deal. The GGEH deal differs in this respect from the GS Medical deal because in that deal the full amount of investor funds was used for the intended purpose.

[161] Because the full amount of the investor funds was not advanced to GGEH, the Revolving Promissory Note from GGEH to SCC was incapable of securing the full amount that the Plastinas and Tucker had invested. Instead, it could only secure the amount that was actually drawn by GGEH.

PP36

[162] This was a $500,000 investment by Mr. Plastina in Comvest Corporation, another entity owned by Mr. Holden. The typewritten notation on Mr. Plastina’s investment cheque reads, “GPS Telematics Standby Fund.” The cheque is dated July 24, 2009. In fact, Comvest Corporation was de-registered in 2007, meaning that it was not an operating company. As a result, it is questionable whether Assignments of Debt and Security and Promissory Notes signed by Mr. Holden as President of Comvest Corporation as part of this transaction were enforceable.

[163] In addition, when the investment was rolled over on July 24, 2011, Mr. Holden signed an Assignment of Shares in order to provide security for Mr. Plastina’s investment. The assignment was very specific. It reads, in part, “1. For value received, which is acknowledged, the Assignor [Comvest Corporation] hereby assigns its proportionate interest and benefit to Assignee [Maple View Building Corp] in the common shares of Healthscreen Solutions Inc. evidenced by Account Statement of Scotia iTrade in the amount of up to Five Hundred And Thirty Thousand ($530,000). 2. The Assignor warrants the Assignee that the Shares are fully paid-up and that the Assignor owns the Shares free and clear of all encumbrances.”

[164] In reality, the shares assigned were worthless. Brokerage account documents reveal that in July 2011, Comvest Corp’s Scotia iTrade account held 3,100 shares of Healthscreen Solutions Inc. Their market value in July is not completely clear as there is no July account statement. On the June statement, those shares were valued at 3.5 cents per share, or $109 for all 3,100 shares. On the next statement in September, the share value was “unpriced.”

[165] As a result, Mr. Holden’s execution of the Assignment of Shares on July 24, 2011, was entirely misleading. It implied that Mr. Plastina’s company was receiving valuable security for his $500,000 investment. In reality the security interest that it conferred was almost worthless.

[166] Mr. Plastina testified that it was not communicated to him that Comvest’s shares of Healthscreen Solutions Inc. were worth less than $200 and he would not have accepted the Assignment of Shares as security had he known this.

(b) Angel Variyski’s investments

[167] Mr. Variyski met Mr. Holden at the home of an acquaintance who was a Seaquest investor in October or November 2010. Mr. Holden told him that he was in the business of purchasing, selling, and investing in companies, mostly in the United States. The investments were made from a pool of investor money. Mr. Variyski was concerned about how secure the investment would be. Mr. Holden explained that he was lending money to companies in trouble but that had a value of at least three times the loan. In the worst-case scenario, he could sell the company and recover the money invested, and so the investment was low risk. An investor would be paid an interest rate of 12-20%.

[168] On December 16, 2010, Mr. Variyski invested $250,000 with SCC through Mr. Holden. Mr. Variyski arranged a home equity line of credit for his house to make the investment. He dealt exclusively with Mr. Holden. Mr. Variyski gave Mr. Holden a certified cheque for $250,000. The term of the investment was one year, and the interest rate was 12¾%. Interest in the amount of $2,656.25 was to be paid to him monthly. Mr. Variyski received an unsecured debenture from SCC for the amount of his investment, a document entitled Confidential Offering Memorandum which enumerated the risk factors associated with the investment, a subscription agreement for his investment, and a cheque post-dated to December 16, 2011 for the repayment of the amount of his principal investment upon maturity. Mr. Variyski understood that his money would only be used for commercial loans. Mr. Holden told Mr. Variyski that he had two projects going on, and that his money would go to one of them, a project in which three coal power stations were being converted to gas. Two of these stations were in the United States, and one was in Canada.

[169] Mr. Variyski received interest payments on his investment from January to August 2011, but received no further interest payments. He did not receive the return of his principal investment. He did not attempt to deposit the post-dated cheque because he had been informed that SCC was in bankruptcy.

(c) Brian Tucker’s investments

[170] Mr. Tucker is a retired businessman. He had owned and sold two successful businesses.

[171] In early 2010, Mr. Tucker heard a radio advertisement for Harris Brown, a company associated with SC and SCC, that was offering investments at rates of return that were better than what was offered by banks and typical RRSP-type investments. This twigged his interest. He called and spoke to Peter Harris, who invited him to attend his office for a presentation of current investments he was offering.

[172] Mr. Tucker attended the presentation in February 2010. The presentation was made in Seaquest’s office by Jeff Watts. After the presentation, Mr. Harris took Mr. Tucker to meet Mr. Holden. Mr. Harris spoke glowingly of Mr. Holden, whom he described as a business guru. Mr. Holden spoke to him about investments in Seaquest that he said were more exciting than the Harris offerings, with returns in the area of 18 to 22%. He understood that Mr. Holden was in charge of the Seaquest investments, and that there were many investors. Mr. Tucker became interested, and attended a couple of meetings at the Seaquest lounge where he was introduced to investors and people who worked for Seaquest.

[173] Mr. Holden told Mr. Tucker that the two Seaquest companies were capitalized with 100 million dollars each. When he sought an investment from Mr. Tucker, Seaquest would put up half of the money, and investors like Mr. Tucker would put up the balance. In Mr. Tucker’s case, Mr. Holden said that they would only invest in a company to the extent that the total value of the company’s assets would always be more than 300% of the total value of the investment, so there would always be plenty of reserve left to cover the loan. Each loan would be covered by a general security agreement registered in Mr. Tucker’s name.

[174] Mr. Holden also told Mr. Tucker that he had never made a bad loan or investment. His investment committee worked very hard to choose their investments, and their people all worked hard to monitor each investment and to help the companies they invested in to manage better. On this basis, Mr. Tucker decided to invest in Seaquest.

[175] Mr. Tucker made his first investment, in the amount of $150,000, in March 2010. He subsequently invested larger amounts before demanding the return of his money in June 2011 after becoming suspicious about the operation. He invested a total of $6,200,000 and was able to recoup about $3,088,500 through a settlement agreement.

[176] Mr. Tucker testified that his investments with Seaquest were supposed to contribute to bridge loans to specific companies, and that he was given the option to participate in any particular loan. He did not authorize Mr. Holden to use the funds he invested to make payments to other investors or other companies, or to cover Seaquest’s operating expenses. He was not told that the transactions he was investing in were not at arm’s-length, other than on one occasion when he specifically asked about the ownership of MMI Capital Corporation and Mr. Holden informed him it was owned directly and indirectly by SCC.

[177] While Mr. Tucker is understandably angry with Mr. Holden, and humiliated by his own credulity, he was nonetheless a credible and reliable witness whose evidence was confirmed to a significant degree by other witnesses and the documentary evidence, and not undermined in cross-examination. While I would not accept as precisely accurate every single word of his recollection of what was said to him by Mr. Holden several years ago, and remembered through the lens of bitter experience, I nevertheless found his memory to be solid, and, as I have indicated, I consider him overall to be a reliable historian as well as a credible one.

[178] Mr. Coort provided a very detailed analysis of Mr. Tucker’s investments, but he did not prepare a chart showing the amounts owed to Mr. Tucker as of the date of bankruptcy. Mr. Coort concluded that Mr. Tucker invested a total of $6,200,000 and was repaid a total of $3,088,500. The following is a summary of the most questionable of Mr. Tucker’s investments.

[179] This was a $300,000 investment by Mr. Tucker. According to Mr. Holden’s email soliciting this investment, Mr. Tucker’s funds were to be used for a bridge loan to “Regional Ready-Mix Inc.” That company did not exist, but Mr. Coort did locate a company named Regional Ready-Mix Concrete Inc., which Mr. Holden owned. Mr. Tucker’s investment was purportedly secured by an “Assignment of Debt and Security of Regional Ready-Mix Inc.”, which was signed by Mr. Holden, and which stated that SCC “has made loans and extended credit to Regional Ready-Mix Inc. . . . in the sum of $300,000.” Mr. Tucker was never told that Regional Ready Mix Concrete Inc. was not at arm’s length from Seaquest.

[180] Mr. Coort’s analysis demonstrates that only $150, and not $300,000, was ever advanced by SCC to “Regional Ready-Mix Concrete Inc.” Instead, Mr. Tucker’s investment was used to fund an unrelated investment in a company called Baanto International Inc. Mr. Tucker was not told that his money was being used to fund the Baanto deal. Mr. Holden knew that Mr. Tucker’s funds were used for the Baanto deal and congratulated Ed So for pulling together enough funds for it, including the $300,000 from Brian Tucker.

[181] In the result, this appears to have been a fraudulent non-arm’s length transaction apparently involving a company, Regional Ready-Mix Concrete Inc.”, which was owned by Mr. Holden. Contrary to the Assignment of Debt and Security signed by Mr. Holden, SCC never advanced $300,000 to “Regional Ready-Mix Inc.”, so Mr. Plastina did not have good security. Instead, the money was used for an unrelated deal, without Mr. Holden’s knowledge and approval.

[182] This was Mr. Tucker’s part of the investment in the GGEH deal, which I discussed in detail under the heading PP34 and PP35. The GGEH transaction involved SCC advancing funds to a legitimate arm’s-length company from its US dollar account. Mr. Tucker invested $500,000 in this deal at 15% per annum. However, no funds other than the Plastina investment went into the SCC US dollar account. In particular, none of Mr. Tucker’s funds were deposited in that account, and as a result none of his funds went to GGEH. His investment funds were used for other purposes and were not properly secured.

[183] This was a $350,000 investment by Mr. Tucker, which was purportedly secured by a debt of MMI Capital Corporation to SCC, as was the case with PP23. Mr. Holden signed the Assignment of Debt and Security, dated March 22, 2011, which stated that SCC “has made loans and extended credit to MMI Capital Corporation . . . in the sum of $500,000.”

[184] Mr. Coort’s analysis demonstrated that, as of March 22, 2011, SCC had advanced only $69,000 to MMI Capital Corporation, and not $500,000. Mr. Tucker testified that he was never told this.

[185] In addition, the Assignment of Debt and Security signed by Mr. Holden was clearly backdated and prepared long after the fact in June 2011, after Mr. Tucker had raised concerns and demanded to see the security documents relating to his investments. In fact, in an email message from Mr. Holden dated June 27, 2011, Ms. Alibhai was directed to “make up” assignments on this and other Tucker deals in preparation for Mr. Holden’s meeting with Mr. Tucker scheduled for June 29, 2011.

[186] In the result, this appears to be a fraudulent non-arm’s length transaction. Contrary to the Assignment of Debt and Security signed by Mr. Holden, SCC never advanced $500,000 to MMI Capital Corporation, and so Mr. Tucker did not have good security. The apparently fraudulent nature of the transaction is further demonstrated by the fact that security documents were only prepared months after the investment was made.

[187] This was a $2,000,000 investment by Mr. Tucker. The funds were to be used by SC for the “Standby Cyberplex opportunity.”

[188] Mr. Coort’s analysis demonstrates that SC and its related companies only ever purchased $15,345 worth of Cyberplex shares, and of Mr. Tucker’s $2,000,000 investment, only $14,959 went to purchase shares of Cyberplex. Mr. Coort traced the actual use of Mr. Tucker’s $2,000,000 investment in a flow chart. The chart demonstrates that, within the roughly two week period from June 1 to 16, 2011, Mr. Tucker’s investment was used for a variety of other purposes, including to pay Mr. Cosentino over $300,000, to make payments to other investors totaling over $500,000, and to make payments on the Hawker aircraft.

[189] Mr. Tucker testified that he did not expect his investment to be used for anything other than the Cyberplex transaction and that Mr. Holden never told him that only about $15,000 would be used for that purpose. He was never told that funds would be used to pay Mr. Cosentino, or to pay interest to other investors. He would not have made this investment had he known that is how his funds would be used. He testified, “I had no interest in supporting Seaquest’s business. That’s the definition, I think, of a Ponzi. Collecting fresh money from me to pay off old investors? I would have no interest, none whatsoever.”

[190] Mr. Holden was fully aware of the ways in which Mr. Tucker’s investment was disbursed. In fact, Mr. Holden explicitly directed Mr. Hemani about how to spend Mr. Tucker’s money, as documented in detail by an email chain between Mr. Holden and Mr. Hemani.

[191] This was a $1,500,000 investment by Mr. Tucker. The funds were to be used by SCC for a bridge loan to Northstar eHealth Corp., to buy up shares of Healthscreen Solutions Inc.

[192] Mr. Coort traced the use of the $1,500,000 in a flow chart that shows that, within the one month period from June 1 to 30, 2011, Mr. Tucker’s investment was used for a variety of purposes unrelated to the investment, including to send a US$350,000 wire transfer to GGEH, and to make payments to other companies, investors, and Seaquest employees.

[193] Mr. Tucker testified that he did not expect his investment to be used for anything other than the Northstar eHealth Corp. transaction, and that Mr. Holden never told him that his investment would be used for other purposes.

[194] At the time of this investment on June 2, 2011, Mr. Tucker did not receive an Assignment of Debt and Security from SCC; however, in late June, after Mr. Tucker told Mr. Holden that he wanted to see the security documents relating to his investments, Ms. Alibhai generated such a document, after the fact, on Mr. Holden’s instructions. The document was then signed by Mr. Holden and back-dated to June 2, 2011.

[195] In the result, this appears to be a fraudulent transaction.

(d) Sauro Prioreschi’s investments

SP3

[196] Although Mr. Prioreschi did not testify, evidence was adduced that established that he invested $300,000 with SCC on September 27, 2011. He was promised in a Confidential Offering Memorandum that his money would be “…used by the Corporation to provide short term commercial loans to small and mid sized businesses in Ontario.” Mr. Gaudet, a vice-president of SCC in charge of dealing with investor clients, answering their questions and picking up their documents, said that neither he nor anyone else told Mr. Prioreschi that his money would be used for anything else. Mr. Holden personally signed a series of post-dated cheques for monthly interest payments to Mr. Prioreschi and for the return of his principal upon maturity.

[197] Mr. Coort traced the use of Mr. Prioreschi’s $300,000 in a flow chart. It showed that, instead of being used to provide short-term commercial loans to small and mid-sized businesses in Ontario as was promised to Mr. Prioreschi, during a three day period from September 26-28, 2011 Mr. Prioreschi’s money was used to help fund a US$150,000 transfer to GGEH in Dallas, Texas, and to make a $150,000 repayment of principal to Elena Cipriano, an existing investor who wanted to cash out.

(e) Additional evidence that funds received from investors were used to repay principal and interest to existing investors and to cover Seaquest’s operating costs

[198] In addition to the evidence concerning specific investment transactions, the Crown adduced the following evidence on this issue.

[199] Mr. So testified that “there was a lot of cash shortfall so investor dollars may have been used to cover interest payments” and “to cover repayment of capital.”

[200] Mr. Cosentino testified that he understood that “new funds were being used to pay old investors”, and also believed that investor funds that came in were being used to pay rents and salaries.

[201] Mr. Hemani testified that he saw investor funds being used to cover operating expenses like payroll, rent, phone, credit cards, and interest payments to other investors. He asked Mr. Holden in January 2011 if this was a permissible use of investor funds. Mr. Holden told him that they were allowed to “use a certain percentage” this way. For his own peace of mind, in order to make sure he was not involved in anything illegal, Mr. Hemani asked Mr. Holden for documentation confirming that Seaquest was entitled to use the funds this way. Mr. Holden said he would provide that documentation to Mr. Hemani, but never did.

[202] Ms. Alibhai testified that incoming investor funds were being used to make payroll, to pay existing investors who wanted to cash out, and to pay interest payments to existing investors.

[203] Flowcharts prepared by Mr. Coort traced the use of funds from several investments made by Peter Plastina, Brian Tucker and Sauro Prioreschi. Those flowcharts, and Mr. Coort’s testimony, established that much of the funds received from investors did not go to their intended purpose, but rather went to “interest payments, principal payments, expenses, utilities, employee salaries, all the expenses of the corporation, [and] payments to the various companies.” Mr. Coort testified that while the flowcharts dealt with only a subset of the total number of transactions, they were a “representative example of what happened overall.”

[204] An example of Mr. Holden’s misappropriation of investor funds is documented in an email exchange with Ali Hemani in which Mr. Holden gave instructions to Mr. Hemani about how to use much of the $3,500,000 received from Brian Tucker in early June 2011 (T7 and T8). Those funds were intended by Mr. Tucker to be used for the “Standby Cyberplex opportunity” (T7) and for a bridge loan to Northstar eHealth Corp to enable it to buy up shares of Healthscreen Solutions Inc. (T8). Instead, Mr. Holden directed Mr. Hemani, initially by email and subsequently also over the phone, to use a large portion of the funds to make interest and principal payments to earlier investors, to make payments to Mr. Cosentino, to make payments on the Hawker aircraft, and so on.

6. Brian Tucker’s Demand for the Return of His Principal Led to the Collapse of the Seaquest Scheme

[205] The collapse of Seaquest came in 2011. That summer, Mr. Tucker became suspicious and demanded to see documentation confirming that his money was being used as promised. When he was not satisfied, he demanded the return of his money. Under the threat of legal action, Mr. Holden agreed, and Seaquest attempted to repay Mr. Tucker. This unanticipated demand on Seaquest’s cash holdings accelerated its inevitable collapse. Mr. Holden attempted to make up the shortfall by obtaining funds from Mr. Cosentino as well as by soliciting new investments, but he fell short. In the fall of 2011, both SC and SCC declared bankruptcy.

7. The Individual Transactions with Investors, as well as the Overall Investment Scheme, were Fraudulent, and Mr. Holden Intended to Defraud the Investors

[206] Before going further, it is necessary to identify the elements of fraud. I note that the cases are not uniform in how they describe the elements of the offence of fraud, or the manner in which they order the elements. But my discussion is consistent with the controlling cases, including R. v. Théroux, 1993 CanLII 134 (SCC), [1993] 2 S.C.R. 5.

[207] For me to find Mr. Holden guilty of fraud, the Crown must establish beyond a reasonable doubt that:

Mr. Holden deprived at least some of the investors of something of value;
Mr. Holden caused the deprivation by deceit, falsehood or other fraudulent means;
Mr. Holden intended to defraud the investors who were deprived of something of value; and
The value of the property in question exceeded $5,000.

[208] With respect to the second element, “deprivation” includes, but does not require that the investor suffer actual economic loss. It is enough that the investor is induced to act to his/her detriment by the accused’s conduct. The investor’s economic or financial interests must be at risk, but the investor does not have to lose any money or anything of value as a result of the accused’s conduct.

[209] Also, with respect to the second element, the words “deceit’, “falsehood”, and “other fraudulent means” can all be further defined.

[210] “Deceit” is an untrue statement made by a person who knows that it is untrue, or has reason to believe that it is untrue, but makes it despite that risk, to induce another person to act on it as if it were true, to that other person’s detriment.

[211] “Falsehood” is a deliberate lie.

[212] “Other fraudulent means” is a term that covers more ground than either deceit or falsehood. It includes any other means that are not deceit or falsehood but are properly regarded as dishonest according to the standards of reasonable people. Courts have defined the sort of conduct which may fall under this third category of other fraudulent means to include the use of corporate funds for personal purposes, non-disclosure of important facts, exploiting the weakness of another, unauthorized diversion of funds, and unauthorized arrogation of funds or property. Reasonable people unquestionably consider each of these acts to be dishonest dealing. (See Théroux, at para. 18.)

[213] With respect to the third element, the intent to defraud relates to the accused’s state of mind at the time he or she deprived the investor of something of value by deceit, falsehood or other fraudulent means. To prove this essential element, Crown counsel must establish that the accused meant to say and/or do any of those things that amount to deceit, falsehood or other fraudulent means, and knew that saying and/or doing them could put at risk the economic or financial interests of the investor. It does not matter whether the accused thought that what s/he was saying and/or doing was not dishonest, or thought that neither the investor nor anyone else would suffer harm in the end as a result.

[214] The Crown alleges that Mr. Holden committed a number of smaller frauds, any one or more of which would support a finding of guilt on the fraud charge. These smaller frauds were individual transactions in which Mr. Holden made fraudulent representations to investors about the nature of their investments, what would be done with their funds, and about the security for their investments. Any one of these sub-frauds would, standing alone, be enough to make out the offence of fraud over $5,000.

[215] But the Crown’s larger allegation is that these smaller frauds should be considered to be sub-frauds within an overarching fraud that took the form of a Ponzi scheme.

[216] I have fully canvassed the evidence relied on by the Crown to establish both the smaller frauds and the overarching fraud, and will not repeat it here.

[217] The accused denied committing the smaller frauds as well as the overarching fraud. In support of his position, he relied in particular on his own evidence, and the evidence of Mr. Catty.

[218] In the evidence relied on by the defence, there is not a great deal that contradicts the evidence led by the Crown. For the most part, the defence evidence relates to the second and third elements of fraud: did Mr. Holden cause deprivation by deceit, falsehood or other fraudulent means, and did Mr. Holden intend to defraud any or all of the investors?

[219] I will examine next the defence evidence.

The Defence Evidence

[220] The defence called Mr. Holden as a witness, as well as Mr. Catty, who, as I have already said, gave expert opinion evidence in the areas of corporate valuation, investment analysis and management. I will summarize the evidence of each of them.

(i) Evidence of David Holden

[221] Mr. Holden is 56 years of age. He attended Fanshawe College and took general business courses at the University of Western Ontario. He has experience in the investment and finance business. After several years of doing deals and raising financing for American Capital Partners, he decided to do it on his own and became a limited market securities dealer. I need not explore his description of the early period of his efforts, but he explained that when he set up SC in 2005, he wanted it to be a discretionary capital pool for short term lending, including short term bridge loans and short-term positions, and also for acquiring and holding stock. The advantage of having a pool was to be able to move quickly, avoiding the needing to get financing for every deal he made.

[222] Seaquest started with investments made by friends and family. Mr. Holden offered high interest rates to attract investors. He described himself as an active owner, and said that he personally brought $1.9 million into the business, some in cash but mostly in assets. He said that people then started investing money into a very discretionary fund at SC. He said that the company was strictly a brokerage, the pool permitted him to do multiple things, and he could do what he wanted with the money. This was explained to his investors. As things got going, it was Mr. Holden’s job to raise money.

[223] Mr. Holden brought Josh Pelley with him when he started SC, and brought Vince Bulbrook in in 2006 on a consulting basis to help with financial analysis. Mr. Bulbrook also helped set up an internal accounting system. Mr. Holden also hired two accountants. As SC was “coming along”, Ed So joined the company as an analyst. Later, Mr. So managed investor files and sent out renewal documents. By 2007, SC had five or six employees.

[224] As SC grew, they were off in several directions, doing a hodgepodge of equity deals and lending. They were dealing with companies that had no value that they hoped to turn around and generate returns. They increasingly needed to raise capital to fund corporate investments. Mr. Holden developed the idea that it would be advantageous to take corporate loans out of SC and put them into a new company, SCC, that could be audited at a reasonable cost. Creating SCC would also permit Mr. Holden to focus on the sort of investment activity that he wanted to spend the most money and time on. He brought in Mr. Cosentino, who had been an investor who put up money for stand-by deals, with the idea of having him stand in as president of SCC for a year or a year and a half. The idea was that SCC would go to market to raise money rather than seeking investments from family and friends. To do this, they needed to produce full information packages, and so began generating investment documents, which Mr. Pelley and Mr. So plagiarised from other companies and modified. Eleven or twelve million dollars in loans were transferred to SCC from SC.

[225] At that point in time SCC was offering interest rates on investments from 12% to over 20%, was getting a good response from planners and investors, and was growing quickly. By 2008 and 2009, they had tripled their assets, but things were getting chaotic. Their accounting and administrative systems were not kept up and Mr. Bulbrook was brought in to help. Seaquest began holding monthly, and then weekly meetings. Mr. Holden, Mr. Cosentino, and Mr. Bulbrook were the key players at these meetings. Mr. So, Mr. Phipps, and Mr. Watts also attended, and later Mr. Hemani as well. At these meetings, they discussed everything: the number of deals, external funding, and their efforts to remedy the problem that they were falling behind on administration as investments increased. As business reached a fever pitch in 2009, Mr. Holden got Mr. Cosentino involved in “other things”, while Mr. Holden did the deals and raised the money.

[226] At that time, SCC began “incubating things” – making risky investments in troubled or unstable businesses with the goal of improving or consolidating them and creating “winners”. They also surreptitiously purchased shares in undervalued publicly traded companies looking to acquire majority positions. They then spun some of these businesses out to subsidiary companies. Mr. Holden described some of these transactions in detail, but I see no need to attempt to summarize them. I note that, assuming they were bona fide, none of these machinations met with much success. A complex chart was created to make sense of these disorganized efforts. It was made an exhibit at trial but, according to Mr. Holden, it was still a work in progress. At the top of the chart was an entity called Seaquest International Corporation, but Mr. Holden did not know if it actually ever got set up. The chart also included a Bahamian subsidiary that was formed in around 2011 to handle the investment of Canadian money offshore. According to Mr. Holden, in order to get a securities licence in the Bahamas, it was necessary for them to purchase a piece of real estate there. They therefore purchased a condominium in a popular resort that they rented out.

[227] In examination-in-chief, Mr. Holden was taken through each of the investments made by Mr. Tucker, Mr. Plastina, Mr. Variyski, and Mr. Prioreschi. I will not examine this evidence in any detail, but I will note a few of his answers.

[228] With respect to Mr. Tucker, Mr. Plastina, and Mr. Variyski, Mr. Holden agreed that their investments were not made to an investment fund, but rather were specific purpose loans. He did say that Mr. Prioreschi’s investment was an investment into a pool of funds.

[229] However, with respect to Mr. Prioreschi’s investment, Mr. Holden agreed in cross-examination that while it was intended for short term commercial loans, a large portion of it went to GGEH in Texas, with the remainder dispersed other than for the agreed-upon purpose, all within one day. Mr. Holden explained that this was normal practice, because his loan would be offset by other loans going to short-term commercial loans. However, there was no bookkeeping done for this supposed offset.

[230] In cross-examination, Mr. Holden was asked to explain how it was that when monies were invested for a specific purpose, the bank records of SC and SCC did not show most of the money being used for that purpose. For example, he was asked to explain why, in the case of T7, only $14,959 of Mr. Tucker’s $2,000,000 investment went to purchase shares of Cyberplex. Mr. Holden explained that in cases such as that one, shares were purchased in street form, sometimes prior to the investment in question, and in cash, sometimes from Mr. Cosentino, or with a bank draft from a different bank, all to keep other investors in the target company unaware that SCC was attempting to acquire a majority position. As a result, the purchases did not show up in SCC’s banking or brokerage records.

[231] Mr. Holden explained that in many additional instances, what might appear to be a misappropriation of investor funds, in fact, was not. The funds were not in Seaquest’s banking or brokerage records because they were used to purchase street form shares. He agreed that this practice was used in the purchase of at least $4.6 million in street form shares. He also agreed that once a share certificate was certified in street form it was like a bearer bond that one wouldn’t want to lose. When asked where these share certificates were kept, he said that he kept them in a locked filing cabinet purchased from Staples in his office at Seaquest. He didn’t know what became of them after the bankruptcy.

[232] With respect to loans, he said that sometimes money had already been loaned before the investment, and sometimes it actually was loaned later.

[233] Mr. Holden was asked about the purchase of a Hawker jet, a condominium, and a yacht in the Bahamas. He said that SC invested in the jet for business travel in South America, with the idea that it could be chartered when it wasn’t needed to cover expenses. Mr. Holden testified that the purchase ended up being a mistake because of the cost of repairs. The condominium was used when employees were in the Bahamas, and was rented out when it wasn’t needed. The yacht was used to entertain brokers for business purposes.

[234] Mr. Holden also confirmed in cross-examination that when shortfalls were anticipated, he dealt with them by raising more money, persuading investors to roll over their investments, or borrowing money from Mr. Cosentino.

[235] Much of Mr. Holden’s evidence simply confirms evidence led by the Crown. Much of it does not advance any defence. But some of it does. I turn to Mr. Holden’s written argument to explain how.

[236] First, Mr. Holden explained in his evidence that while the business plan of Seaquest generally may have appeared on the surface to be problematic, given the interest rates being offered to investors versus the interest rates being paid back to Seaquest on the short term business loans, with the interest spread between the investor loan and the return interest to Seaquest being minimal or even zero (I note that even this is an unduly rosy picture), he said that the high interest rates attracted investors. He went on to say that Seaquest also profited from lender fees and management fees attached to the bridge loans, particularly bearing in mind that most loans were short term and could be turned over with additional fees.

[237] Next, Mr. Holden and some of Seaquest’s former employees testified that they believed a number of the companies involved in the Seaquest group of companies appear to have held out real promise of being successful.

[238] In addition, Mr. Holden said that the evidence of the bi-weekly meetings for Seaquest and monthly meetings for Bancorp, another Seaquest company used to combine small companies to create larger entities, is evidence that the Seaquest operations were discussed or consulted upon with various top employees of the Seaquest group. There was obviously more than ample opportunity for people to voice opinions in these meetings regarding any perceived impending problems. And certainly if there was anyone who felt there was some improper or dishonest behaviour, or evidence of various investment deals unfolding in some improper way, they would have raised it at such meetings. However, no one who testified about the meetings indicated that such subjects had ever come up.

[239] Mr. Holden also testified that when SCC was formed, in order to start the company they had to have a financial starting position. Therefore, he, along with Mr. Bulbrook and Mr. Cosentino, decided to loan $11-12 million from SC to SCC. Mr. Holden said that his understanding was that when SC needed money, money that had come into SCC from SC investors that was not needed directly for loans, presumably in instances where the money was brought in from investors to cover costs on deals that had already been funded from SC’s own money, that money would be transferred to SC for its use and there would be an offset in the accounting to acknowledge the repayment to SC on the initial $12 million it had put into SCC for its start up.

[240] Crown counsel suggested to Mr. Holden that he was untruthful about making frequent purchases of street form shares. Mr. Holden explained that the purchases of street form shares were not picked up by records from Seaquest’s TD Canada Trust (TDCT) trading account or their etrade account, as the shares were purchased directly from the seller of those shares and they were paid for by bank drafts. Moreover, Mr. Holden pointed to one instance where Mr. Coort found evidence of street form shares being purchased by Seaquest. Mr. Coort located a share purchase agreement dated January 9, 2010 naming Strata as purchaser and American Capital Partners as the seller. American Capital Partners apparently agreed to sell 2,470,000 shares of Webtech Wireless to Strata for $1,432,890.00. The agreement was signed by David Holden, director of ACPL, and Craig Brown on behalf of Strata. Mr. Coort could not find records of the transaction taking place through the TDCT or etrade accounts, but did find the signed purchase agreement. Mr. Coort also found that 15,887,500 shares of BSM Technologies had been received by Seaquest on May 11, 2011 and that 400,000 shares of Valucap had been received, but that he had not located a related cost to acquiring those shares.

[241] Next, Mr. Holden testified that it was his belief that every investment had requisite security assigned to it. It is clear that there were errors made on a number of occasions regarding the proper drafting of the documents on several investor deals, but Mr. Holden testified that he typically didn’t read through each document and therefore he would have failed to notice such errors.

[242] Next, Mr. Holden asserted that there were numerous employees working with Seaquest. He did not work alone, doing as he pleased without anyone around to notice. While Mr. Holden was the directing mind of the Seaquest group of companies he did not have “complete control.” Although Mr. Holden was called upon to make final decision on important issues, he relied heavily on Seaquest employees to carry out much of the day-to-day operations.

[243] Departing from Mr. Holden’s written argument for a moment, I note that this minimization of his role at Seaquest and shifting blame to others was a theme of Mr. Holden’s evidence. I have mentioned some of this in my summary of his evidence above. But to focus on this issue more closely, I note that Mr. Holden: claimed that because he was so busy raising money from investors he blindly signed documents without reading them or without fully understanding what he was signing; signed documents prepared by the accounting staff also without reading them, including a worthless assignment of security to Mr. Plastina; denied that he dealt with smaller investors; rarely signed cheques; put his trust in others; denied controlling when investors cashed out; distanced himself from transactions even when they involved his own companies such as Natrapharm Corp; and even denied directing the use of funds by Seaquest. Based on this evidence, one might be excused for thinking that Mr. Holden was nothing more than a Seaquest salesman. This, of course, is very far from the truth.

[244] Next, as I have already mentioned, Mr. Holden testified that it was his understanding that he could apply investor funds to operating costs, so long as the funds were replacing Seaquest funds that had already facilitated the various deals, and, in such circumstances, off-setting accounting entries would be made against the Seaquest Corporation loan of $12 million dollars which was made to Seaquest Capital Corporation to give it backing for its start-up.

[245] In the end, as I apprehend all of this, Mr. Holden’s evidence has two elements that, he says, at least raise a reasonable doubt about his guilt:

The apparent deficiency of assets that were supposed to have secured investors’ money can be innocently explained, because: (1) in some cases, Seaquest bought up valuable positions, worth millions of dollars, in small public companies, by way of untraceable street form share certificates purchased with untraceable cash or bank drafts, as well as by loans made in advance of funds being transferred to Seaquest for that purpose; and (2) in other cases, as a result of his wrongly believing there was sufficient security for investments as a result of the mismanagement of Seaquest.
Mr. Holden’s role at Seaquest was less central than it appears. Although he was the directing mind of SC and SCC, others were to blame for the decisions that make it appear that Seaquest was engaged in fraud.

(ii) Evidence of James Catty

[246] The defence also called Mr. James Catty as a witness. As I have said, Mr. Catty was qualified to give expert opinion evidence in the areas of corporate valuation, investment analysis, and management. His overall conclusion was that Seaquest declared bankruptcy due to a number of causes but that the most significant was “poor financial management”. The defence described his evidence as follows.

[247] Mr. Catty identified numerous errors that had been made by Seaquest management. He said that the accounting system was inadequate for the size of the business, that it was a poor choice for Seaquest, and that the journal entries didn’t have adequate explanations. Because of that, “one isn’t sure exactly what happened”.

[248] Mr. Catty testified that the operation didn’t have adequate equity, but if they were basing their assumptions about their adequacy on statements of Seaquest Capital, then they would have thought that they did. When Mr. Catty was asked to assess this kind of thinking by Seaquest management, Mr. Catty testified that there was inadequate financial management and inadequate controls.

[249] Mr. Catty also testified that when he reviewed how funding was handled generally at Seaquest, he observed that in many cases, the terms of the loans that they extended were longer than the terms of the borrowings they undertook to finance them. Mr. Catty explained that long term assets should not be financed with short term debt.

[250] Mr. Catty used an example of Concrete Ready Mix to illustrate the kinds of problems that Seaquest was not dealing with properly. When he reviewed the accounts receivable for the company, he determined that 30% of them had been owing for more than 90 days, with 50% outstanding for more than 90 days at the related pumping company. He explained that any CFO or organization that was properly monitoring the situation would have observed this and taken action on it a long time before. Mr. Catty also noted that Ready Mix appeared to be operating under capacity and was probably losing money, and that again should have been picked up by any review.

[251] Mr. Catty also testified that he observed journal entries that indicated that loans were transferred from Seaquest Corporation to Seaquest Capital Corporation, with the intent being to concentrate lending in the latter company, but that he could not find the assignments of those loans. This was an example of things that were partially but not fully recorded.

[252] Mr. Catty also reviewed the document created by Mr. Holden entitled “Seaquest Group of Companies: 2011 Objectives and Strategies”. Mr. Catty observed that Mr. Holden recognized that there were major problems with Seaquest. However, Mr. Catty suspected that neither Mr. Holden nor management generally at Seaquest recognized that they didn’t have the proper systems and financial controls in place and that they were making all sorts of decisions based on inadequate and probably wrong information.

[253] When asked for his final conclusion as to why Seaquest failed, Mr. Catty said that there were a number of causes, including mismatch of long-term lending and short-term financing, but the most significant was poor financial management.

[254] In the end, the position of the defence was that as a result of poor management practices, and the unavailability of accurate information, Mr. Holden signed off on investments and made decisions without being aware of the problems associated with them. Mr. Holden never intentionally provided information to investors that was false. While Mr. Holden had been made aware of cash shortages, he had no information that ran counter to his understanding that the security for investments was anything other than what he expected it to be, that it was in good standing, and that it was able to provide the investments the security he believed it would.

[255] The defence claimed that while there were certainly shortcomings in the management style at Seaquest and a number of decisions on spending and company purchases that may have suffered from poor decision-making practices, these kinds of decisions were not made so as to mislead or improperly influence investors.

[256] The defence took the position that Mr. Holden did not intentionally deceive, lie or commit some other fraudulent act for which he had any awareness of or intent. At times Mr. Holden may have not been as diligent as he should have been, and Mr. Holden may have on occasion been acting on inaccurate or insufficient information, but if he was, he certainly was not aware of this.

[257] In sum, the position of the defence was that there was no fraudulent act committed by David Holden. While there may have been mismanagement, as indicated by Mr. Catty, the defence submits that Mr. Holden did not engage in any fraudulent act and should be acquitted.

(b) Did Mr. Holden Commit Fraud?

[258] I turn at last to my analysis of the charge of fraud. For me to find Mr. Holden guilty of fraud, as I have already explained, the Crown must establish beyond a reasonable doubt that:

Mr. Holden deprived some or all of the investors of something of value;
Mr. Holden caused the deprivation by deceit, falsehood or other fraudulent means;
Mr. Holden intended to defraud some or all of investors who were deprived of something of value; and
The value of the property in question exceeded $5,000.

[259] Elements 1 and 2 are the actus reus of fraud. Element 3 is the mens rea. Element 4 is simply an organizing principle that determines the available range of sentence upon conviction.

[260] It is the Crown’s position that Mr. Holden committed “sub-frauds” in his individual transactions with investors, and an overarching Ponzi scheme fraud that encompassed the sub-frauds. I will consider each element of the offence of fraud in relation to the sub-frauds and the overall fraud. I of course am aware that the requirement of proof beyond a reasonable doubt applies to each element or essential part of the offence.

[261] As will be seen, I am satisfied beyond a reasonable doubt that Mr. Holden committed a series of sub-frauds, as alleged by the Crown, and is also guilty of the overarching Ponzi scheme alleged by the Crown. In reaching that conclusion, I of course applied the judgment of the Supreme Court in R. v. W. (D.), 1991 CanLII 93 (SCC), [1991] 1 S.C.R. 742, as modified in subsequent cases. The accused testified, and called an expert witness in his defence. I have considered their evidence carefully. I do not believe Mr. Holden when he says that he did not commit either the sub-frauds or the overarching offence of fraud alleged against him. Mr. Holden’s evidence, even when considered along with the evidence of the expert, does not leave me with a reasonable doubt that he committed either the sub-frauds or the overarching offence of fraud alleged against him. On the whole of the evidence, I am satisfied beyond a reasonable doubt that Mr. Holden committed the sub-frauds, and is guilty of the overarching offence of fraud alleged against him.

[262] I will proceed to analyze each element of the offence.

(i) Element 1: Did Mr. Holden Deprive Some or All of the Investors of Something of Value?

[263] I begin this question by reminding myself that deprivation includes, but does not require, that an investor suffer actual economic loss. It is enough that an investor is induced to act to his/her detriment by the accused’s conduct. The investor’s economic or financial interests must be at risk, but the investor does not have to lose any money or anything of value as a result of the accused’s conduct.

[264] First, I am satisfied beyond a reasonable doubt that if investors were deprived of something of value, they were deprived of something of value by Mr. Holden. While they invested their money with SC or SCC, Mr. Holden owned both companies, was the directing mind of each, was an entirely hands-on owner, devised Seaquest’s strategy, knew of and approved everything that Seaquest did with money, and directly solicited virtually all investments.

[265] Mr. Tucker, Mr. Plastina, and Mr. Variyski all testified that they dealt directly with Mr. Holden in making their investments. There is evidence that Mr. Prioreschi did as well. While Mr. Holden distanced himself from a few transactions, and did not remember them all, I accept the evidence of and about Mr. Tucker, Mr. Plastina, Mr. Variyski, and Mr. Prioreschi on this issue and I am satisfied that Mr. Holden directly dealt with them all. To the extent that he didn’t deal directly with any other investors, and, in particular, didn’t deal directly with some investors when they decided to roll their investments over, I am satisfied that he was aware of and authorized all of the transactions, knew the terms of the investments and what representations would be made, and authorized them. Once again, as I have noted, Mr. Holden told the police that he was very involved in Seaquest every day and there was probably nothing that he didn’t know about. In relation to investments, not much money moved around Seaquest that he wasn’t aware of. And in cross-examination, Mr. Holden confirmed that he brought all monies and most of the capital into Seaquest, controlled the investment funds, and approved where the money went.

[266] Second, I am satisfied beyond a reasonable doubt that in the case of each investment, the investor was deprived of something of value, specifically, money. While in some instances the money advanced by an investor was repaid with interest, and accordingly the investor suffered no actual economic loss, I am satisfied beyond a reasonable doubt that in every case where money was advanced, the investor was induced directly or indirectly by Mr. Holden’s conduct to act to his/her detriment, in the sense that the investor’s economic or financial interests were placed at risk. I did not hear the defence suggest otherwise.

[267] When I speak of risk, I do not mean the risk that the specific investments might fail. Where the investment was to go to the purchases of shares, the investors knew that the investment was speculative. What else could justify the high rates of return? However the funds advanced to Seaquest by at least Mr. Tucker, Mr. Plastina, Mr. Variyski, and Mr. Prioreschi did not go where they were supposed to go. Instead they went in large measure to repay earlier investors and to cover other corporate or personal expenses. As a result, they were misled about the nature and extent of the risks associated with their investments. That is sufficient to amount to deprivation. In this regard, I place reliance on what was said by Fairburn J.A. in Schoer at para. 28:

Third, the appellant argues that the trial judge erred by failing to consider that some of the complainants acknowledged that their investments would be illiquid and non-refundable and that, if the deal with Magnet did not succeed, another merger with Hyberlab would have to be sought. Although the appellant is right that some of the complainants acknowledged that they knew they were assuming risk, the trial judge found that the appellant diverted their funds to his own use and misled the complainants about the nature and extent of risk associated with their investment. In light of that factual finding, there was no need to repeat the minutiae of each complainant's evidence.

[268] I recognize that in a sense I have put the cart before the horse. I have expressed my conclusion about risk caused by Mr. Holden’s deceit, falsehood, and other fraudulent means before I have explained why I conclude that he employed deceit, falsehood and other fraudulent means. However these are my reasons for the decision I have made, not my thinking as I consider the matter for the first time. There is a degree of overlap in the elements of fraud. It is impossible to discuss one issue without reference to another. I will explain my reasons for my conclusions about deceit, falsehood and other fraudulent means in due course.

[269] Finally, I am satisfied beyond a reasonable doubt that the manner in which investments were solicited was part of an overall scheme. Each solicitation of an investment was part of Mr. Holden’s business plan, and followed a pattern in which newly solicited investments were directed toward fulfilling current obligations, rather than revenue-producing activity. As a result, this element of the offence of fraud is satisfied for both sub-frauds and an overall fraud.

(ii) Element 2: Did Mr. Holden Cause the Deprivation by Deceit, Falsehood, or Other Fraudulent Means?

[270] The Crown’s position on this issue is simply this: in soliciting the investments, Mr. Holden made false representations to the investors about the nature of their investments, what would be done with their funds, and about the security for their investments, and that these representations caused deprivation. Moreover, this was done on a systematic basis consistent with an overall fraudulent scheme.

[271] There can be no serious issue that the deprivation, that is, the advancing of investor funds, would not have occurred but for the representations made by Mr. Holden not only about the high rates of return, but also about the nature of the investments, about what would be done with the funds, and about the security for the investments. If evidence is needed on this issue, it exists. Mr. Tucker and Mr. Plastina were very clear on this point. I will point to three of the many examples in the evidence.

[272] In respect of T7, Mr. Tucker testified that he did not expect his investment to be used for anything other than the Cyberplex transaction and that Mr. Holden never told him that only about $15,000 would be used for that purpose. He was never told that funds would be used to pay Mr. Cosentino, or to pay interest to other investors. He would not have made this investment had he known that his funds would be used for those purposes. He testified, “I had no interest in supporting Seaquest’s business. That’s the definition, I think, of a Ponzi. Collecting fresh money from me to pay off old investors? I would have no interest, none whatsoever.”

[273] In respect of PP22, Mr. Plastina testified that, when he invested $820,000, he was not told by Mr. Holden or anybody else that only $500 would flow to American Telematics Corporation. His response when asked about this in examination-in-chief was: “you’re scaring me.”

[274] With respect to PP36, Mr. Plastina testified that it was not communicated to him that Comvest’s shares of Healthscreen Solutions Inc. were worth less than $200, and that he would not have accepted the Assignment of Shares as security had he known this.

[275] With respect to Mr. Variyski’s investment, as I have already explained, Mr. Variyski testified that Mr. Holden told him that he was in the business of purchasing, selling, and investing in companies, mostly in the United States. He pooled money to make these investments. Mr. Variyski expressed concern to Mr. Holden about the security of such investments. Mr. Holden told him that he loaned money to companies in difficulty that were worth at least three times the amount of the loan, so in the worst case scenario, he could sell the company and recover his money, and so the risk was low. With this information, Mr. Variyski invested in December 2010.

[276] Of course, it is not enough to satisfy this element of the offence of fraud that Mr. Holden caused the deprivation by his representations. It must also be shown that he caused the deprivation by deceit, falsehood, or other fraudulent means. As I have already noted, “deceit” is an untrue statement made by a person who knows that it is untrue, or has reason to believe that it is untrue, but makes it, despite that risk, to induce another person to act on it as if it were true to that other person’s detriment; “falsehood” is a deliberate lie; and “other fraudulent means” is a term that covers more ground than either deceit or falsehood. It includes any other means, which are not deceit or falsehood, properly regarded as dishonest according to the standards of reasonable people.

[277] In my view, Mr. Holden’s dealings with the investors are replete with deceit, falsehood, and other fraudulent means. In his efforts to induce potential investors to advance funds to SC and SCC, he knowingly, persistently, and repeatedly made false statements to them about the nature of their investments, what would be done with their funds, and about the security for their investments. At the same time, Mr. Holden concealed other pertinent information about these transactions.

[278] I need not plough through the many transactions with Mr. Tucker, Mr. Plastina, Mr. Variyski, and Mr. Prioreschi again. In my descriptions of them above, I have referred to many occasions when funds were not used as described, when the security for investments had little or no value, and when the fact that the transaction was not arm’s length was not disclosed. I am satisfied that these falsehoods and omissions were made intentionally, dishonestly, deceitfully, and fraudulently by Mr. Holden. Mr. Holden knew full well that the money would not be used as represented and that the security offered for the investments did not have the value that he represented it as having. The failure to make use of investor funds as promised was not, as has been suggested, the result of inadequate record keeping or poor administration. It was intentional. Mr. Holden knew, when he solicited the funds, that he would use them to pay principal and interest to earlier investors, to pay the expenses of SC and SCC, and to enrich himself. In fact, that was his primary reason for soliciting many of the investments. He knew that the security he offered was of little or no value. And he intentionally declined to disclose that many of the transactions were not at arm’s length. All of this formed part of an overall plan to dishonestly solicit new investments and misappropriate them.

[279] Mr. Holden presented a variety of innocent explanations for his representations to investors. He minimized his role in Seaquest and said that other employees were to blame for some of the errors in what he said. And he blamed the maladministration of his business for some of the mistakes. None of these explanations are true. None of them raise a reasonable doubt in my mind. I am satisfied beyond a reasonable doubt that Mr. Holden deprived his investors of their funds by deceit, falsehood, and other fraudulent means.

[280] A major component of Mr. Holden’s position that some of his representations were truthful – that the money really was to be used, and was used, for the stated purpose – is his assertion that the apparent deficiency of many assets that were supposed to have secured investors’ money can be explained on the basis that Seaquest bought up valuable positions worth millions of dollars in small public companies by way of untraceable street form share certificates purchased with untraceable cash or bank drafts. This explanation is pure fiction.

[281] In assessing Mr. Holden’s evidence about street form shares and earlier loans missed by Mr. Coort in his analysis, I begin with an assessment of his credibility.

[282] I begin with his prior convictions for three counts of fraud. I am alert to the fact that I can only use these convictions to assess his credibility. I cannot use them as evidence of bad character, or to conclude that he is a dishonest person who would commit these crimes of dishonesty, or for any other forbidden purpose. However, fraud is a crime of dishonesty. These past convictions do have a bearing on Mr. Holden’s credibility as a witness in the current proceeding. Specifically, they reflect adversely on it. But far more significant than these convictions when assessing Mr. Holden’s credibility is the preposterous nature of Mr. Holden’s evidence.

[283] I note first of all that Mr. Holden’s explanation for the apparent failure of SC and SCC to put investors’ funds to the agreed-upon uses first emerged in the course of Mr. Holden’s evidence. While there were brief references to shares owned or transferred in paper certificate form in the evidence, there was no suggestion that this accounted for millions of dollars of untraceable shares purchases by SC and SCC. Of course I do not suggest that Mr. Holden was obliged to give the Crown notice of his defence. But counsel for Mr. Holden did not ask any of the witnesses who might have been in a position to confirm this story about it. I do not penalize Mr. Holden for this. But the absence of other evidence to support his story does not enhance its credibility.

[284] That said, there is no doubt that shares can be purchased in street form, and that doing so allows for anonymity of the buyer against the company’s management, and other investors. But Mr. Holden’s evidence about his handling of large amounts of cash, bank drafts and share certificates of high value is too convenient, convoluted, and unbelievable.

[285] Mr. Holden explained that large cash withdrawals were sometimes done because the cash would be used to buy bank drafts, which then would be used to buy shares in street form. However he agreed in cross-examination that it was inconvenient and risky to handle large amounts of cash, and that banks sometimes need a few days’ notice to provide large cash amounts. But he contradicted himself by also saying that a reason to use cash was to avoid the delay of having an account-to-account transfer or a cheque held until it cleared.

[286] When he was asked why he didn’t write a cheque directly to the seller, he said that would defeat the goal of anonymity. Of course, there is no reason that Seaquest’s competitors would see a cheque that Seaquest gave to a person selling shares to Seaquest. When he was asked why he wouldn’t skip the step involving cash by buying a bank draft directly from TD Bank, which was Seaquest’s own bank, with money drawn directly from its account, he said that Seaquest’s competitors knew that Seaquest used TD Bank, so a bank draft from TD Bank would defeat the goal of anonymity. He did not explain how Seaquest’s competitors would know that a TD Bank draft had been purchased by Seaquest. When Mr. Holden was shown a TD Bank draft purchased by Brian Tucker that was coincidentally already in evidence, he could not point to anything on the bank draft that would identify its purchaser.

[287] Mr. Holden finally settled on the explanation that for Seaquest’s own accounting purposes, they would fill in identifying information about the transaction in the bank draft’s memo line. He did not say why that was necessary, nor why it would be done only if the draft was purchased from TD Bank but not if it was purchased from another bank.

[288] I will not further review Mr. Holden’s ever-shifting story about his purchase of street form shares. I simply observe that it makes little sense to use bank drafts instead of cheques drawn directly from Seaquest’s bank account and made payable to the seller of the shares. It makes no sense to withdraw cash from Seaquest’s bank in order to immediately purchase bank drafts from another bank. And it makes no sense to walk with large amounts of cash to a different bank just to buy a bank draft that could have been purchased at Seaquest’s own bank branch. I disbelieve the story on this basis alone. But there is more.

[289] Mr. Holden testified that he dealt with many millions of dollars’ worth of street form share certificates. He agreed that once endorsed by the seller, the share certificate is like a bearer bond: it is not registered to an owner and it is valuable in the hands of whoever possesses it. As a result, the certificates had to be secured in some way, and the credibility of Mr. Holden’s story depended on explaining what became of them. What did he say?

[290] Mr. Holden said that he kept the street form certificates in a locked drawer in his office, in a file cabinet that had been purchased at Staples. He said that three or four people had keys: himself, Mr. Bulbrook, Mr. Cosentino, and maybe Mr. So and Ms. Alibhai. When asked why he did not keep these valuable certificates in a safe deposit box, he gave no meaningful answer. And conveniently, Mr. Holden doesn’t know what became of the street form share certificates after the bankruptcy.

[291] What is more, as the Crown points out, Mr. Holden’s numbers don’t add up. The point of his evidence about holding street form shares purchased using cash and bank drafts was to explain that there was indeed valuable security for certain investments despite the fact that it was not identifiable in the bank and brokerage account records. In order for his story to explain away the deficient security, based on his and other evidence, Seaquest must have possessed at least $5.4 million worth of street form shares that are untraceable in the banking and brokerage account records: $1.8 million worth of shares in Bennett Environmental; $2.38 million worth of shares in Cyberplex; at least $431,000 worth of shares of an unnamed company, owned by MMI Capital; at least $450,000 of shares of an unnamed company owned by Strata Technologies; and $350,000 of shares of an unnamed company purchased by Tony Cosentino. Mr. Holden testified that the cash used to buy these missing street form shares came from SC, SCC, Comvest, Tony Cosentino, or Tony Brown, an early investor in Seaquest and business associate of Mr. Holden’s. However, Mr. Coort’s analysis of the bank accounts of those entities and individuals reveals that not nearly enough cash was withdrawn to have paid for all the street form shares that Mr. Holden claims to have possessed.

[292] Mr. Coort’s analysis identified that the total cash withdrawals from the accounts of SC, SCC, Comvest, and twenty-four accounts associated with Tony Cosentino and his companies and immediate family was $1,434,983. The RCMP did not obtain complete records for the accounts of Tony Brown, but did obtain his monthly bank statements. As a result, cash withdrawals cannot be reliably identified, but the total of withdrawals in all forms from his accounts was $482,670. These two amounts add up to less than $2 million, which is far short of the $5.4 million that would have been needed at minimum to make Mr. Holden’s story plausible.

[293] In the end, I conclude that Mr. Holden’s convoluted evidence that the apparent lack of security for some investments was that they were secured by untraceable street form shares purchased using cash and bank drafts is a fabrication invented for the purpose of exculpating him at this trial. I reject it in its entirety. Moreover his credibility generally is diminished by this blatant lie.

[294] Similarly, his explanation that some loans were made in advance of the investment in question and were simply offset by other uses of money subsequent to the investments is not borne out by the bank records.

[295] As I noted above, Mr. Holden presented a variety of innocent explanations for his representations to investors. He minimized his role in Seaquest and said that other employees were to blame for some of the errors in what he said. And he blamed the maladministration of his business for some of the mistakes. I will address next his blaming of others.

[296] I have already dealt in detail with Mr. Holden’s role in Seaquest. I will not repeat what I have already said. I simply note again that he owned SC and SCC. He was their controlling mind. He was the architect of their investment strategy. He controlled the flow of money. He solicited the investments. He knew and authorized where the money went. Neither Mr. Cosentino, nor Mr. Bulbrook, nor the accounting staff were responsible for his misrepresenting to investors the nature of the investments, the nature of the security for them, and what would be done with their funds.

[297] I do not believe for a second that Mr. Holden blindly signed documents presented to him by accounting staff without knowing what he was signing and taking responsibility for his signature. It may be that Mr. Bulbrook and/or Mr. Cosentino were more complicit in Mr. Holden’s scheme than they wish to admit, but even so the scheme was his, and he knew and authorized everything that was done. Whatever titular positions either of them did or did not have, Mr. Holden was in control and fully apprised of the business of SC and SCC. Most importantly, he directed the use of Seaquest’s funds.

[298] I should add that I accept Mr. Bulbrook’s evidence that he was never the CFO of Seaquest, and reject Mr. Holden’s evidence on the issue.

[299] Mr. Holden sought to shift responsibility to Mr. Bulbrook when it suited him to do so in his evidence at trial. He testified that Mr. Bulbrook was “effectively understood” to be the CFO of all the Seaquest group of companies. He said that Mr. Bulbrook was the official CFO of SCC and the “unofficial” CFO of SC. He said that Mr. Bulbrook (and Mr. Cosentino) knew everything that was going on in SCC. He said that everybody went to Mr. Bulbrook for accounting matters. He even said, rather incongruously, that by 2009, “I kind of handed the reins over to Tony Cosentino and to Vince Bulbrook.”

[300] On the other hand, Mr. Bulbrook was clear in his evidence that he was never CFO for SC or SCC, nor was he ever asked to be. I accept his evidence and reject Mr. Holden’s evidence on this point. Mr. Bulbrook testified that Seaquest’s business was relatively simple and it did not need a CFO. Mr. Hemani, the controller, was all that was needed. Mr. Bulbrook testified that he learned at some point that he was listed on a website as CFO for Seaquest Global Corp, and objected to this because it was inaccurate. He said that he contacted the website administrator and had it changed. Mr. Bulbrook also described being given a copy of a brochure about Seaquest in 2011, and seeing his name listed as CFO. He testified that he objected to this because it was inaccurate, and confronted Mr. Holden about it. Mr. Holden said that it was an error and agreed not to distribute the brochure. Mr. Bulbrook was not challenged on this point. Mr. Holden claimed in cross-examination that he did not remember the incident.

[301] It is noteworthy that in Mr. Holden’s own plan for the “Seaquest Group of Companies” dated January 6, 2011, he did not list Vince Bulbrook as CFO (nor as having any other role) despite listing the officers and directors, advisors, and a five-person “senior management team” of SCC. Further, corporation registry documents for SC and SCC do not show Mr. Bulbrook being CFO or holding any officer or director position.

[302] It is true that Mr. Catty, the defence expert, asserted that Mr. Bulbrook was the CFO of Seaquest, and pointed the finger at him for not doing the job of a CFO adequately. This is an example of Mr. Catty’s tendency to reach conclusions without a solid foundation. Mr. Catty said that the basis for his belief that Mr. Bulbrook was the CFO was a website he had seen, plus other evidence he did not describe, none of which was tendered at trial. Mr. Catty maintained this opinion while acknowledging that he knew that Mr. Bulbrook denied being the CFO. Mr. Catty’s evidence in this regard appeared to be an effort to bolster Mr. Holden’s position that he was unaware of problems at Seaquest because Vince Bulbrook did not bring them to his attention, rather than an effort to find the truth.

[303] As I said, I accept Mr. Bulbrook’s evidence that he was not the CFO, but in any event, I fail to see what difference it would make if he were. The fact that Mr. Holden might not have known the extent of Seaquest’s financial problems, as doubtful a proposition as that is, might have had a bearing on the failure of Seaquest. However, it would have no bearing on the question at hand: did Mr. Holden cause deprivation by deceit, falsehood or other fraudulent means?

[304] Next, I turn to the more central evidence of Mr. Catty. He testified convincingly about Seaquest’s poor financial management and saw it as the most significant cause of Seaquest’s bankruptcy. But he analyzed neither the bank accounts of Seaquest nor the documentation provided to investors, and he had nothing to say about the alleged sub-frauds and overarching Ponzi scheme. Mr. Catty identified a number of shortcomings: Seaquest was poorly managed; used short term funds for long term holdings; was not generating sufficient revenue on an ongoing basis to satisfy its short term loans; did not properly account for the transfer of loans from SC to SCC; and made unsuitable purchases of an aircraft, a yacht, and a condominium in Bahamas. While these issues may have contributed to the bankruptcy, they are not in the slightest inconsistent with fraud. Indeed, much of this evidence supports the Crown’s theory. These problems provided good reason for a dishonest businessman to misappropriate new investor funds and use them for the very purposes that Mr. Holden did if that was not in fact his original intent.

[305] In any event, there is a particularly serious flaw in Mr. Catty’s approach to this case that I will address briefly. He testified it was his understanding that most of Seaquest’s borrowing was for “general corporate purposes and that relatively little was done for particular purposes.” As a result, in his view, Mr. Holden was free to make payments to other investors and for other corporate purposes out of corporate funds. If that were so, then the Crown’s case might be defeated. The Crown’s case would largely depend on false statements about investments being solicited by Mr. Holden for specific, identified purposes. But Mr. Catty is wrong. His assumption is erroneous. Mr. Holden was not soliciting investments from Mr. Plastina and Mr. Tucker, his two largest investors, for general corporate purposes. They were for particular, specified purposes. And while Mr. Holden solicited investments from Mr. Variyski and Mr. Prioreschi for a pool of funds, that pool was created for the clearly described purpose of making short-term loans to small and mid-sized businesses in Ontario. They were not investing into a fund for general corporate purposes.

[306] This erroneous assumption explains why Mr. Catty’s opinion focused on financial mismanagement of Seaquest, and specifically the general corporate fund pool that he thought existed. As a result, he examined why Seaquest failed, and not whether Mr. Holden was defrauding investors. That is also why he pointed the finger at Mr. Bulbrook. If Mr. Bulbrook had been the CFO of Seaquest, then he might have to answer for the financial mismanagement and the perhaps even the bankruptcy of Seaquest. But Mr. Catty is simply wrong – in part because he was not aware of the evidence of the investors and did not examine the material they received from Seaquest.

[307] The only example Mr. Catty gave for his opinion that most of Seaquest’s borrowing was for “general corporate purposes and that relatively little was done for particular purposes” was the GGEH transaction. He admitted that he was basing his understanding on this transaction alone. That is a surprisingly frail basis on which to base such a broad conclusion. Mr. Catty’s understanding was clearly wrong and unsupported by the evidence, both in respect of the GGEH transaction and otherwise.

[308] The evidence called by the Crown established that Mr. Holden solicited funding for the GGEH transaction from Peter Plastina and Brian Tucker specifically for use in that transaction. Funding for the GGEH transaction did not come out of an amorphous “pool” of funds; rather, the Plastinas and Mr. Tucker specifically invested in the GGEH transaction. They did not invest money to be used however Mr. Holden saw fit. The evidence is overwhelming that all of the other transactions examined in this trial were represented to be for a specific purpose, and not for general corporate purposes or to repay other investors.

[309] The defence argues that Mr. Holden signed off on investments and made other decisions without being aware of the problems associated with those investments and other decisions. Mr. Holden never intentionally provided false information to investors. While Mr. Holden had been made aware of cash shortages, he had no information that ran counter to his understanding that the security for investments was anything other than what he expected it to be, that is, in good standing and sufficient to secure each investment. I reject this entirely. Mr. Holden intentionally and repeatedly provided false information to investors, often precisely because he needed to raise cash quickly to pay Seaquest’s debts. Whatever shortfall of information about Seaquest’s problems he might have had and whatever inaccurate information he may have been given could in no way undermine my conclusion about his blatant dishonesty.

[310] As a result, I am satisfied beyond a reasonable doubt that in soliciting investments, Mr. Holden made false representations to the investors about the nature of their investments, what would be done with their funds, and the security for their investments, and that these representations caused deprivation to those investors. He caused this deprivation by deceit, falsehood, and other fraudulent means, and he did this on a systematic basis consistent with an overall fraudulent scheme. I am satisfied that the manner in which investments were solicited was part of an overarching fraudulent scheme. Each solicitation of an investment was part of Mr. Holden’s business plan and followed a pattern. As a result, this element of the offence of fraud is satisfied for both the sub-frauds and the overarching fraud.

(iii) Element 3: Did Mr. Holden Intend to Defraud Some or All of the Investors Who Were Deprived of Something of Value?

[311] This, as I have stated, is the mens rea of fraud. In Théroux, McLachlin J., as she then was, described the mens rea of fraud as follows:

subjective knowledge of the prohibited act; and

subjective knowledge that the prohibited act could have as a consequence the deprivation of another (which deprivation may consist in knowledge that the victim's pecuniary interests are put at risk).

[312] I bear in mind the careful listing in Théroux of things that fall short of the subjective knowledge that is necessary for a finding of mens rea. The Court stated, at p. 26:

The requirement of intentional fraudulent action excludes mere negligent misrepresentation. It also excludes improvident business conduct or conduct which is sharp in the sense of taking advantage of a business opportunity to the detriment of someone less astute. The accused must intentionally deceive, lie or commit some other fraudulent act for the offence to be established. Neither a negligent misstatement, nor a sharp business practice, will suffice, because in neither case will the required intent to deprive by fraudulent means be present. A statement made carelessly, even if it is untrue, will not amount to an intentional falsehood, subjectively appreciated. Nor will any seizing of a business opportunity which is not motivated by a person's subjective intent to deprive by cheating or misleading others amount to an instance of fraud. Again, an act of deceit which is made carelessly without any expectation of consequences, as for example, an innocent prank or a statement made in debate which is not intended to be acted upon, would not amount to fraud because the accused would have no knowledge that the prank would put the property of those who heard it at risk. We are left then with deliberately practised fraudulent acts that, in the knowledge of the accused, actually put the property of others at risk. Such conduct may be appropriately criminalized, in my view.

[313] In this case, there is no doubt that Mr. Holden had subjective knowledge of the prohibited acts, since all of those acts were his. The question I must consider is whether I am satisfied beyond a reasonable doubt that he knew that the prohibited acts could have as a consequence the deprivation of others.

[314] Given that all the prohibited acts involved deceit, falsehood, or fraudulent means on the part of Mr. Holden, it would appear to be no great leap to conclude that he had subjective knowledge that the prohibited acts could have as a consequence the deprivation of others. There is no other conceivable reason for his deceit, falsehood, and other fraudulent means. The whole point of his dishonest dealings with investors was to secure funds to pay earlier investors and corporate expenses in order to keep his scheme going, and, obviously, to enrich himself. On the record before me, I reach this precise conclusion. I utterly reject any suggestion that his dishonesty reflects mere negligence, carelessness, or sharp or improvident business conduct. Rather, he deliberately practised fraudulent acts that, to his certain knowledge, actually put the property of others at risk.

[315] But of course I must consider not only whether Mr. Holden had the mens rea for the individual sub-frauds. I am also concerned about the mens rea for the alleged overall Ponzi scheme. I have no doubt that his overall fraudulent intent has also been established beyond a reasonable doubt, and I will point to some additional indicators that confirm the correctness of this conclusion.

[316] First, I find that this scheme exhibited many of the elements of a Ponzi scheme:

SC and SCC had minimal revenue.
SC and SCC offered artificially high interest rates.
The continued existence of SC and SCC depended on Mr. Holden’s ability to solicit new investments and to convince larger investors like Peter Plastina to “roll over” their existing investments instead of cashing out, because SC and SCC did not have the ability to repay principal at maturity in the case of larger investments.
Funds received from investors were used to repay principal, or to pay interest, to previous investors in SC and SCC – and, in the case of the Peter Plastina “fiasco,” new funds received from him were used to repay the principal from his own earlier investment.
Funds received from investors were also used to pay Seaquest’s operating costs, including payroll, and to enrich Mr. Holden.
When Brian Tucker demanded the return of his investments, there was little in the way of assets to liquidate, so Mr. Holden attempted to make up the shortfall by obtaining funds from Tony Cosentino and by soliciting new investments from investors like Mr. Prioreschi.

[317] I have already discussed the evidentiary foundation for each of these findings.

[318] In addition, running throughout this case are numerous other indicators of illegitimacy, including: overselling of investments, self-dealing and non-arm’s length transactions, cash transactions in large amounts, failure to file tax returns, installation of figureheads or “straw” executives, back-dating of documents, and the creation of forged documents using the Tony Cosentino signature stamp.

[319] Next, I refer again to the numerous sub-frauds committed by Mr. Holden that I have already outlined. His conduct can be described in language virtually identical to the language used to describe the fraudulent conduct of the appellant in Schoer, at para. 63:

… the appellant's conduct … was similar across all of his dealings with the complainants. In his capacity as an investment advisor, he actively and intentionally preyed upon people who trusted him, by deceiving them into thinking that their money was being used to invest, either in shares or some other position in corporate entities. Although the corporate entities changed from time-to-time, and his lies morphed according to the “story” being told, at its core, the deception remained essentially the same.

[320] Not only did Mr. Holden’s conduct remain essentially the same from transaction to transaction, but his purpose remained the same and the outcome remained the same. Funds were misappropriated to pay the financial obligations of Seaquest, and to enrich Mr. Holden.

[321] The Court in Schoer concluded, at para. 65, that the described conduct was properly charged in a single count of fraud over $5,000. The overall fraudulent conduct was a single transaction, connected by time, place, and similarity of conduct. It was a large Ponzi fraud.

[322] None of this is to say that every investment in Seaquest was a fraudulent transaction. Seaquest did conduct some legitimate arms-length business. Clearly there were some funds invested that were used for the promised purpose. Nor is it to say that all the remaining investments were entirely fictitious. In most of the transactions, some small amount of the funds invested went to the destination held out by Mr. Holden. But some of the investments were hopeless. Many were long shots with no real chance of success. Only a few were more substantial. Undoubtedly Mr. Holden hoped that one of the long shots would pay off, satisfy all the outstanding debts, and further enrich him and his associates. But none of this changes the essential nature of the scheme and its fundamentally fraudulent nature. And none of it changes the fact that Mr. Holden had the mens rea necessary for the overarching fraud.

[323] I note that since the offence of fraud does not require proof of any actual economic loss on the part of the person defrauded, it follows that there is no requirement that the perpetrator actually be enriched, and I have not focused on enrichment in these reasons. The fact is, however, that the accused benefitted significantly from his Ponzi scheme.

[324] Ed So testified that he was regularly instructed by Mr. Holden to withdraw tens of thousands of dollars at a time in cash from Seaquest’s bank accounts for Mr. Holden’s use (with Mr. Holden often stating that the withdrawals were payments for Tony Brown). Nobody other than Mr. Holden instructed Mr. So to withdraw large cash amounts. Mr. Coort’s forensic accounting analysis showed that cash withdrawals totaling over $1.3 million Canadian dollars and $38 thousand US dollars were drawn from the bank accounts of SC and SCC. While Mr. Holden advanced various explanations for these payments, it is hard to imagine any legitimate rationale for taking this money out in cash. A remark Mr. Holden made in cross-examination is telling. He agreed that he would regularly ask Mr. So to withdraw cash in $100 bills, and indicated that he sometimes referred to these withdrawals as “brownies.”

[325] Perhaps more importantly, Mr. Coort established that the minimum amount of Mr. Holden’s personal benefit from the Ponzi scheme is $4,888,374 during the period from 2006-2011. This amount includes payments that benefitted Mr. Holden and his wife, including net payments to their bank accounts, mortgage payments on two Ontario properties in which they lived during the relevant time period, payments to Mr. Holden’s wife and ex-wife, and payments on an Aston Martin automobile. It does not include any cash withdrawals from the SC or SCC bank accounts, payments relating to the Hawker aircraft or payments relating to the Bahamian condo or yacht. It is a conservative figure. While these amounts do not come directly from any particular sub-fraud, they were available to Mr. Holden directly and exclusively on account of the overarching Ponzi scheme.

[326] This evidence of enrichment is important because it sheds light on the fundamental nature of this Ponzi scheme. It makes clear that this was not a desperate scheme to defraud investors to save a failing company. It was a fraud perpetrated for purposes of personal gain.

(iv) Element 4: Did the Value of the Property in Question Exceed $5,000?

[327] It did. But the more difficult question is by how much. There are various ways that the amount of the fraud in an on-going scheme that encompasses many sub-frauds might be quantified. In addition, since fraud includes funds at risk as well as actual economic loss, it is possible to calculate the amount of a fraud in a highly inflated manner.

[328] The Crown canvassed several ways to quantify the fraud, but argued that the most appropriate measure of it in this case is the total amount owed by SC and SCC to investors at the time of bankruptcy. The Crown’s position is that, on the day before bankruptcy was declared, all of the investor funds in SC and SCC were clearly at risk as a result of the Ponzi scheme, including, for example, the $2,000,000 owed to Mr. Plastina as a result of his investment in the GS Medical bridge loan (PP32), which GS Medical had repaid to SCC in full by October 14, 2011. Mr. Coort calculated the investor funds outstanding at bankruptcy as totalling $54,159,737 ($40,766,924 from SC, and $13,392,813 from SCC). Mr. Coort did not include in this total the significant amounts owed to Mr. Cosentino, since he was not an investor, and was not a victim at least of the fraud alleged in this indictment. I note that in the bankruptcy process, Mr. Holden calculated the total amount owing as $56,656,130.

Conclusion on Count 1

[329] I am satisfied beyond a reasonable doubt that Mr. Holden is guilty of the fraud alleged in count 1, in the amount of $54,159,737.

Count 2: Money Laundering

The Nature of the Alleged Offence

[330] In count 2, the Crown alleges that Mr. Holden dealt with monies invested in SC and SCC with the intent to conceal or convert those monies knowing that all of part of them was derived from the commission of the offence of fraud. This count substantially duplicates the fraud offence. It concerns the investment funds that were the subject matter of count 1, and focuses on the conversion of those funds to purposes other than those stipulated by Mr. Holden when he solicited them.

[331] The actus reus of the offence is made out by proof of a prohibited dealing with money or other property, in any manner and by any means, that is proceeds of the commission of a designated offence such as fraud over $5,000. Almost anything done with property that is proceeds of a designated offence will satisfy the conduct element of the offence (see R. v. Trac, 2013 ONCA 246, 115 O.R. (3d) 424 at paras. 83-86.) Depositing proceeds of crime into a bank account, or transferring between accounts, amounts to an act of laundering. So does co-mingling the proceeds with other funds. So does using the proceeds in any way in further financial transactions.

[332] The mens rea of the offence has two elements: (1) intent to conceal or convert proceeds of crime, and (2) knowledge or belief that the property or proceeds were derived from a designated offence.

Analysis

[333] Having regard to the findings of fact I have made in respect of count 1, a finding of guilt on count 2 is all but inevitable. Mr. Holden dealt with funds invested in SC and SCC when he accepted those funds from investors, and used them for purposes other than the purposes for which the funds were solicited. He actually converted them when he failed to use them for the intended purpose but instead used them to pay other investors, to pay corporate expenses, and to enrich himself. He knew that the funds were the proceeds of his fraud, and he intended to convert them when he formed the intention to use invested funds in this way. He formed that intention from the outset – it was the very purpose he had in soliciting a great deal of the funds.

Conclusion on Count 2

[334] Accordingly, Mr. Holden is guilty of count 2.

Verdict

[335] Mr. Holden is guilty of both counts in the indictment.

M. Dambrot J.

Released: September 16, 2019

COURT FILE NO.: CR-16-00000-625

DATE: 20190619

ONTARIO

SUPERIOR COURT OF JUSTICE

B E T W E E N :

HER MAJESTY THE QUEEN

– and –

DAVID HOLDEN

REASONS FOR JUDGMENT

M. DAMBROT J.

RELEASED: September 16, 2019

REASONS FOR JUDGMENT

Count 1: Fraud

The Nature of the Alleged Fraud

The Case for the Crown

1. Mr. Holden Was in Control of the Seaquest Companies and their Activities

(a) The Origin of SC and SCC

(b) The Inner Workings of the Companies and Mr. Holden’s Controlling Role

(c) Mr. Holden’s Control of the Banking of the Seaquest Companies

(d) Mr. Holden Personally Dealt with Virtually All Investors and Was in Charge of Soliciting Funds from Investors

(e) Mr. Holden Directed How Investor Funds Were Used

(f) The Defence Position about Control

(g) My Analysis of the Issue of Control

2. SC and SCC had minimal revenue

3. Mr. Holden Solicited Investments by Promising High Rates of Interest and by Making Representations about Each Investment’s Nature, Purpose, and Security

4. Of Necessity, Mr. Holden Constantly Solicited New Investments and Put Pressure on Existing Investors to Roll Over Funds

5. Funds received from investors were used to repay principal and interest to earlier investors, and to pay the operating costs of SC and SCC

(a) Peter Plastina’s investments

(b) Angel Variyski’s investments

(c) Brian Tucker’s investments

(d) Sauro Prioreschi’s investments

(e) Additional evidence that funds received from investors were used to repay principal and interest to existing investors and to cover Seaquest’s operating costs

6. Brian Tucker’s Demand for the Return of His Principal Led to the Collapse of the Seaquest Scheme

7. The Individual Transactions with Investors, as well as the Overall Investment Scheme, were Fraudulent, and Mr. Holden Intended to Defraud the Investors

The Defence Evidence

(i) Evidence of David Holden

(ii) Evidence of James Catty

(b) Did Mr. Holden Commit Fraud?

(i) Element 1: Did Mr. Holden Deprive Some or All of the Investors of Something of Value?

(ii) Element 2: Did Mr. Holden Cause the Deprivation by Deceit, Falsehood, or Other Fraudulent Means?

(iii) Element 3: Did Mr. Holden Intend to Defraud Some or All of the Investors Who Were Deprived of Something of Value?

(iv) Element 4: Did the Value of the Property in Question Exceed $5,000?

Conclusion on Count 1

Count 2: Money Laundering

The Nature of the Alleged Offence

Analysis

Conclusion on Count 2

Verdict

Judge

Counsel

Parties

Areas of Law

Fact Patterns

Expert Witnesses

Issues

Legal Tests 1