On October 3, 2012, the British Columbia Securities Commission found that Paul Stiles' craigslist postings for investments with Velocity Entertainment Inc. ("Velocity") were contrary to section 50(1)(d) of the BC Securities Act, which prohibits a person intending to effect a trade in a security from making a statement that the person knows or ought to know is a misrepresentation.
Stiles' 2011 and 2012 craigslist postings represented that Velocity was a film and television production house in Vancouver, and sought investments from the public, guaranteeing 12% interest on investments. Two Commission staff investigators, posing as investors, corresponded with Stiles, who made further representations about the investment opportunity, including non-compounded annualized returns of 200% or 152%-203%, respectively. Stiles had made similar postings in 2009 and 2010, and received a warning from the Commission in 2009.
The BC Securities Commission issued a decision against Stiles, who chose not to appear at the hearing. The Commission noted that the investment posted by Stiles was both an "evidence of indebtedness" and an "investment contract" and therefore constituted a security under the Act. The Commission found that Stiles made misrepresentations contrary to s. 50(1)(d) in that Velocity, its address, and bank accounts did not exist, contrary to Stiles' representations; in representing to the first investigator that the loan would be secure; and failing to disclose the risk associated with the loan to the second investor, despite having been asked. The Commission further found that the represented returns would be impossible to achieve without significant risk, and that Stiles would have known that all of the statements were untrue.
Fraud was not alleged, as neither of the investigators actually sent funds to Stiles, and therefore the requirement of deprivation was not met. Nevertheless, the Commission found that Stiles attempted to commit fraud, which has "the same potential to seriously impair the integrity and reputation of our markets as do actual frauds, especially if it were to appear that attempted frauds drew consequences significantly less serious than actual ones."
In this vein, the Commission ordered that Stiles cease trading (and is permanently prohibited from purchasing) in securities and exchange contracts; is permanently prohibited from acting as a registrant or promotor; is permanently prohibited from acting as a director or officer of any issuer or registrant; is permanently prohibited from acting in management or a consulting role in connection with securities market activities; is permanently prohibited from engaging in investor relations activities; and must pay an administrative penalty of $35,000.
A full copy of the Commission's decision can be found here.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
