The Supreme Court of British Columbia has agreed to vary asset freeze orders imposed against a couple of B.C. residents who are facing legal and regulatory proceedings against them in the U.S., alleging that they were involved with a cross-border pump-and-dump scheme.
According to the court’s decision, Paul Sexton and Mike Veldhuis applied to the court, seeking to vary an injunction imposed against them in 2024 in B.C to allow them access to money for legal expenses in the U.S..
In 2021, the U.S. Securities and Exchange Commission (SEC) brought civil proceedings against them (and others) in a U.S. district court in Massachusetts, alleging that they breached securities law.
At the time, the SEC obtained asset freeze orders against them, the B.C. Securities Commission (BCSC) also issued asset preservation orders against them — and, the SEC obtained a court injunction in B.C. freezing their assets.
In 2024, the SEC won its case in Massachusetts, and the pair were ordered to jointly disgorge US$42.5 million (along with their co-defendants), among other civil sanctions. That decision was upheld on appeal in February.
Sexton and Veldhuis then applied to the B.C. court seeking access to funds to finance a potential appeal to the U.S. Supreme Court, along with money for their defences in the pending criminal cases against them in the U.S.
Ultimately, the B.C. court decided that they can have access to some money for their legal fees — ruling that they at least have an arguable case for leave to appeal to the U.S. Supreme Court, even though only about one in 100 of these efforts is successful.
“While I accept the SEC’s submission that the joint and several liability arguments are an ‘uphill battle’, I am nonetheless satisfied that they meet the very low merits threshold required for an arguable case,” the judge presiding over the case in the B.C. court said, adding that there’s a “potential arguable issue about whether disgorgement may be imposed jointly and severally without tying each defendant to specific evidence to the disgorgement sought against them in the specific case.”
Ultimately, the court varied the orders to allow Sexton to access US$37,500 and Veldhuis to access US$22,500 so they can seek leave to appeal from the U.S. Supreme Court. They were also each allowed to access US$50,000 for legal fees in the criminal proceedings.
The pair each requested US$100,000 for their criminal defences, which the SEC opposed, arguing that US$50,000 would be reasonable to cover their pre-trial preparations.
The B.C. court agreed with the regulator, ruling that they can each have access to US$50,000 for now — amounts that can be revisited as that litigation proceeds, once those funds are used up.