When MJardin Group Inc. needed new capital to help fund its North American cannabis ambitions, it frequently turned to a familiar financier: Bridging Finance Inc.
The Toronto-based private lender's relationship with the beleaguered cannabis producer plays a major role in the scandal that rocked Bay Street over the past week amid allegations against Bridging Finance of “numerous” legal and regulatory infractions relating to conflicts of interest, misappropriated funds and inadequate disclosure. None of the claims have been proven in court or before the Ontario Securities Commission; however, the severity of the OSC staff’s investigation that’s underway led to PricewaterhouseCoopers Inc. being appointed to manage Bridging Finance’s affairs and the suspension of Chief Executive Officer David Sharpe as the lender’s ultimate designated person late on April 30.
With OSC investigators untangling a complex web of funds that’s alleged to be connected to Sharpe, former short-lived PI Financial owner Gary Ng, and Canadian entrepreneur Sean McCoshen, much of the probe's focus centres on Bridging Finance’s ties to MJardin, a small pot producer with five production facilities in the U.S. and Canada, and its former CEO, Rishi Gautam.
In a sworn affidavit dated Apr. 29, OSC Senior Forensic Accountant Daniel Tourangeau said Gautam told the regulator’s enforcement staff that Sharpe and his wife asked that he accept a $35-million loan secured against MJardin’s assets and then lend the same amount back. The money was allegedly intended to help Bridging buy out a major Bay Street firm (Ninepoint Partners) that was looking to end its ties with the lender in Oct. 2018. According to Tourangeau, the so-called “back-to-back arrangement” was not properly disclosed and OSC staff alleges the $35 million was appropriated from Bridging Finance investment funds.
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