But places like Panama aren’t just good for avoiding taxes. They’re also a way to manipulate markets from afar.
The BC Securities Commission (BCSC) has identified a number of offshore accounts in Panama and Switzerland that have been used to conceal trades made by British Columbians, some of which were likely part of pump-and-dump schemes involving U.S. penny stock companies.
The most recent case involves Verdmont Capital, a Panamanian securities brokerage firm, which is now in liquidation, operated by two former B.C. residents: Glynn David Fisher and Taylor Kennedy Housser.
The BCSC alleges the two breached securities laws by trading on behalf of B.C. residents without being registered in B.C. The allegations have not been proven and will be the subject of upcoming hearings.
A BCSC investigation revealed that more than 100 B.C. residents held 112 Verdmont brokerage accounts that were used to buy more than $15 million worth of shares and sell $31 million.
Verdmont has been implicated in an alleged pump-and-dump scheme involving penny stock companies in the U.S.
The American Securities and Exchange Commission (SEC) last year charged Verdmont, along with a Cayman Islands bank, Caledonian Bank Ltd., with unregistered distribution of four American penny stock companies. Caledonian went bankrupt after the SEC had its assets frozen.
Panama was also where North Vancouver businessman Mark Aaron McLeary used a holding company, Pecado Capital SA, to conceal insider trades in two publicly traded B.C. companies he was involved in.
A BCSC investigation found McLeary was dumping stock in one of his companies, Silver Sun Resource Corp., and buying up stock in another: Chlormet. He was doing so while still under investigation for market manipulation involving Sungro Minerals Inc.
By using his Panamanian account, McLeary was able to sell his position in one of his companies that had dwindling prospects (Silver Sun/Golden Sun) and buy stock in another – Chlormet – without disclosing it to the investing public.
At the time, McLeary was the CEO of Chlormet and its predecessor companies, which moved from mineral exploration into the medical marijuana sector and changed names three times. In November 2015, Chlormet changed its name again, this time to PUF Ventures Inc. (CSE:PUF).
McLeary is no longer a director for the company, because he was permanently banned from trading in securities or being a director or officer for public companies last year for market manipulation in the Sungro case. He also received an $800,000 fine, which he has not paid.
By using offshore accounts, Canadians not only avoid taxes on gains they make on stock, but can also hide trades to manipulate markets.
“We can’t regulate what we can’t see,” said BCSC enforcement director Lang Evans. “If they want to use [offshore accounts] for illegal purposes, it is very, very difficult to find because of the bank secrecy.
“I would say the vast majority of it is just simply to avoid tax. Now, things that I specifically see here in Canada would be market manipulation: ‘Oh, that’s not me trading – that’s some financial institution that really likes our stock.’”
In a case involving a Swiss bank, a number of British Columbians were found to have used accounts in Bank Gutenberg AG and Gutenberg Management AG to make $327.8 million worth of trades.
BCSC believed about 40 of those accounts were used in pump-and-dump schemes involving American penny stock companies. Bank Gutenberg agreed to a voluntary $850,000 penalty for unregistered trading.
North Vancouver businessman Mark Aaron McLeary used Pecado Capital SA, a holding company in Panama, to conceal insider trades in two publicly traded B.C. companies he was involved in | Submitted