Five of the 13 people involved in the FS Financial boondoggle, which raised more than $36 million in illegally sold shares, has agreed to a number of securities law sanctions.
George Lay was one of the directors for Verico FS Capital Inc., which was one of several affiliates of the FS Financial Strategies and FS Financial Services group, which had their bank accounts frozen and which are still facing a formal hearing for securities fraud.
Lay and four others have recently reached settlement agreements with the BCSC, which is imposing securities trading restrictions on them.
Verico FS raised $5.4 million between 2014 and 2017 from investors without a prospectus. It was just part of the $36 million that was raised by FS Financial affiliates.
Lay himself may have been a victim of the FS Financial scandal, as he invested $300,000 of his own money in the FS Group.
None of the buyers qualified for an exemption as accredited investors, which means the money was raised in breach of the Securities Act. Ostensibly, FS Financial was an insurance company. The company and affiliates had annual losses, starting at $800,000 in 2011 rising to more than $7 million in 2015. The company failed to disclose its poor financial state to potential investors, the BCSC said.
In a settlement agreement with the BCSC, this week, Lay must pay $30,000 to the BCSC, and is prohibited from securities trading for three years, among other restrictions. He is also forbidden from engaging in investor relations activities.
Lay was just one of more than a dozen people implicated in the FS Financial fraud. The BCSC has also reached settlements with four others: Chung-Shen “Johnson” Kao, Gagan Deep Bachra, Chi Kay “Dixon” Wong and Meng Cher “Phillip” Tsai
Some of the others involved in the fraud still face a BCSC hearing in January 2020.
