How Bridging Finance fooled Bay Street – and hundreds of millions of dollars disappeared

source photograph : FRED LUM/The Globe and Mail After more than a decade as a fiscal adviser and money coach, Alejandro Cardot had a bent for spotting the flaws in investment pitches. therefore when a relative e-mail in 2019 asking whether it was worth joining the hordes of Canadians flocking to secret debt funds, he went into deep-dive manner. Mr. Cardot had little know in secret debt, specially here in Canada – he ’ s originally from Venezuela but lives in Montreal, where he earned an MBA at McGill. Over the years, however, he ’ five hundred developed finely tuned radar for salesmen who overpromise and underdeliver. And when he came across David Sharpe, the chief executive of Bridging Finance Inc., his radar started to ping.

When touting his company, Mr. Sharpe suggested in a television receiver consultation that Bridging had found a gratifying blot in debt markets : lend to mid-sized canadian companies that had been ignored by the big banks. It was a strategy he claimed had allowed Bridging to generate annual returns of 8 per cent, with not a one down month or a loss on any of its loans. But Bridging deal with some of the least stable borrowers out there, Mr. Cardot thought to himself. How could this possibly be truthful ? What is Bridging Finance and who are its leaders ? Bridging Finance failed to account for bad loans, potentially boosting its management fees : Receiver Mr. Cardot began digging. While Bridging disclosed very small about its loan reserve, some of its borrowers were publicly traded or in bankruptcy proceedings, and therefore obligated to disclose their relationships with lenders. The deep he combed through U.S. court records and piles of regulative filings, the more implausible Mr. Sharpe ’ s statements became. Mr. Cardot believed this warranted some kind of regulative treatment. He became intrigued by the hypothesis of receiving a reward through the Ontario Securities Commission ’ south whistle blower program, and filed an official written complaint about Bridging and several other private debt funds. This was unfamiliar territory for him. “ In Venezuela, ” he says, “ if you do whistle-blowing, badly things will happen for certain. ” Alejandro Cardot, who spent a decade as a fiscal adviser and money coach, spotted red flags in Bridging Finance ‘s business practices.CHRISTINNE MUSCHI/The Globe and Mail He had no manner of knowing that by the clock time he filed his ailment on Feb. 12, 2021, alleging “ Bridging Finance ’ sulfur returns are not real, ” the OSC had already been on Bridging ’ s fag end for a full year. privately, investigators had been asking to see its loanword documents since February, 2020, and had even gone thus far as to interview top Bridging officials. It would be another three months before the OSC ’ mho probe became public cognition. But on April 30, the regulator asked an Ontario judge for permission to put Bridging under the control of a recipient, and the future morning – a Saturday – it was announced to the universe. In an instant, Mr. Sharpe ’ s professional worldly concern collapsed. so did his personal liveliness : His wife, Natasha, was one of the company ’ second owners and had been its foreman investment officeholder. As for Bridging ’ s 26,000 investors – the huge majority of them retail buyers – their portfolios were upend and their investments frozen indefinitely. The allegations that have come to light since, both in court filings and through The Globe and Mail ’ s report, have been harrowing. Hundreds of millions of dollars worth of Bridging ’ s struggling loans were allegedly never revalued, boosting the Sharpes ’ management fees. about half of Bridging ’ s loanword portfolio didn ’ t pay cash matter to and rather deferred the payments – something financiers refer to as a game of “ extend and pretend. ” The OSC and the receiver, PricewaterhouseCoopers, have besides alleged the problems ran deeper than playing fast and loose with valuations. About $ 19.5-million in Bridging funds ended up in Mr. Sharpe ’ s personal bank account. contribution of that money was then transferred to Liechtenstein, a sleep together tax haven. Another $ 1.9-million appears to have been used for home renovations, and $ 228,000 was used for payments to Tesla Motors, and for leases on a 2013 Bentley GT Mulliner and a 2018 Bentley Bentayga. The scandal has rocked Bay Street. Bridging once seemed unstoppable, and its track record was catnip for aging retail investors desperate for ample but stable concede in a world of stubbornly low interest rates. Bridging had besides partnered with one of Bay Street ’ s best-known money managers, Sprott Asset Management, which put Bridging ’ south funds in front man of some of Canada ’ s exceed investment advisers and helped make them available for sale by every major savings bank and freelancer brokerage. By the time of its receivership, Bridging had amassed $ 2-billion in assets under management. The Sharpes looked like the masters of risk . David and Natasha Sharpe, of Bridging Finance Inc., photographed in the party ‘s downtown Toronto offices on April 11, 2019.Fred Lum/The Globe and Mail A Globe investigation has found that was by and large a mirage. Despite Mr. Sharpe ’ randomness background in submission and securities law, the hard-partying CEO systematically blurred the lines between his friends and Bridging borrowers, and repeatedly signed off on huge loans to arguably despicable debtors. Natasha Sharpe, meanwhile, could be wildly affirmative about Bridging ’ s chances of recovering money from weak borrowers, despite her repute as a risk expert and an daunting negotiator. And the OSC has alleged some investor funds flowed into her bank explanation, equally well. The Sharpes were both sent an extensive list of questions about the development of Bridging Finance and The Globe ’ s report. Ms. Sharpe declined to comment for this report. In a statement, Mr. Sharpe ’ s lawyer said he “ is not going to argue the issues related to the receivership of Bridging Finance in the media. Mr. Sharpe disagrees with the OSC ’ mho allegations and will address Bridging Finance issues, where allow, through proper legal channels. ” PwC is presently trying to salvage what it can from the troubled loanword portfolio and sell the ship’s company, but that ’ s a challenge because the liquidator has already discovered Bridging ’ randomness largest lend is likely worth a fraction of its record prize. As it stands, investors are expected to lose between $ 800-million and $ 1-billion, according to people familiar with the sale process. While the OSC has however to bring a case against any individuals, the matter has already had an shock – and exposed a major loophole in asset management. alleged alternative investments – private debt, very estate, infrastructure and the like – have seen their popularity soar as retail investors scour for decent yields. But because these assets are privately managed, they face much less external scrutiny, meaning investors must put their faith directly in the fund managers. Bridging ’ south crack up has exposed fair how fraught that relationship can be. It has become clearly the Sharpes weren ’ deoxythymidine monophosphate masters of risk at all ; they were masters of marketing themselves. Self-promoters are everywhere, of course. The big question here is why no one on Bay Street saw through the Sharpes – or if they did, why they weren ’ thymine willing to call David and Natasha out. Bridging ’ s early repute was built on Natasha Sharpe ’ s lineage. Raised in Kingston, she earned four university degrees, including a PhD in epidemiology, before taking a job at Coopers & Lybrand ( now part of PwC ) in 1999. Two years late, she moved to Bank of Montreal ’ south risk management division and then into corporate finance, cover loans for mid-market commercial clients . Jenny Coco, Chief Executive Officer of Coco Paving Inc., a division of the Coco Group, provided fiscal back for Ms. Sharpe to start Bridging Finance.Anne-Marie Jackson/The Globe and Mail During her time at BMO, Ms. Sharpe won the back of some influential internal figures and was tagged as a high-voltage employee, putting her on track to become a senior executive. But in 2010, Sun Life Financial wooed her away to fill the newly created role of head citation gamble policeman. A class late, she was named to Canada ’ s top 40 Under 40. Despite being pursued by the insurance company, her time at Sun Life was ephemeral, and she left in 2012. not long after, Ms. Sharpe started Bridging Finance with fiscal backing from Jenny Coco, whose family-owned company, Coco Group, is best known for its road paving business. The two women met in January, 2009, when BMO underwrote Coco Paving ’ mho skill of the Ontario and Quebec road-paving assets of Lafarge SA, and quickly developed a fast shackle. In 2011, Ms. Sharpe joined Coco Group ’ s board of directors – a post she relished because it was “ the entirely paving company of any size in the world run by a woman, ” she told The Globe at the fourth dimension. The take after year, Ms. Coco and her brother, Rock-Anthony, became majority shareholders in Bridging, with Ms. Sharpe holding the remaining minority stake. Ms. Coco is besides godmother to the Sharpes ’ son. Ms. Coco was sent an extensive number of questions about her relationship with the Sharpes and her ties to Bridging. She declined to comment. A class after Bridging was created, David Sharpe joined as head operating military officer. A calibrate of Queen ’ s Law with an MBA, Mr. Sharpe had held respective posts as corporate repository or headman complaisance officer at firms including Mackenzie Financial Corp., Citigroup and CI Financial. He had besides spent four years at the Mutual Fund Dealers ’ Association, where he was conductor of investigations. The Sharpes believed they ’ d found a break in the lending market : mid-sized canadian companies starved for recognition in the consequence of the 2008 global fiscal crisis. early on, Bridging focused on a specific type of lending known as factoring – small, short-run loans that weren ’ thyroxine excessively complex. One of Bridging ’ s early borrowers, for exemplify, sold 2x4s to Lowe ’ south. many retailers don ’ t pay their receivables for a few months, which can leave suppliers strapped for cash. To alleviate the crunch, Bridging would buy the receivable at a deduction and pay the 2×4 supplier up presence, then wait to collect the full cheque from Lowe ’ south. Bridging ’ south other clientele line was known as asset-based lend, focusing on high-cost, short-run loans to less established companies. To help manage the implicit in hazard, Bridging frequently charged annual matter to rates around 12 per cent, and the Sharpes told investors they didn ’ deoxythymidine monophosphate like to extend recognition for long periods. In fact, the company ’ second name refers to bridge loans, which are frequently paid back in a year or less. The Sharpes besides claimed they had bulletproofed their loanword portfolio by ensuring they ’ vitamin d be repaid first if something went wrong. Bridging demanded personal guarantees from its borrowers, excessively, something the Sharpes referred to as “ boot collateral ” – assets that could fit in the boot of a car. If a lend went bad, Ms. Sharpe was known to be bad – if not a little pitiless – when collecting that collateral, instructing underlings to “ throw it in the boot. ” From the outside, Bridging looked entice : Natasha was a accredit gamble specialist with a history at some of Canada ’ mho largest fiscal institutions. She besides stood her ground in an industry prevailing with chummy men. David, meanwhile, was a legato speaker with a long history as a dominion hatchet man. Yet money management is built on personal relationships, and the Sharpes calm needed some aid open doors. In 2014, help arrived in the form of Sprott Asset Management. The two firms teamed up to launch the Sprott Bridging Income Fund, with Sprott focused on selling and the Sharpes focused on gamble management and investing. The partnership was formed right as the business of managing money was quickly evolving. Because concern rates were stuck at obscenely gloomy levels, and because an increasing number of investors were starting to choose low-cost substitution traded funds over reciprocal funds, money managers began offering alternate investment funds that specialized in private credit, real estate and infrastructure. While these options were more expensive for investors – Bridging ’ randomness monetary value about two per penny annually, plus an incentive tip if the annual return beat a certain threshold – the expectation was that they ’ vitamin d rescue outsized returns. Amid this shift, the Sprott Bridging Income Fund had a first-mover advantage. It besides had a singular feature that did wonders for sales. speciate funds typically locked in investor money for a pin down time inning – sometimes five years or more. Investors in the Sprott Bridging fund, interim, could sell on a monthly footing. That was highly appealing to older, higher-net-worth retail investors, who, by virtue of their wealth, are considered “ accredited ” investors authorized to put money into riskier products – even if they aren ’ deoxythymidine monophosphate constantly understanding enough to know precisely what they ’ ra getting into. As the partnership deepened, a couple of luminary developments put Bridging on a new path. For one, Kevin Westfall, who ’ five hundred run Bridging ’ s factoring business, left in 2015, nudging the caller toward higher-risk lend. ( Mr. Westfall did not return multiple requests for gloss. ) then, former in 2016, the Sharpes shuffled their roles, with David taking over as CEO so Natasha could focus on her head investment policeman duties. The move created a puzzle chain of command : Natasha now reported to David, evening though she was a co-owner of the company and he wasn ’ thymine. dim cracks besides began to show inside the firm and widened over time, according to early employees. In effect, there was Team David, which specialized in sales, and Team Natasha, which focused on risk. Members from both squads sat on the eight-person credit committee – as did Jenny Coco, the majority owner – and each person had one right to vote . A photograph shared on chitter shows David Sharpe at a party to celebrate Bridging Finance reaching $ 1-billion in assets under management.Handout At the same time, David began to replace Natasha as Bridging ’ s public face – and to become a public figure writ large. In 2018, around the prison term Bridging hit $ 1-billion in assets under management, he was elected to the Queen ’ s University board of trustees, helping pave his direction into Bay Street ’ s upper echelons. All this coincided with an increased focus on Canada ’ s troubling discussion of autochthonal peoples. As a member of the Mohawks of the Bay of Quinte, Mr. Sharpe began to talk about his autochthonal roots and positioned Bridging to help fund wealth creation for First Nations. In the give of 2019, the company launched a modern fund dedicated to financing autochthonal economic development. A calendar month late, David made a $ 250,000 personal contribution to Queen ’ mho to fund the Indigenous Knowledge Initiative. When the gift was announced, Jim Leech – early head of the Ontario Teachers ’ Pension Plan and the university ’ s then-chancellor – tweeted : “ You are a great canadian, David – gallant to be a ally. ” Talking about his autochthonal identity was a major passing for Mr. Sharpe. Few knew that he ’ five hundred grown up in subsidized housing in Brampton, Ont., where he leaned hard into ice hockey culture. As a goalkeeper, he earned a full athletic scholarship to play for the Ferris State University Bulldogs in Michigan, but played barely 12 games before quitting school and returning to Canada. He besides appeared in the 1986 cult-classic field hockey movie Youngblood, starring Rob Lowe and Patrick Swayze, which was shot in Toronto. When marketing Bridging funds, he besides loved to tell people he ’ d been invited to try out for the New York Rangers. In holocene years, Mr. Sharpe has said he avoided talking about his autochthonal background for so long because he was ashamed. He has publicly described his childhood home plate as a “ battlefield ” where he learned to defend himself with his fists. In a 2018 address to the Children ’ sulfur Aid Foundation, he spoke honestly about learning to “ live in two worlds. ” That notion would become a recur subject as Bridging ’ s popularity exploded – not just for David, but for Natasha, excessively. The stories the Sharpes told about their prudent, no-BS overture to lending proved to be at odds with the true state of Bridging ’ s portfolio. Around 2015, David Sharpe became enamoured by an dark businessman named Sean McCoshen. Based in Winnipeg, Mr. McCoshen had a record of business failures and a obscure, unobjective résumé. Yet he ’ d remake himself as an adviser to First Nations communities and earned millions brokering loans for them. much like with Jenny Coco, the professional relationship blurred into a personal one, with the Sharpes vacationing with Mr. McCoshen and his son. As the two men grew closer, Mr. McCoshen ’ s pipe dream of building a railroad from Fort McMurray to the ports of Alaska became a central separate of Bridging ’ south lend portfolio. David publicly supported the project, claiming it would spur economic development for autochthonal communities along its route. But no one in truth knew the depths of the fiscal web between Bridging and the railroad track until this summer, when the receiver revealed that Mr. McCoshen ’ s company, known as A2A, owed Bridging $ 208-million, making it the largest loan in the lender ’ mho portfolio. Bridging besides had an equity interest in A2A it valued at $ 109-million. meanwhile, the railway had just $ 1-million in cash and few hard assets. tied more startle, the OSC alleges that a party controlled by Mr. McCoshen transferred a total of $ 19.5-million to Mr. Sharpe ’ s personal cheque report between 2016 and 2019 – frequently curtly after Bridging had advance loans to Mr. McCoshen ’ s projects. According to the liquidator, $ 25.5-million in Bridging funds were besides sent directly to Mr. McCoshen ’ s personal bank report. Through his lawyer, Mr. McCoshen declined to comment for this floor. even if these payments can ultimately be explained, the A2A loan doesn ’ t align with the principles Bridging used to swear by. While Bridging did require Mr. McCoshen to personally guarantee the loan, much of his wealth was tied to the rail project, creating a circular backstop. In fiscal statements filed in court, Mr. McCoshen ’ second largest asset was his $ 4-billion equity venture in A2A, a value ascribed by consulting firm McKinsey & Co. in the fall of 2020. Yet A2A filed for creditor protection this summer, and without this asset, Mr. McCoshen ’ mho net income deserving was pegged at damaging $ 96-million. Mr. McCoshen is besides closely tied to another of Bridging ’ south largest loans, to Bondfield Construction Co. Ltd., which was one of Ontario ’ sulfur largest builders of populace infrastructure until it collapsed in 2019. The OSC ’ s probe revealed Bridging quietly assigned the lend to Mr. McCoshen at no cost, which means another loan is ultimately backstopped by the trouble rail project. As well, Bridging lent one of Mr. McCoshen ’ s numbered companies $ 9-million to procure a 2002 Bombardier Challenger jet. In all, Mr. McCoshen has ties to more than $ 500-million worth of Bridging ’ s loans, about one-fourth of its assets under management. Beyond Mr. McCoshen, The Globe has discovered a web of connections between Bridging borrowers, advisers and Sharpe family friends, potentially creating conflicts of interest. adrian Montgomery, the CEO of Bridging borrower Enthusiast Gaming, served as regent of the trust that holds many of the Sharpes ’ assets, including their home in Toronto ’ south tony Rosedale vicinity. He was besides appointed as chair and interim CEO of cannabis manufacturer MJardin Group Inc., a major Bridging borrower, after it ran into fiscal difficulties in 2019. Mr. Montgomery declined to comment for this report. Investment bank Canaccord Genuity Corp., meanwhile, brokered a 2019 lend between Bridging and Enthusiast, and has besides been the gaming company ’ south lead fiscal adviser and an adviser to MJardin. In September 2018, Stuart Raftus, who runs Canaccord ’ second Canadian wealth management part, took a $ 3.75-million personal loanword from Bridging, according to court filings and documents obtained by The Globe. A spokesperson from Canaccord told The Globe the loanword was repaid “ well before the receivership. ” There was besides a discrepancy between Mr. Sharpe ’ s master image and his after-work behavior. Around retail clients and in media interviews, Mr. Sharpe was measured and cogent, the mental picture of a conservative lender. After work, however, he was known to drink heavily and turn combatant, even with employees. One said they learned not to answer his calls or text after 8 post meridiem because he could be explosive. The following dawn, however, Mr. Sharpe sometimes didn ’ triiodothyronine remember his behavior or merely acted like nothing happened. Mr. Sharpe declined to comment on these allegations .
Bridging ’ s exposure to perturb loans
Despite assurances from Bridging finance that the
company adhered to strict lend requirements, some
of its largest loans have struggled and besides had scant
collateral for the court-appointed telephone receiver to enforce against .
A sample distribution of some of Bridging ’ s poorest perform loans
are summarized below .
$ 144-
million**
$ 317-million*
Alaska-Alberta Railway
Development Corp. ( A2A )
Mjardin Group Inc .
description : A marriage proposal to
build a railway from North-
ern Alberta to the ports of
Alaska as a means of
transporting oil
description : A publicly traded
cannabis company with
facilities in Winnipeg, Nevada ,
and Brampton and Dunnville
in Ontario
Assets : No hard assets ,
except “ intangible intellectual
property ”
Assets : production
facilities and several retail
outlets in Nevada, with a
market detonator of $ 2-million
interest payments : In kind
interest payments : unclear
$ 127-
million**
$ 130-
million **
Hygea Health Holdings
( now NeighborMD )
Peguis First nation
description : A health caution
caller that owns and
manages doctor ’ mho offices in
the United States
description : The largest
first nation in Manitoba ,
population 10,000
Assets : unclear – a lawyer
for Bridging acknowledged
in court filings the company
is “ deplorably undersecured ”
Assets : indecipherable, though
consultants estimated the
district has “ downside
collateral ” of $ 50-million
interest payments : In kind
pastime payments : In kind
* $ 208-million in debt and $ 109-million in equity ** A2A measure as of June ,
2021. other loan values as of Sept. 2020

greg mcarthur and JOHN SOPINSKI/THE GLOBE AND MAIL ,
source : R.C. Morris & Co., internal presentation, as
well as documents filed in court
=

Bridging ’ sulfur vulnerability to trouble loans
Despite assurances from Bridging finance that the
ship’s company adhered to strict lend requirements, some
of its largest loans have struggled and besides had skimp
collateral for the court-appointed liquidator to enforce against .
A sample of some of Bridging ’ s poorest perform loans
are summarized below .
$ 144-
million **
$ 317-million*
Alaska-Alberta Railway
Development Corp. ( A2A )
Mjardin Group Inc .
description : A marriage proposal to
build a railway from North-
ern Alberta to the ports of
Alaska as a mean of trans
porting oil
description : A publicly traded
cannabis company with
facilities in Winnipeg, Nevada ,
and Brampton and Dunnville
in Ontario
Assets : No unvoiced assets ,
except “ intangible intellectual
place ”
Assets : production facili-
ties and respective retail
outlets in Nevada, with a
market capital of $ 2-million
matter to payments : In kind
matter to payments : ill-defined
$ 130-
million**
$ 127-
million **
Hygea Health Holdings
( immediately NeighborMD )
Peguis First state
description : A health care
company that owns and
manages doctor ’ randomness offices in
the United States
description : The largest
first nation in Manitoba ,
population 10,000
Assets : indecipherable – a lawyer
for Bridging acknowledged
in court filings the ship’s company
is “ deplorably undersecured ”
Assets : ill-defined, though
consultants estimated the
district has “ downside
collateral ” of $ 50-million
interest payments : In kind
sake payments : In kind
* $ 208-million in debt and $ 109-million in equity ** A2A value as of June ,
2021. early lend values as of Sept. 2020

greg mcarthur and JOHN SOPINSKI/THE GLOBE AND MAIL ,
source : R.C. Morris & Co., inner presentation, as
well as documents filed in court

Bridging ’ second exposure to disruptive loans
Despite assurances from Bridging finance that the ship’s company adhered to strict lending requirements, some of its
largest loans have struggled and besides had light collateral for the court-appointed receiver to enforce against .
A sample distribution of some of Bridging ’ s poorest do loans are summarized below .
$ 144-
million**
$ 127-
million**
$ 130-

million**
$ 317-million*
Alaska-Alberta Railway
Development Corp. ( A2A )
Mjardin Group Inc .
Hygea Health Holdings
( now NeighborMD )
Peguis First state
description : A proposal to
build a railroad track from North-
ern Alberta to the ports of
Alaska as a intend of trans-
porting vegetable oil
description : A publicly traded
cannabis party with
facilities in Winnipeg, Nevada ,
and Brampton and Dunnville
in Ontario
description : A health care
ship’s company that owns and
manages doctor ’ sulfur offices in
the United States
description : The largest
inaugural state in Manitoba ,
population 10,000
Assets : No unvoiced assets ,
except “ intangible cerebral
property ”
Assets : production facili-
ties and several retail
outlets in Nevada, with a
market cap of $ 2-million
Assets : ill-defined – a lawyer
for Bridging acknowledged
in court filings the caller
is “ deplorably undersecured ”
Assets : indecipherable, though
consultants estimated the
territory has “ downside collat-
eral ” of $ 50-million
interest payments : In kind
sake payments : unclear
sake payments : In kind
concern payments : In kind
* $ 208-million in debt and $ 109-million in fairness ** A2A value as of June, 2021. early loan values as of Sept. 2020

greg mcarthur and JOHN SOPINSKI/THE GLOBE AND MAIL, SOURCE : R.C. Morris & Co., internal
presentation, adenine well as documents filed in court
Through it all, the Sharpes maintained their risk-averse façade. “ We do the most cautious phase of asset-based lend and accounts receivables, besides known as factorization, ” David said in a BNN interview in 2019. “ We ’ ra very binary at Bridging Finance, ” he added. If a loanword has stopped paying cash interest, “ we write it down…We want to be very guileless in that case. ” And he stressed that Bridging had never experienced a loanword loss. This message helped draw in retail investors, who poured at least $ 1.5-billion into Bridging funds. They may not have amply understood private accredit, even if they were “ accredited, ” but they could trust a track record. The selling pitch besides helped win over influential investment advisers ; by the prison term the receiver took over, every big canadian bank had some photograph to Bridging funds. Advisers at Toronto-Dominion Bank were particularly smitten, investing $ 276-million deserving of client assets, the most of any bank or freelancer brokerage, according to a dislocation obtained by The Globe. “ The allegations against Bridging Finance are identical dangerous. As the OSC ’ south probe into Bridging Finance is ongoing, we do not feel it is appropriate to comment publicly, ” the bank said in an e-mail statement. With investor funds pouring in, Bridging started making dangerous money on its management and bonus fees. In 2016, the company ’ s earnings before interest, taxes, depreciation and amortization was $ 2-million. By 2019, it had jumped to $ 43-million, according to internal figures obtained by The Globe. To cash in on this growth, Bridging ’ second owners hired Raymond James to explore a sale. That ’ randomness when Gary Ng appeared . Gary Ng acquired PI Financial Corp. for $ 100-million in 2018.Mikaela MacKenzie /Winnipeg Free Press Mr. Ng was another obscure Winnipeg-based businessman who ’ d been making the rounds, publicly referring to himself as an “ admiral ” who was amassing a “ fleet ” of independent firms. A year sooner, he ’ five hundred surprised Bay Street by acquiring Vancouver-based money coach PI Financial Corp. for $ 100-million, and over dinner at Sotto Sotto in Toronto ’ s Yorkville vicinity, Mr. Ng expressed interest in acquiring Bridging. In August 2019, the Cocos and Natasha Sharpe sold a 50-per-cent stake to him for $ 50-million. early in 2020, however, PI discovered some issues with the collateral Mr. Ng had posted when he purchased the money director. An investigation revealed Mr. Ng had forged documents and wasn ’ thyroxine worth anywhere near what he ’ d said he was. This spelled trouble oneself for Bridging, which – unbeknown to investors– had lent Mr. Ng $ 100-million from its funds during the lapp time time period he was negotiating the purchase of his 50-per-cent venture. This wasn ’ t the first gear fourth dimension Bridging had done something along these lines. A year earlier, Bridging had agreed to end its Income Fund partnership, which meant it had to buy out its co-manager. ( By that steer, Sprott ’ s alternative induct arm had gone through a management buyout of its own and was renamed Ninepoint Partners LP. ) At the time, the dissolution was described as a business decision. The OSC alleges there ’ mho more to the floor. Court filings show that a few weeks before the disassociate was announced, Ninepoint spotted a strange transfer : $ 20-million had been moved out of the Ninepoint Bridging Income Fund and was then repaid from two separate Bridging funds. Ninepoint besides noticed that Bridging may have collected a special fee from one of the fund ’ s borrowers but kept the money for itself rather of sharing it. In an interview with the OSC this February, Ninepoint co-CEO John Wilson described the allege transfers as “ very unusual movements of das kapital out of the fund ” and added, “ We didn ’ thyroxine sympathize precisely what would have caused that to happen. ” Even though all the money came back, Ninepoint couldn ’ thymine bring “ satisfactory answers ” from Bridging. When asked about the transfers, both David and Natasha Sharpe, along with a few early Bridging employees, gave the OSC a wholly unlike explanation, telling the watchdog Ninepoint was facing fiscal difficulties and wanted to be bought out so it could make lend repayments. Emails filed in court appear to support Ninepoint ’ s interpretation of events. In May, 2018, Ninepoint sent Bridging a dinner dress letter outlining its concerns about the transfer of funds. Mr. Wilson besides met with David Sharpe and Bridging ’ second foreman conformity officer, Andrew Mushore, to discuss the matter. In an e-mail to colleagues and Ninepoint ’ s legal rede subsequently, he wrote : “ Andrew ( and to a specify extent, Dave ) attempted to explain away the $ 20M transfer out of our store – I won ’ triiodothyronine go into the details, let ’ s precisely say it was a fairly inadequate and crystalline undertake to cover up what they had done. ” Bridging ultimately bought out Ninepoint ’ s stake in the management contract for $ 45-million, and the direction this payment was sourced is now under examination. much like the lend Gary Ng used to buy his Bridging venture, the OSC alleges the buyout was misappropriated because it was paid for with investor funds and disguised to look like the money came from elsewhere. Whether it will ever be returned to investors could depend on the OSC ’ s ongoing investigation. The Ng loan, however, was partially repaid by the Cocos and Natasha Sharpe as character of a deal to buy back his $ 50-million stake in Bridging for $ 5 in March, 2020. Bridging ’ mho woes have alone snowballed since then, however. Two weeks after buying out Mr. Ng, Canada entered its first COVID-19 lockdown. As markets tanked, panicked investors filed redemption requests amounting to 10 per penny of Bridging ’ randomness assets under management. With the economy in free-fall, the lender couldn ’ t sell its illiquid loans fast enough, and it was forced to gate its funds and lock investors in .
Bridging Finance ’ s asset increase over five years
Assets under management, in millions of dollars
$ 2,029
$ 1,836
$ 1,164
$ 664
$ 398
2016
2017
2018
2019
2020E
Bridging Finance ’ s fiscal performance over five years
tax income vs. EBITDA, in millions of dollars
$ 64.2
$ 56.4
$ 48.7
ebitda
tax income
$ 42.8
$ 31.7
$ 20.6
$ 15.1
$ 10.5
$ 7.3
$ 2
2016
2017
2018
2019
2020E
domenic macri and JOHN SOPINSKI/THE GLOBE AND MAIL
reservoir : R.C. Morris & Co. home presentation

Bridging Finance ’ s asset growth over five years
Assets under management, in millions of dollars
$ 2,029
$ 1,836
$ 1,164
$ 664
$ 398
2016
2017
2018
2019
2020E
Bridging Finance ’ s fiscal performance over five years
gross vs. EBITDA, in millions of dollars
$ 64.2
$ 56.4
$ 48.7
ebitda
gross
$ 42.8
$ 31.7
$ 20.6
$ 15.1
$ 10.5
$ 7.3
$ 2
2016
2017
2018
2019
2020E
domenic macri and JOHN SOPINSKI/THE GLOBE AND MAIL
source : R.C. Morris & Co. inner display

Bridging Finance ’ s asset growth over five years
Assets under management, in millions of dollars
$ 2,029
$ 1,836
$ 1,164
$ 664
$ 398
2016
2017
2018
2019
2020E
Bridging Finance ’ s fiscal performance over five years
$ 64.2
gross vs. EBITDA, in millions of dollars
$ 56.4
$ 48.7
ebitda
gross
$ 42.8
$ 31.7
$ 20.6
$ 15.1
$ 10.5
$ 7.3
$ 2
2016
2017
2018
2019
2020E
domenic macri and JOHN SOPINSKI/THE GLOBE AND MAIL
generator : R.C. Morris & Co. home display
The matter went unsolved for months, but by September 2020, Bridging was able to secure a $ 126-million cash infusion from institutional investors. Under the terms of the participation notice, as the fund was known, the modern investors ranked elder to all existing investors, and they were entitled to cash interest payments, careless of whether the borrowers themselves were paying in cash or deferring their payments. That like month, the OSC issued a summons for Bridging to produce more loan documents, and compelled David and early officials to appear for interviews with investigators. Around this time, Mr. Sharpe instructed a Bridging employee to contact the company ’ s IT service supplier and delete caller e-mails that contained specific research terms, one of which was “ Sean McCoshen, ” the receiver has alleged. According to court documents, 34,000 records were targeted for destruction. Mr. Sharpe besides started moving around money. Four days after his first sit-down with the OSC, he closed the BMO chequing report that had allegedly received Bridging funds lend to A2A ; a month former, in December 2020, $ 4.7-million of this money was moved offshore to a believe tauten Liechtenstein, according to the receiver. There was a significant shuffle inside Bridging, excessively. In January of this year, members of Mr. Sharpe ’ s lap were promoted to senior roles, including Robb Cacovic to co-CIO, aboard Natasha. then everything came came crashing to a halt at the conclusion of April, when the court stripped master of Bridging away from the Sharpes. With Bridging up for sale and major losses expected, the easy prey for investor rage is the Sharpes themselves. David and Natasha allegedly exploited the secrecy afforded to private debt managers and misled people about the true state of Bridging ’ sulfur finances. One glaring exemplify may be the emergency cash infusion Bridging obtained to fund its redemptions. The loan cost around 13 per cent annually and ranked the new institutional backers ahead of all existing store investors. alternatively of giving long-standing clients full disclosure of the deal, they say they leaned on legal advice that determined they didn ’ t need to say much about it. other times, David Sharpe contorted facts until they were unrecognizable. In 2019, during a BNN interview, Mr. Sharpe was asked about the trouble Bondfield lend and replied by saying it had been sold to a family in western Canada. In reality, the lend was assigned to his dependable acquaintance Mr. McCoshen, at no cost. so far Bridging besides didn ’ thyroxine operate in a vacuum. There were multiple parties who either took the Sharpes at their word or failed to ask questions at all. KPMG LLP is cardinal to this note of inquiry. As the auditor of Bridging ’ mho investment funds for the past two years, it ’ second one of the few external parties who had access to detailed loan data. In its 2020 audit, KPMG earmarked $ 31-million in expected loan losses for the Bridging Income Fund and $ 12-million for the Mid-Market Fund. ( Combined, the two funds have $ 1.5-billion in assets under management. ) The A2A lend and fairness military position, meanwhile, could see Bridging lose hundreds of millions of dollars It ’ sulfur possible KPMG relied on documents that supported the Sharpes ’ credit analysis, such as McKinsey ’ s $ 4-billion evaluation for the A2A railway. even then, it would be hard to justify keeping every loan but one at its master rate. When Bridging went hunting for hand brake fund stopping point year, it gave institutional investors a rare look at its books. One of them, R.C. Morris & Co. ( RCM ), grouped the loans in Bridging ’ s two largest funds into three tranches : A, B and C. RCM described C loans as “ regretful, ” with Bridging “ improbable to collect ” on the star, according to a presentation obtained by the Globe. By RCM ’ s measure, just 21 per penny of Bridging ’ south loans warranted an A rating ; 44 per penny were given a C. Most of those loans besides had deferred pastime payments or a “ payment in kind ” – IOUs that would be collected when the full loan was finally repaid. In answer to questions from The Globe, KPMG said it “ takes its role, responsibilities, and obligations as an auditor very seriously on every engagement. Our obligations under our Code of Professional Conduct prohibit us from discussing client confidential matters. ” Ninepoint, meanwhile, besides allegedly got a glance of some questionable demeanor when it was bought out of the co-management contract in 2018. There ’ randomness nothing to suggest Ninepoint was mindful of the full extent of Bridging ’ s behavior. But rather than tell its clients – or possibly even a watchdog – about what it had uncovered, it accepted the buyout without disclosing the backstory to those it helped bring into Bridging ’ s flagship fund. “ Ninepoint has always acted with the highest standards of diligence, integrity and foil, ” co-CEO John Wilson wrote in a statement to the Globe. “ We in full cooperated with the OSC ’ s investigation of Bridging Finance. We never had cognition of the allegations made by the OSC against Bridging Finance. We are very please that the OSC is taking a potent position in this case. ” Mr. Wilson besides noted that its disagreement with Bridging Finance “ was commercial in nature and related to fees. ” then there are the assorted investors, advisers and brokerage submission departments who played a function in the debacle. With debt investments, fat returns are synonymous with higher risk, and at eight per cent annually, Bridging ’ s were preferably fat.

The notion that such great returns could come with minimal hazard is what initially sparked Mr. Cardot ’ south curiosity about private debt and sent him searching for answers in the far corners of the internet. It might have been excessively much to ask individual investors to do the like. But all the signs pointed to the fact that Bridging was besides good to be true – specially for anyone who was supposed to know better. For all the blame the Sharpes deserve, Bay Street besides let itself get fooled. Your time is valuable. Have the Top Business Headlines newsletter conveniently delivered to your inbox in the morning or evening. Sign up today .

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