The legal saga surrounding one of Canada’s most significant private lending collapses intensified yesterday as former Bridging Finance executive David Sharpe filed an appeal against the Ontario Securities Commission’s fraud ruling. Sharpe, who served as CEO until the firm’s dramatic 2021 implosion, is contesting both the verdict and the unprecedented $4.3 million in penalties imposed last month.
“This appeal represents more than a challenge to financial penalties—it’s about fundamental questions of regulatory overreach and procedural fairness,” said Brendan Wong, Sharpe’s lead counsel in the high-stakes appeal. “We believe the tribunal made several critical errors in both their interpretation of evidence and application of securities law.”
The collapse of Bridging Finance sent shockwaves through Canada’s investment community when regulators seized control of the firm’s $2 billion in assets following allegations of significant misconduct. OSC investigators uncovered what they described as “systematic misappropriation” involving several high-risk loans and undisclosed conflicts of interest that ultimately left thousands of investors facing substantial losses.
At the heart of Sharpe’s appeal is the claim that the OSC tribunal failed to properly consider key exculpatory evidence, including documentation showing that certain transactions had received board approval. The appeal also challenges the unprecedented size of the penalties, which include a $3 million administrative penalty and $1.3 million in disgorgement.
The case has drawn intense scrutiny from the financial services industry, with many viewing it as a bellwether for regulatory enforcement in Canada’s private lending sector. Industry analysts following the case note that the outcome could reshape compliance practices across similar investment firms.
“Whatever the appeal court decides will effectively set the standard for what constitutes appropriate disclosure and conflict management in private debt,” explained Marina Lau, senior financial analyst at Westbrook Capital. “Firms throughout the alternative lending space are watching closely.”
For the thousands of investors caught in Bridging’s collapse, the appeal prolongs an already painful process. Many have seen their retirement savings locked in recovery proceedings for over two years, with preliminary estimates suggesting eventual recoveries might reach only 35-50 cents on the dollar.
The OSC’s original ruling highlighted what it called “egregious breaches of fiduciary duty,” specifically citing Sharpe’s failure to disclose personal benefits received from borrowers and allegations that he diverted over $1 million in funds for personal use—claims Sharpe has consistently denied.
Legal experts suggest the appeal faces significant hurdles, but note that Canadian courts have occasionally overturned regulatory decisions when procedural issues arise. The appeal process could extend well into 2024, further delaying final resolution for affected investors.
The Bridging Finance case represents one of the most significant fraud findings in Canadian private markets in recent memory. The firm’s spectacular downfall has already prompted calls for enhanced oversight of private credit markets, with investor advocacy groups pushing for reforms to protect against similar failures.
For more on this developing story and its implications for investors, visit CO24 Business for continuing coverage and expert analysis of this landmark case.
