David Holden was recently convicted of defrauding Canadian investors in Seaquest Corporation and Seaquest Capital Corporation of more than $54-million in a complex ponzi-scheme. In related civil proceedings our team acted to obtain significant recoveries for some of Holden’s victims. Sadly, this was not the first time that Holden had defrauded investors.

In 1995, Holden plead guilty to 44 charges under the Ontario’s Securities Act and in 1999, he plead guilty to three counts of fraud related to his investment businesses’ activities. These earlier frauds were perpetrated against several hundred victims over an extended period. The way in which he attracted and influenced his investors was described in a Hamilton Spectator article dated October 23, 1999, this way:

The young investment guru advertised in [the local paper] and the Financial Post, held money seminars at the [local arts centre] and carried a youthful, crisp-suited charisma that attracted seniors to pump up their nest eggs.

In his earlier frauds, the Court found that Holden had converted the monies he had received from investors ‘into a trough, all the while conducting seminars at which he assured [them] that the investment was secured.’ In these earlier frauds, Holden was described by the presiding judge as having shown “arrogant indifference” to the trusting individuals he duped out of millions.

Most people would find it alarming to learn that Holden could perpetrate a further investor fraud when he had previously been convicted for similar schemes. In fact, at his recent trial there was evidence indicating that Holden set the Seaquest frauds in motion while still incarcerated for his previous fraud. As with his earlier schemes, Holden’s ability to carry out the Seaquest frauds hinged largely on the way he portrayed himself to his victims. In the trial decision concerning the Seaquest frauds, the presiding judge, Justice Dambrot, had this to say about Holden’s character:

Mr. Holden is incorrigible. He is polite, personable and cordial, characteristics that are not generally found in recidivist criminals. But they are the stock in trade of the fraudsman.

David Holden had always been a savvy promoter and salesman, but as is often the case, in the Seaquest frauds there were red flags that investors could have taken note of, including:

  • Guaranteed high returns with the promise of little to no risk
  • Lack of supporting documentation for investments
  • Ongoing pressure to stay “invested
  • False Credentials (that could have been confirmed)

The Ontario Securities Commission has published a checklist of questions that investors should ask themselves before investing, including:

  1. Were you promised a high return on a low-risk investment? One of the first rules of investing is that higher return equals higher risk. In other words, the more money you can potentially make on an investment, the higher the risk of losing some or all of your investment.
  2. Did you have enough time to make a decision? You should never feel pressured into buying an investment on the spot. If you hear things like “act fast,” “one-time opportunity” or “buy now before it’s too late,” the person you’re talking to likely has something to hide.
  3. Were you given confidential or “inside” information? A scam artist may claim to have information that nobody else knows about a company. You have no way of knowing if this “inside” information is true. And even if it is, trading on inside information is illegal in Canada.
  4. Can you verify the investment with a credible source? If you receive an unsolicited investment opportunity, get a second opinion from your registered financial adviser, lawyer or accountant.
  5. Is the person who contacted you registered? Anyone who tries to sell you an investment or give you investment advice must be registered unless they have an exemption. You can contact your local securities regulator, listed on the back cover of this guide, to check if someone is registered.

On February 7, 2020, the Ontario Superior Court of Justice sentenced Holden to 12 years imprisonment, and a fine of $54,159,737. The judge also ordered an additional five years’ imprisonment if Mr. Holden fails to pay the fine within ten years after the expiry of his 12 year sentence. The Court listed several aggravating factors, which weighed in favour of a heavier sentence. These included abusing a position of trust, the fraud’s magnitude and complexity, the large number of victims, and the fraud’s impact on victims given their personal circumstances. The Court emphasized the exceptionally egregious nature of Mr. Holden’s fraud. Of his 65 victims, he targeted not only investors but also those people he cultivated as friends. Most of his victims would not be able to recoup their losses within their lifetimes.

In addition to proactive steps that can be taken prior to investing to confirm the legitimacy of a promoter or investment vehicle, once invested there are legal remedies available if you have concerns about your investments. If there has been improper conduct, it is often possible to bring civil proceedings, including emergency relief measures to freeze and recover investor funds.

* With thanks to Jan Nato, articling student, for his assistance.