UPDATE - JUNE 14, 2018
By order of the Supreme Court of British Columbia dated April 7, 2017 (the “Receivership Order”), Grant Thornton Limited (the “Receiver”) was appointed receiver of certain funds (the “Receivership Funds”) of Bossteam E-Commerce Inc. (“Bossteam”).
The Receivership Order was sought and obtained by the British Columbia Securities Commission (the “Commission”). The Commission had earlier found that Bossteam had defrauded thousands of individual investors of millions of dollars by way of an internet advertizing scheme.
The Commission began investigating Bossteam and its principals in January 2012. In 2012 and 2013, the Commission froze cash assets in bank accounts of Bossteam in British Columbia totalling approximately $10,000,000 US (the “Frozen Funds”).
By Order of the Court dated April 7, 2017, called the Claims Process and Distribution Order (the “CPDO”), the Receiver was tasked with administering a claims process, with a view to returning the Frozen Funds to Investors who could establish that they had provided funds to Bossteam. Capitalized terms used and not otherwise defined in this Summary have the meaning ascribed to them in the CPDO.
In furtherance of its mandate under the CPDO, the Receiver:
- gathered such information as was available from the Respondents and the Commission, in order to better identify Investors and potential Investor Claims;
- provided notice to Known Claimants via electronic or regular mail;
- created and maintained the Dedicated Website (as the Court directed), in order to provide information and access to Known and potential Claimants;
- issued press releases in China and North America;
- published a legal notice in the Wenhui Daily, a Chinese daily newspaper widely available in print and online;
- identified and analysed Investor and Creditor Claims;
- adjudicated all Claims received prior to the Claims Bar Date; and
- delivered Notices of Disallowance to those Claimants whose Claims have been disallowed.
Bossteam’s records, which are incomplete, indicated that there may have been several thousand Bossteam Investors. However, despite significant efforts to contact Investors, the Receiver received only 972 Investor claims prior to the Claims Bar Date. Of those, the Receiver has allowed 451 claims, with a combined value of about $3.5 million US. The Receiver also has admitted the claims of three main creditors of Bossteam: the Commission, the Canada Revenue Agency and a law firm, Miller Thomson LLP.
Unfortunately, the records of Bossteam were fragmented and incomplete. It was not part of the Receiver’s mandate to conduct a forensic examination of those records or to gather further information. The Receiver’s mandate was limited to taking possession of the Receivership Funds and to administering a claims process, with a view to distributing the Receivership Funds to as many legitimate Investors as possible, in accordance with the CPDO. The Receiver was not asked to otherwise investigate the affairs of Bossteam or attempt to locate or recover other assets.
Given the deficiencies in Bossteam’s record-keeping, the Receiver did not require investors to meet a stringent threshold of proof to establish their claims, particularly Investors with small claims. Nevertheless, the Receiver did require investors to at least provide some evidence that they had actually provided funds to Bossteam. This was done, at least in part, out of concern that parties might view the claims process as an opportunity to submit fraudulent claims, and also to reduce the risk of fraudulent claims being allowed.
The Receiver adjudicated Investor Claims in a manner reflecting the fact that the Investors were mainly individuals with limited investment experience or sophistication, many of whom invested in cash and did not receive any receipt or other documentation from Bossteam.
Despite the Receiver’s desire to distribute as much of the Frozen Funds to Investors as possible, a large number of claims were submitted with no supporting documentation and which did not otherwise match anything in the records in the Receiver’s possession, and thus the Receiver could not be satisfied that these were legitimate claims. As a result, the Receiver was compelled to disallow a significant number of claims.
The Receiver is satisfied that it has taken appropriate steps to notify Investors of the Claims Process and that the Claims it has allowed are legitimate Claims that should be paid.