"C. VIOLATION / CONDUCT - THE ILLEGAL DISTRIBUTIONS CONTRARY TO SECTION 53 OF THE ACT"
The Distribution During 2008
25. During 2008 Bordynuik distributed securities of JBI or John Bordynuik Inc. to residents of Ontario without a prospectus as required by Section 53(1) of the Act.
26. In documents filed with the Commission Bordynuik purported to rely on exemptions for the 2008 distributions, namely the accredited investor exemption and the family, friends and business associates exemption.
27. The distribution in 2008 raised roughly $2.9 million from approximately 204 Ontario investors. The 2008 distribution was contrary to Ontario securities law for the following reasons: (a) The family, friends and business associates exemption does not apply to a trade in securities in Ontario hence was not an available exemption;
(b) It appears that the majority of the Ontario investors were not in fact accredited investors. Bordynuik’s reliance upon that exemption was inappropriate.
28. The 2008 distribution of John Bordynuik Inc. shares were accordingly an illegal distribution insofar as it was marketed and sold to Ontario investors, contrary to Section 53 of the Act.
The PIPE Transactions
29. The acronym “PIPE” stands for Private Investment in Public Equity. In the United States a PIPE offering may be registered with the SEC or may be completed as an unregistered private offering.
30. Bordynuik caused JBI to raise money through four PIPE offerings and in each of the four PIPE offerings shares were marketed and sold to Ontario residents. The particulars are set out below.
31. The first PIPE offering was at $0.80 per share and took place from December 2009 through January 14, 2010. In the first PIPE offering Bordynuik assisted in the marketing and sale of shares to 176 Ontario residents and raised $4,105,000 US in proceeds from those Ontario investors. The first PIPE offering was made without a prospectus or offering memorandum and there was no exemption available. Bordynuik did not purport to claim any exemption on behalf of JBI. The distribution to Ontario investors during the first PIPE offering was contrary to Section 53 of the Act.
32. The second PIPE offering took place in May 2010. Bordynuik caused JBI to distribute its shares at $4.00 per share during the second PIPE offering and he caused JBI to market and sell shares to 40 Ontario investors who paid in aggregate $1,734,000 U.S. The second PIPE offering was made without a prospectus or offering memorandum and there was no exemption available. Bordynuik did not purport to claim any exemption on behalf of JBI. The distribution to Ontario investors during the second PIPE offering was contrary to Section 53 of the Act.
33. In December 2010 Bordynuik caused JBI to carry out the third PIPE offering, this time offering shares of JBI at $0.50 per share. A total of 6 Ontario investors participated in the third PIPE offering. A total of $1,215,000 US was raised from these 6 Ontario investors. There was no prospectus or offering memorandum during the third PIPE offering. There was no exemption available and Bordynuik did not purport to claim any exemption on behalf of JBI. The distribution to Ontario investors during the third PIPE offering was contrary to Section 53 of the Act.
34. Bordynuik caused JBI to undertake a fourth PIPE offering in April 2011. At this time JBI offered its shares for sale at $0.70 per share. In the fourth PIPE offering the company marketed and sold its shares to 52 Ontario residents and raised a total of $1,215,000 US from Ontario investors. No prospectus or offering memorandum was provided in connection with the fourth PIPE offering. No exemption was available with respect to sales to Ontarians within that PIPE offering. Bordynuik did not purport to claim any exemption on behalf of JBI. The distribution to Ontario investors during the fourth PIPE offering was contrary to Section 53 of the Act.
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