B.C. court says fraudster's financial sanction will not be erased by bankruptcy

VANCOUVER, BC, June 19, 2025 /CNW/ - A $6.8 million financial sanction against a fraudster will not be extinguished if he is discharged from bankruptcy, a B.C. Supreme Court judge has ruled.

The BC Securities Commission (BCSC), which ordered Thomas Arthur Williams to pay the sanction in 2016, had asked that the sanction remain enforceable even if all or most of his other debts are erased by discharge from bankruptcy.

The judge granted the BCSC's application based on last year's ruling by the Supreme Court of Canada in another BCSC case. The Supreme Court of Canada said that a type of financial sanction known as disgorgement – an order to pay money representing the amount obtained or loss avoided by the wrongdoing – should survive bankruptcy if it was imposed for misconduct involving "false pretences or fraudulent misrepresentation."

"There is a direct link between the disgorgement order debt and [Williams's] deceitful misconduct," the court said.

A BCSC panel found in 2016 that Williams, who had been a registered mutual fund representative, was the mastermind of a Ponzi scheme that raised approximately $11.7 million from 123 investors between February 2007 and April 2010. The panel found that he committed fraud and violated securities laws concerning prospectus and registration requirements.

Williams, who applied for bankruptcy in 2021, has not paid any portion of the $6.8 million disgorgement order. He opposed the BCSC's application to have the disgorgement survive discharge from bankruptcy, but according to the court, he "was unable to provide a reason for why the declaration should not be granted when given an opportunity to do so during the course of the hearing."

Any funds collected for disgorgement can be returned to victims of the misconduct.

This month's B.C. Supreme Court ruling was the first to use the Supreme Court of Canada's legal test for determining whether a financial sanction should survive discharge from bankruptcy.

The Supreme Court of Canada, in that same 2024 ruling, said that administrative penalties – which are separate from disgorgement orders, and are aimed at deterring misconduct – are not enforceable after a discharge from bankruptcy. The court's 5-2 ruling was based on its interpretation of the federal Bankruptcy and Insolvency Act (BIA), which says that certain types of debts will not be erased after discharge. The court noted that Parliament could have drafted the BIA to expressly say that financial sanctions of regulatory bodies or administrative tribunals are exempt from bankruptcy discharge, but the BIA does not say that.

In response to that ruling, the BCSC has been engaging with elected and appointed federal officials about adding securities regulators' financial sanctions to the BIA's list of debts that survive bankruptcy.

In addition to the $6.8 million disgorgement order against Williams, the BCSC also imposed a $15 million administrative penalty. He has not paid any portion of that, either.

Williams sought to be discharged from bankruptcy in 2023. The BCSC and the court-appointed trustee opposed that application, which was adjourned indefinitely.

About the BC Securities Commission (www.bcsc.bc.ca)

The BC Securities Commission, an independent provincial government agency, strives to make the investment market benefit the public. We set rules, monitor compliance by industry, take action against misconduct, and provide guidance to investors and industry. As guardians of B.C.'s investment market, we're committed to maintaining a market that is honest, fair, competitive and dynamic, enabling British Columbians to thrive.

Learn how to protect yourself and become a more informed investor at www.investright.org

SOURCE British Columbia Securities Commission

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