BC court lifts freeze on funds for US legal fees

The Supreme Court of British Columbia has partially lifted asset freeze orders that barred two residents from accessing money needed for legal costs in the United States.

Background of the SEC case

In 2021, the U.S. Securities and Exchange Commission filed civil proceedings in a Massachusetts district court against Paul Sexton and Mike Veldhuis, alleging participation in a cross‑border pump‑and‑dump scheme that violated securities law. The agency secured asset freeze orders in the United States and, concurrently, the British Columbia Securities Commission issued preservation orders that led to a B.C. injunction freezing the pair’s assets.

After a trial last year, the Massachusetts court ordered the defendants to jointly disgorge US$42.5 million and imposed additional civil sanctions. The ruling was affirmed on appeal in February 2024.

Court decision on the freeze

Facing the need to fund a possible appeal to the U.S. Supreme Court and to cover defenses in ongoing criminal cases, Sexton and Veldhuis petitioned the B.C. court to vary the 2024 injunction. The judge noted that while the SEC’s “joint and several liability arguments are an ‘uphill battle,’” the applicants met the low merits threshold for an arguable case.

The court concluded that the request had a plausible basis, even though such petitions succeed in roughly one out of a hundred attempts. Consequently, the order was modified to allow the former to access US$37,500 and the latter to receive US$22,500 for the appeal effort. Each also obtained US$50,000 for criminal‑law fees.

Both men originally asked for US$100,000 each for their criminal defenses. The agency objected, asserting that US$50,000 would adequately cover pre‑trial preparation. The B.C. judge agreed, granting the lower amount but leaving room for future adjustments once the funds are spent.

From a practical standpoint, the decision shows how Canadian courts can balance domestic asset‑preservation measures with the need to preserve defendants’ ability to contest foreign judgments. It also signals that regulators may not automatically block all funding for appeals, especially when the legal arguments touch on complex issues like joint and several liability. Whether the limited sums will be sufficient for a full Supreme Court petition remains uncertain, but the ruling creates a procedural pathway that was previously unavailable.

The unfreeze does not affect the underlying civil judgment. Sexton and Veldhuis remain liable for the full disgorgement amount, and the SEC retains its ability to enforce the judgment against their assets.

Legal analysts will be watching the next steps closely. If the pair pursue a U.S. Supreme Court appeal, the modest funds may only cover filing fees and limited briefing work, leaving additional financing needs to be addressed later. The B.C. court’s willingness to revisit the allocation suggests that future court filings could trigger further adjustments.