Back in the News: Bridging Finance Inc

A number of spectators have pointed me toward the latest Bridging Finance developments and, given the recent Novaporte announcement, this seems as good a time as any to do a check-in.

Bridging, in case you’ve forgotten, was the Toronto-based private debt lender that loaned Membertou Corporate $6.8 million to invest in Albert Barbusci’s Sydney harbor container terminal project. Membertou and Bridging Inc were announced as partners in Barbusci’s Novaporte “consortium” in January 2020. As I have noted before, Membertou turning to Bridging Finance for money is indicative of the risky nature of the Novaporte investment—private debt lenders specialize in boldly going where regular banks fear to tread and Ontario Securities Commission (OSC) filings and media reports suggest Bridging was bolder than most.

Natasha and David Sharpe

Natasha and David Sharpe, 11 April 2019 (Source: Bridging Finance Inc)

Run by the husband-and-wife team of David and Natasha Sharpe, Bridging was managing about $2 billion for some 26,000 investors in April 2021 when a judge, at the behest of the Ontario Securities Commission (OSC), took the reins from the Sharpes amid allegations of self-dealing and misleading investors. (This is a rather dry summary of a case that is really pretty fantastical at times, see: anything related to Sean McCoshen.)

PricewaterhouseCoopers (PwC) was appointed trustee with a mandate to sell the company, but after identifying “significant issues” with many of Bridging’s loans, it asked the court to allow it to abandon the attempted sale and proceed to a wind-down of the firm.

In March 2022, the court approved this request, which was expected to result in a loss to investors of at least $1.3 billion.

On 1 June 2022, OSC staff asked the commission to impose fines of up to $1 million against the Sharpes and Andrew Mushore, Bridging’s chief compliance officer

In November 2022, the Globe and Mail, citing unnamed sources,  reported that investigators with the RCMP’s Integrated Market Enforcement Team were “interviewing witnesses and seeking records” in connection with the company.

The Ontario Capital Markets Tribunal has scheduled a hearing on the enforcement proceedings against the Sharpes and Mushore for late June, unless motions by the Sharpes to stay the proceedings on the grounds of abuse of process are successful, which seems unlikely—the Sharpes also filed motions demanding the disclosure of documents they claimed were relevant to their abuse of process proceedings but the Capital Markets Tribunal dismissed these, saying the Sharpes had failed to demonstrate a “tenable case of abuse of process.” In light of this, the OSC filed a motion on March 16 requesting the Sharpe’s abuse of process motions be dismissed. The tribunal has yet to rule on this.

David Sharpe was unable to have certain evidence in the case made confidential and Bridging COO Mushore was equally unsuccessful in his attempt to have his hearing, on allegations including securities fraud and misleading OSC staff, expedited. (Mushore’s request was opposed by both OSC staff and the Sharpes.)

On March 28, the OSC agreed to extend the ban on trading Bridging Fund securities until 30 days after a decision is made in the enforcement case against the Sharpes.


Local angle

PwC’s most recent breakdown of Bridging’s loan portfolio is not particularly recent, it dates to 30 November 2021, at which point there were still 58 loans on the books, 13 of them within insolvency or litigation.

Interestingly, the report shows just four equity positions (worth a total of $18 million) across all the Bridging funds at that point. Is one of these the Novaporte stake?

Well, as of February 14 of this year, when Novaporte renewed its registration with the Quebec business registry, Bridging was still listed as an investor:

List of Novaporte stakeholders

(Source: Quebec Registraire des entreprises)


3331668 Nova Scotia Limited was registered in October 2019 and lists two directors:  Chief Terry Paul (president) and Trevor Bernard (secretary).

11781839 Canada Inc is a federally registered company that lists only Albert Barbusci as a director.

We’re now approaching the second anniversary of Bridging’s collapse and PwC continues its efforts to wind down Bridging operations and recover funds for Bridging investors, either through negotiations or through legal action (about which, more below).

What this means for Bridging’s stake in Novaporte or its loan to Membertou is beyond my ken, but surely it must mean something. I mean, what would a potential Novaporte investor or partner (assuming such a creature actually existed) make of the fact that, besides Barbusci himself, Novaporte’s investors are a defunct private debt lender whose principals are facing enforcement action and possible criminal investigation in Ontario and a First Nation that borrowed the money to buy its stake from the same defunct private lender?

That has to sound a few alarm bells, no?


Peguis First Nation

Bridging had a reputation for “supporting” First Nations (David Sharpe is a member of the Mohawks of the Bay Quinte) and the Bridging Finance story readers were sending me to this week was one about the Peguis First Nation of Manitoba.

Back in 2021, when the Globe and Mail broke the story of Bridging’s receivership, the paper mentioned a loan to Peguis First Nation, noting that earlier that year, before the receivership, the band council had:

…retained band member and former senator Murray Sinclair to review the transactions with Bridging…“The amount of interest that [Bridging] was charging Peguis was phenomenal,” he told The Globe in an interview. “The concern I had was that it is conceivable that Peguis was taken advantage of.”

The band, which consists of 11,000 people, was facing a housing crisis in 2017 and hired Sean McCoshen to broker three loans worth over $37 million from Bridging Finance. But as the Toronto Star reported in June 2021:

…according to an existing financial arrangement with the Bank of Montreal, Peguis was not allowed to take on additional debt at that time. As a result of the deal cut between Peguis and BFI, BMO requested repayment in full.

McCoshen then arranged for Peguis to borrow millions more from BFI — at a significantly elevated interest rate — so it could repay BMO. At minimum, the Manitoba community of roughly 10,000 has borrowed $122 million from BFI in recent years.

According to a March 2021 report from the Chief Peguis Investment Corp., the community is currently $135 million in debt.

Did I mention the Peguis First Nation has a registered population of 11,000?

In December 2022, PwC filed claims in Ontario and Manitoba courts, seeking to recover the loan, now worth almost $170 million. According to the Globe and Mail, as news of the Ontario court action began to spread through the band:

A dissident group, 269 Silent No More, held a rally and meeting that month in the community of Peguis to highlight the Ontario court action – handing out copies to band members – and to call for more transparency from the chief and council. (269 is Peguis’s band number under the federal Indian Act.)

Last week, “updated financial statements for the band were posted on the Peguis website” and band members discovered that Chief Glenn Hudson and council had written down the loan to $25 million:

According to those financial statements, the chief and council sought legal advice in the wake of the receiver’s Manitoba lawsuit to review the documentation and terms of the Bridging loans, including whether the loans complied with provisions of the Indian Act.

Under the Indian Act, on-reserve property and assets are in general protected from seizure by creditors, but those provisions can be waived. Peguis says its legal counsel believes that some of the Bridging loans required Bridging to obtain fresh waivers under the act, as opposed to relying on those previously obtained by BMO for its loans, and Peguis claims Bridging did not take that step.

Members of 269 Silent No More told the Globe they thought the write-down was a ploy on the part of the chief, who is up for re-election in April, to make the band’s debt seem less serious:

“It’s a complete and utter joke for the current chief and council to think that a band-council resolution, like a magic wand, will somehow make the debt magically disappear,” said Stan Bird, a member of 269 Silent No More who is running for chief against [Chief Mr. Hudson.

The most recent twist occurred on March 24, when Hudson and the councilors posted a letter to band members stating that the write-down has not been finalized and they have “instructed the Manitoba First Nation’s lawyer to talk to PricewaterhouseCoopers Inc., in order to resolve a multimillion-dollar dispute about loans owed to Bridging Finance Inc.” (I’ve linked to a Winnipeg Free Press article because, for some reason, I can’t access any of the content on the Peguis website).

By comparison, Membertou’s $6.8 million loan—which has presumably been settled or is in the process of being settled through negotiations—at whatever crazy rate of interest Bridging was charging, looks almost sensible.

Or at least, as sensible as any entanglement with a lender that has collapsed in the midst of a scandal  can look.