(April 24 – 09:30 ET) – The British Columbia Securities Commission has refused to release funds frozen in a Vancouver bank which the U.S. Securities and Exchange Commission says are proceeds from a fraud.

The BCSC has refused an application by the person winding up the affairs of Sterling Bank, an offshore bank incorporated in the Pacific nation of Nauru, to release about US$500,000 frozen in a Vancouver bank account by a commission order since April 2000. Sterling is unable to pay its debts and the provisional liquidator wants the funds released so he can proceed with winding up the bank.

However, BCSC staff and the SEC say the frozen funds are the proceeds of alleged illegal securities trading by Stephen Sayre and related companies. The SEC says Sayre manipulated the share price of eConnect, a U.S. company. The SEC is seeking orders next month from the California courts to have the allegedly ill-gotten gains surrendered.

“If those orders are made,” the BCSC said, “they will assist the SEC in preserving assets for the eConnect investors. “We therefore consider it in the public interest that the freeze order stay in place.” The commission also noted that its staff investigation into the matter is not complete.

The BCSC also turned down an application by Andalex Ltd., a Sterling bank depositor, seeking to release the funds. The commission ruled that it had no basis to release funds belonging to Sterling at the request of Andalex.