Former executives at troubled asset manager Bridging Finance Inc. (BFI) — which is expected to inflict over $1 billion in losses on its investors — now stand accused of defrauding investors by the Ontario Securities Commission (OSC).

The OSC unveiled allegations against the husband and wife team that ran Bridging, David and Natasha Sharpe, along with the firm’s chief compliance officer, Andrew Mushore, charging that they violated securities laws and defrauded investors.

In the enforcement allegations unveiled today, the OSC said: “David and Natasha Sharpe defrauded institutional and retail investors out of millions of dollars through their dishonesty and deceit. The Sharpes exploited their positions of trust for their own personal gain.”

Among other things, the regulator alleged “the Sharpes funnelled investor funds to themselves and Bridging, then concealed their wrongdoing from investors.”

The regulator also alleged that the pair obstructed the OSC’s investigation into the firm’s business: “Together with Mushore, they destroyed, concealed and altered Bridging records, misled staff after swearing to tell the truth, and, in the case of David Sharpe, intimidated witnesses.”

None of the allegations have been proven.

An initial hearing in the case has been scheduled for April 27 at the OSC.

Before that case can get off the ground, however, it’s likely to face a legal challenge from David Sharpe, stemming from the fact that an OSC hearing panel also ruled today that the regulator’s staff violated his privacy rights by improperly disclosing evidence collected from compelled testimony in court filings without first obtaining an order authorizing the disclosure.

Last year, the OSC pushed Bridging into receivership after it uncovered alleged undisclosed conflicts of interest at the firm and its funds.

In court filings seeking the appointment of a receiver for Bridging, the regulator disclosed some evidence that was collected in its compelled examination of David Sharpe.

He then applied to the commission seeking to have the regulator’s original investigation order revoked, based on the alleged improper disclosure of that testimony.

Now, the OSC panel has ruled that Sharpe was right and the disclosure was improper. The panel concluded that “the commission’s actions defeated Mr. Sharpe’s reasonable privacy expectations.”

However, the panel also dismissed Sharpe’s request for the commission to revoke its investigation order based on the improper disclosure, saying that revoking its order “is not an available remedy in the circumstances.”

“The remedy Mr. Sharpe seeks is unprecedented. That does not mean that it is never available, but Mr. Sharpe has not met the burden of showing why we should exercise our discretion to depart from established precedent, including from the established principle that revocation of an earlier order should result only in the rarest of cases, and for sound reasons, which reasons do not exist in this case,” the panel said in its decision.

Commenting on the panel’s conclusion, Sharpe’s lawyer, Alistair Crawley, said in a statement, “The OSC caused Mr. Sharpe and his family gratuitous stress and reputational damage. Instead of reflecting on the panel’s rebuke of its conduct, OSC staff immediately notified Mr. Sharpe’s lawyers it will bring public allegations against Mr. Sharpe.”

Crawley indicated that Sharpe’s legal team “will seek a remedy for the OSC’s conduct before the hearing panel,” and that “Mr. Sharpe plans to challenge OSC staff’s decision to commence a proceeding against him in the face of the prior ruling by a hearing panel…that the OSC improperly publicly disclosed his compelled testimony.”

If the case against Sharpe is ultimately allowed to go ahead, “Mr. Sharpe intends to defend the proceeding,” Crawley added.

The regulator’s allegations come on the heels of a ruling by the Ontario Superior Court of Justice that granted a motion from Bridging’s receiver, approving its decision to abandon efforts to sell the firm and its assets, and to instead proceed with a liquidation process. That process is expected to result in investors recovering between 34% and 42% of their investments — representing losses of over $1 billion, given that the firm managed about $2.1 billion for investors prior to its receivership.