PyroGenesis Canada Faces Regulatory Action for Alleged Fraud

PyroGenesis Canada (TSX: PYR), along with its CEO Peter Pascali and director Alan Curleigh, is facing regulatory action from the Autorite des marches financiers (AMF), the securities regulator in Quebec. The AMF has taken action against the company and its executives in relation to a settlement agreement entered into in 2018 between PyroGenesis and Phoenix Haute Technology, a company controlled by Pascali's late father. The agreement settled a $5.5 million claim related to the purchase of intellectual property (IP) rights in 2011.

Allegations of Fraud and Misrepresentations

The AMF has charged Pascali with a breach of section 199.1(2) of the Securities Act (Quebec), alleging that he perpetrated a fraud. In addition, both Pascali and the company are accused of breaching sections 196 and 197, which relate to alleged misrepresentations in the filing of a prospectus or transacting in a security. The AMF alleges that Pascali and the company failed to comply with disclosure obligations under securities legislation, and that Pascali and Curleigh failed to fulfill their fiduciary duties as directors.

The securities regulator is seeking to impose $4.2 million in administrative penalties against Pascali, along with a disgorgement order of $9.57 million. For the company, the AMF is seeking penalties of $550,000. Furthermore, the AMF aims to prohibit Pascali and Curleigh from acting as officers or directors for a reporting issuer for a period of five years.

Background of the Allegations

The allegations stem from a settlement agreement reached in 2018 between PyroGenesis and Phoenix Haute Technology. The agreement settled a $5.5 million claim related to the purchase of IP rights in 2011. Under the settlement, PyroGenesis issued $3.7 million in units of the company to Phoenix.

PyroGenesis Responds to the Allegations

In response to the regulatory action, PyroGenesis expressed disappointment in the AMF's decision to proceed with the proceedings. The company stated that it had cooperated with the AMF throughout its extensive investigation and looks forward to presenting its case in court. PyroGenesis expressed confidence in the truth prevailing and suggested that the motives behind those supporting the outcome would be exposed during the legal process.

The company also emphasized its commitment to operating in the ordinary course despite the distraction caused by the proceedings. PyroGenesis expects the impact on its operations to be less significant compared to the previous investigation process.

Denial of Allegations and Vigorous Defense

All three parties involved - PyroGenesis, Pascali, and Curleigh - have denied the allegations and deemed them without merit. They have vowed to vigorously defend themselves against the charges brought by the AMF.

Potential Impact on PyroGenesis and Investors

The regulatory action by the AMF and the allegations of fraud and misrepresentations can have significant implications for PyroGenesis and its investors. If the allegations are proven true, it could damage the company's reputation and erode investor confidence. The potential penalties and disgorgement orders sought by the AMF could also have a financial impact on PyroGenesis.

Investors should closely monitor the progress of the legal proceedings and consider the potential risks associated with the regulatory action when making investment decisions.

Conclusion

PyroGenesis Canada, its CEO Peter Pascali, and director Alan Curleigh are facing regulatory action from the Autorite des marches financiers (AMF) in Quebec. The allegations include fraud, misrepresentations, and failure to comply with disclosure obligations and fiduciary duties. The AMF is seeking significant penalties and disgorgement orders, as well as a prohibition on Pascali and Curleigh acting as officers or directors for a reporting issuer. PyroGenesis has denied the allegations and is prepared to vigorously defend itself in court. Investors should closely monitor the situation and assess the potential impact on the company and its operations.

‍