Emerge Canada: Cathie Wood-Linked ETF Firm Accused of Diverting Investor Funds

Cathie Wood’s Toronto-listed partner, Emerge Canada, is facing serious allegations from the Ontario Securities Commission, which claims the investment manager violated securities laws by diverting investor funds to prop up its own businesses.

The OSC says these transactions amounted to self-dealing loans of approximately C$6 million over nearly four years. Regulators contend that these actions left investors exposed when Emerge encountered financial distress.

Emerge Canada’s troubles became public when the firm was unable to file audited financial statements for 2022. Its auditor had resigned, prompting the OSC to ban trading in all 11 of the company’s funds, including six that followed the investment strategies of Cathie Wood’s Ark Investment Management, in April 2023.

A month later, the OSC found Emerge had insufficient capital, stripped it of its licenses to operate as an investment fund manager, portfolio manager, or exempt-market dealer, and ordered that the company be wound down.

“Emerge acted in its own interests by knowingly taking an estimated $6 million of investor money in self-dealing loans,” the OSC alleges in its enforcement filing.

Much of this money was reportedly channeled into Emerge’s businesses, which the regulator says were in financial peril. When the wind-down process concluded in December 2023, investors discovered they were unsecured creditors in the now-defunct funds.

Emerge owed $4.7 million to five of its Ark-partnered exchange-traded funds, money that was never repaid. A class action effort to recover those funds was abandoned in April 2024.

The case has drawn additional scrutiny because the OSC also named the three members of Emerge’s independent committee charged with overseeing its ETFs. The regulator contends that committee members “breached [their] duties to investors, caused the funds to enter into prohibited loans, failed to properly address the conflict of interest created by the receivable, and failed to maintain proper books and records, or an adequate system of controls and supervision.”

One lawyer representing two of the committee members calls the OSC’s action “unprecedented,” adding that “these women have impeccable records,” and “we believe the grounds that OSC enforcement is relying upon are tenuous.”


Information for this briefing was found via Bloomberg and the sources mentioned. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.

One Response

  1. Retail investors were defrauded. The monies seem to have vanished without hope of restitution. Criminal prosecution the least we can hope for. Unbelievable that this happened in this country!

Video Articles

Gold/Silver: People Can Still Lose Money In This Bull Market!? | Rick Rule

He Said $300 Silver!? | Peter Krauth

Dollar Will Collapse, Gold and Silver Are the Only Safe Havens | Jim Rogers

Recommended

Tsunami Warnings Spread As Largest Quake Since 2011 Hits Russia

Northern Superior Intersects 1.75 g/t Gold Over 65.0 Metres At Philibert

Related News

Single-Stock ETFs Will Soon Let Investors Bet Against AMC, GME And Other Meme Stocks

If things go according to plan, investors will soon be able to conveniently short their...

Wednesday, August 31, 2022, 02:17:00 PM

Cathie Wood Abdicates Manager Role at Two Ark ETFs

It appears Cathie Wood may finally have had enough of her poorly-performing investment funds, and...

Friday, September 23, 2022, 09:45:44 AM

Cathie Wood Launches New ETF That Excludes Fossil Fuel, Alcohol, Banking

In an effort to deliver more transparency to her cult following, Wall Street’s darling Cathie...

Thursday, September 2, 2021, 04:40:00 PM

ARK Invest Buys $42 Million in DraftKings Following Hindenburg Report

ARK Invest, best known for never shying away from a price drop even if the...

Wednesday, June 16, 2021, 05:01:00 PM

Shorts Against Cathie Wood’s ARKK Surge to Record-High

Following what has been a strong performance for Cathie Wood’s Ark Innovation (NYSE: ARKK) fund...

Saturday, August 7, 2021, 03:04:00 PM