Article – The former executives at the heart of Canada’s largest private credit collapse now face a new crisis, as creditors move to force them into bankruptcy amidst mounting legal troubles.
David and Natasha Sharpe, the husband-and-wife team who once controlled Bridging Finance Inc., are fighting bankruptcy applications filed in Ontario courts earlier this month. Court documents show several creditors, including former investors who lost millions when the $2 billion lender collapsed in 2021, are seeking to recover assets they claim were improperly diverted.
“When private lenders fail, the fallout typically extends far beyond the initial corporate collapse,” explains Margaret Williams, a financial restructuring attorney with Bennett Jones who isn’t involved in the case. “Personal bankruptcy proceedings against executives often represent creditors’ last resort to recover funds allegedly misappropriated.”
The Ontario Securities Commission initially flagged concerns about the Sharpes’ management of Bridging Finance, placing the firm under receivership after investigators uncovered what they described as “serious breaches of securities laws and abuses of investor trust.” PricewaterhouseCoopers, appointed as receiver, later determined investors would likely recover less than half their money.
I reviewed court filings from three separate creditors seeking to force the bankruptcy proceedings. They allege the Sharpes transferred personal assets to family members and offshore entities in anticipation of legal action. One filing specifically references a $1.2 million property in Muskoka cottage country allegedly moved into a family trust shortly before regulators intervened.
The Sharpes, through their legal team, have denied wrongdoing and filed motions to dismiss the bankruptcy applications. Their lawyer, Jonathan Wilder, provided a statement asserting “these proceedings represent an improper attempt to circumvent ongoing civil litigation where evidence and facts, not allegations, will determine outcomes.”
Bridging Finance’s collapse sent shockwaves through Canada’s private credit market, which had expanded rapidly as institutional investors sought alternatives to low-yielding traditional fixed income. The firm specialized in providing loans to mid-sized companies unable to secure traditional bank financing, promising investors returns of 8% or higher annually.
Court records detail how the Securities Commission investigation alleged the Sharpes diverted approximately $35 million from the funds they managed to personal accounts through a series of complex transactions. The bankruptcy filings cite these findings as evidence of “fraudulent preferences” that warrant unwinding.
“Private credit represents a critical funding source for Canadian businesses, but cases like Bridging underscore the risks when oversight proves inadequate,” notes Catherine MacDonald, a financial markets researcher at the C.D. Howe Institute. “The personal bankruptcy proceedings may reveal whether assets can actually be recovered for investors.”
The case has drawn attention from financial regulators across North America. According to documents from the Ontario Securities Commission and statements from the Investment Industry Regulatory Organization of Canada, authorities are using the Bridging Finance collapse to reassess oversight frameworks for private credit markets.
Former investors, many of whom were retirees or pension funds, have expressed frustration at the pace of recovery efforts. “We trusted these investment managers with our life savings,” said Robert Jennings, a retired engineer who lost over $450,000 in the collapse. “The bankruptcy proceedings feel like our last chance for any meaningful recovery.”
Legal experts suggest the bankruptcy cases could extend for months or even years. The Sharpes’ lawyers have filed preliminary motions questioning the creditors’ standing and arguing that existing civil litigation should proceed before any bankruptcy determination.
Financial disclosure documents submitted to the court show the couple once enjoyed significant wealth, including luxury properties in Toronto’s Rosedale neighborhood and a collection of vintage automobiles now allegedly transferred to third parties. Creditors have asked the court to appoint investigators with authority to trace assets internationally.
“The tricky part in these cases involves following the money,” explains Lauren Foster, a forensic accountant specializing in financial fraud investigations. “Sophisticated individuals often create complex ownership structures spanning multiple jurisdictions to insulate assets from creditors.”
The bankruptcy proceedings come amid growing scrutiny of Canada’s private credit market, which has expanded to over $50 billion according to data from the Bank of Canada. Regulators have signaled intention to implement stricter disclosure requirements and enhanced investor protections in response to the Bridging Finance scandal.
As hearings continue next month, the case highlights the personal consequences facing executives when financial firms collapse under allegations of mismanagement or fraud. For investors still hoping to recover their losses, the bankruptcy process represents both a potential path to recovery and a sobering reminder of private credit’s risks.
