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A biotech executive has been sanctioned after the British Columbia Securities Commission (BCSC) found his companies illegally distributed securities to foreign investors.

A regulatory panel banned Winter Huang (a.k.a. Dong Huang) for 10 years and ordered him to pay a $500,000 penalty for his role in illegal distributions by two companies. Huang was president and director of B.C.-based Pegasus Pharmaceuticals Group Inc. and a director of Careseng Cancer Institute Inc.

The panel found that, between 2010 and 2012, Pegasus raised US$45 million from investors in Taiwan by distributing more than 1,400 bonds without a prospectus. It also found that Careseng guaranteed repayment of 447 of the bonds, representing approximately US$12.8 million.

The fundraising represented illegal distributions, the regulators found, as no prospectus was issued and exemptions weren’t available for the offerings.

According to the panel’s decision, Huang mistakenly believed that the funds raised by Pegasus were not subject to B.C. securities law because all the investors were outside Canada.

That said, “Pegasus and Huang accepted their misconduct was serious and damage was done generally to the integrity of the capital markets as a result,” the panel noted.

It’s not yet clear whether investors will ever see a return on their money.

“While the investors’ losses have not yet crystallized, the evidence suggests at least the possibility of significant losses for the investors,” the panel said. “The potential sources of funds to repay investors identified by Pegasus are all speculative at this stage as the projects from which such revenues are to be derived are on hold, in development or require further investment.”

However, the panel noted there’s no evidence the funds were misused or that Huang personally benefited.

As a result, the panel declined to order disgorgement against the company, saying that “would only potentially harm the very investors that were the subject of the misconduct.”

It also declined to impose a monetary penalty on the company so as not to impact Pegasus’s ability to generate income and therefore harm investors.

Instead, the panel banned Pegasus for 10 years and Careseng (which has since been dissolved) for eight years. The market bans are appropriate in the case, it said, given the respondents’ careless compliance with securities laws.

According to the panel’s decision, the BCSC sought 12-year bans against Huang and Pegasus along with $1 million penalties against both.

Pegasus and Huang argued for five-year bans and a $500,000 penalty.