Opening
On April 30, 2021, Ontario Superior Court placed Bridging Finance Inc. into receivership at the request of the Ontario Securities Commission. PwC was appointed receiver of the firm, which had managed over $2 billion on behalf of approximately 26,000 investors across Canada. For many Canadian accredited investors, Bridging represented what seemed like an attractive alternative: high yields from private lending, distributed through major brokerages and platforms they trusted. The receivership marked a significant moment for the Canadian alternatives industry—a reminder that size and distribution don't equal either safety or diligence.
What Happened
Bridging Finance operated as a private lender, offering short-term, high-interest loans to borrowers who fell outside the traditional banking system. The firm had built a substantial business by accepting deposits from retail and accredited investors, then deploying those funds into loans secured by real estate. What made Bridging particularly accessible was its distribution: funds flowed through major Canadian brokerages and partnerships, including a notable arrangement with Sprott, a well-known Canadian alternative asset manager.
The Ontario Superior Court action came after months of concern from the OSC. When receivership was ordered, the regulator had not yet disclosed the specific allegations—a procedural choice that underscored the gravity of the situation. Within days of the receivership order, PwC terminated the firm's founders, David and Natasha Sharpe.
The scale of the exposure became clear quickly. Over 26,000 Canadian investors held positions in Bridging funds, many expecting returns ranging from 7% to over 10%—significantly above what traditional private credit vehicles offered at the time. The firm had been growing substantially, suggesting that investor appetite for high-yield alternatives was outpacing more skeptical institutional due diligence. (OSC Investigation, April 2021)
One of the most significant borrowers, Sean McCoshen, would later file for bankruptcy with reported debts exceeding $222 million, underscoring the concentration and leverage risks inherent in the lending book. (Bankruptcy Court Records, 2021)
The receivership process itself raised practical questions for thousands of investors about what the process meant for their capital, what recovery rates might look like, and what transparency they could expect.
Why It Matters
The Bridging receivership was important not because it argued against private lending as an asset class—private credit has legitimate roles in diversified portfolios—but because it illustrated three structural risks that Canadian accredited investors needed to understand.
First: Distribution is not diligence. Bridging achieved scale because it moved through trusted distribution channels and platforms. Investors saw familiar broker interfaces, recognized partnerships, and straightforward marketing materials. None of that substituted for independent analysis of the underlying lending book, borrower quality, or concentration risk. The ease of distribution can mask the difficulty of underwriting. Just because a product moves through a quality channel doesn't mean the product itself has been subjected to the same rigorous scrutiny that the distribution partner would apply to their own capital.
Second: Yield comes from somewhere. The 7-10% returns Bridging offered were not magic—they reflected the risk profile of the borrowers and loans in the book. Those returns were available because the borrowers were, in effect, too risky for traditional lenders. In a low-rate environment where traditional fixed income yielded 2-3%, the 3-7 percentage point spread was genuinely attractive. But the spread exists because of risk. Understanding what you're being compensated for is foundational.
Third: Illiquidity amplifies problems. Bridging offered what appeared to be quarterly redemption windows, a common feature in private credit funds. Quarterly redemptions might feel like liquidity in bull markets. When stress hits—when borrowers face difficulty, when credit conditions tighten, when asset values decline—quarterly windows become meaningless. The illiquidity that was embedded in the structure all along suddenly becomes visible.
This isn't an argument against private lending. It's an argument for understanding what you own, who's managing it, and what the yield actually reflects about risk. (OSC Enforcement History, 2021)
What to Do
For Canadian accredited investors, the Bridging situation offered several practical framings:
Assess manager quality rigorously. In alternatives, the manager matters more than in public equities. You're not buying a diversified index; you're betting on a team's judgment and process. Bridging had grown substantially, but growth itself isn't validation. Ask: How long has the management team been together? How do they source deals? What's their loss history? What happens in stress? For private credit specifically, scrutinize the underwriting standards and borrower profile.
Understand the yield. Don't assume that higher yields simply mean better opportunity. Run the math: if private credit is yielding 8% and public bonds yield 3%, the 5-point spread needs explanation. Is it compensation for leverage? Concentration? Borrower quality? Illiquidity itself? You should be able to articulate, in specific terms, what risks you're being paid for.
Read redemption terms precisely. "Quarterly redemptions" isn't the same as quarterly liquidity. Understand gates, holdback periods, and what triggers lockups. Many Canadian private credit vehicles have frozen redemptions at precisely the moments investors most wanted liquidity—the stress periods the investments were supposedly underwritten to withstand.
Diversify within alternatives. Don't concentrate your alternative exposure in a single strategy or manager. Bridging attracted capital partly because it was so accessible and seemed to offer stable returns. Concentration always amplifies tail risk.
Consider your role in due diligence. As an accredited investor, you have fewer regulatory protections than retail investors. That's the trade-off. The responsibility to diligence is correspondingly larger. You can't outsource that diligence entirely to distribution channels or platforms.
Closing
The Bridging receivership unfolded quickly but its resolution stretched on for years. Investors faced extended uncertainty about recoveries. The situation served as a test case for how Canadian regulators would manage large alternative asset failures and what transparency and recovery processes would actually look like in practice. It was an expensive lesson in the difference between distribution scale and genuine safety.
Alts Insider provides educational content for Canadian accredited investors. This is not investment advice. Always consult qualified professionals before making investment decisions.