Canadian carbon credit firm sues former executives for US$40M, alleging fraud and 'unjust enrichment'
A statement of claim filed in the Ontario Superior Court by Carbon Streaming Corporation (NETZ.NE) describes diverted six-figure advisory fees, as well as lavish ski trips, hunting excursions, and other retreats without a business purpose, over the span of multiple years.
Toronto-based Carbon Streaming provides capital to carbon capture projects around the world via streaming or royalty agreements for carbon credits, which they sell to buyers looking to offset emissions, or other investors. The company went public on the NEO Exchange, now called Cboe Canada, in July 2021, amid a flurry of investor enthusiasm for clean energy at the time.
According to BloombergNEF, the global market for carbon credits is expected to reach a value of US$1.1 trillion by 2050.
Last week, Carbon Streaming filed a lawsuit with the Ontario Superior Court of Justice against founder, former CEO and company director Justin Cochrane, as well as several other past executives, directors, consultants, and affiliated entities. The lawsuit, dated April 14, seeks more than US$40 million in damages for alleged unjust enrichment, fraud, and breach of fiduciary duty. More than US$30 million of the total damages sought are focused on Cochrane.
The allegations have not been tested in court.
'I fully deny the allegations,' Cochrane told Yahoo Finance Canada in a message last Friday. 'In the middle of a lawsuit, there is not a lot I can say. But I will be responding to the claim.'
Other defendants named in Carbon Streaming's claim include Conor Kearns (former chief financial officer), Anthony Milewski, Michael Beck, Maurice Swan (a former director and board member), Andrew Scott Tester (former director), Jeanne Usonis (former director), The Oregon Group, Regent Advisors, Black Vulcan Resources, Carbon Advisors, and Angstrom Capital Limited.
Yahoo Finance Canada has reached out to these parties for comment, but did not receive responses in time for publication.
The April 14 court filing describes Carbon Streaming as founded by Cochrane, Kearns, Milewski and Beck 'as friends, business associates, and fellow board members in other ventures.' According to the statement of claim, the company incorporated under the name CSC in 2004, changing its name to Carbon Streaming Corporation in June 2020.
The lawsuit alleges 'payments of millions of dollars in monthly retainers, 'advisory fees,' bonuses, finders fees, and fees for alleged 'past services' to consultants and advisors and entities controlled or affiliated with them' were diverted from the company by the defendants. In one cited example, Cochrane is said to have paid a US$900,000 fee to the Oregon Group, a firm he is alleged to have founded with Milewski.
The lawsuit also claims Cochrane used company funds to treat select employees and board members to lavish ski trips in Utah, where they travelled by private snowcat to access the mountains.
The trips involved inappropriate and unprofessional conductApril 14 court filing from Carbon Streaming
'The trips involved inappropriate and unprofessional conduct,' the court filing stated.
'In Mr. Milewski's email dated Jan. 6, 2023, to those invited, which included Mr. Cochrane, Mr. Kearns, and Mr. Swan, he wrote '… make sure and bring your insurance card and magic mushrooms,' had a nickname for Mr. Tester, 'The Liquor', and referred to Mr. Kearns getting 'sexy suits.''
Prior to their roles at Carbon Streaming, Cochrane and Kearns founded Toronto-headquartered nickel-cobalt miner Nickel 28 with Milewski in 2019. The trio were terminated from their executive roles at the company in May 2024, after the company claimed to have found 'evidence of serious misconduct.' None of these allegations have been proven in court.
This prompted Carbon Streaming to form a special independent committee of its board to review those allegations, which also included 'breach of duties and obligations, repeated lack of judgment, care and diligence and non-compliance with various Nickel 28's policies and procedures.'
Carbon Streaming did not respond to a request for comment on Monday.
The company booked a US$67.4 million net loss in 2024, widening from a US$35.5 million loss in 2023. Last year, Carbon Streaming wrote down the value of four of its carbon credit streaming projects to zero. The company says it slashed its headcount from 24 at the start of last year to eight by year-end, while continuing to evaluate strategic alternatives.
On the Cboe Canada exchange, Carbon Streaming shares are down about 97 per cent from their all-time closing peak in December 2021.
Jeff Lagerquist is a senior reporter at Yahoo Finance Canada. Follow him on Twitter @jefflagerquist.
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