Clawing back $71 million from investors paid out from a Victoria mortgage broker’s $316-millon Ponzi scheme “will allow for a just and fair outcome to all investors,” says a B.C. Supreme Court judge.
Madame Justice Shelley Fitzpatrick, who signed off on a court order allowing the clawback in June, released her reasons this week.
She noted that while more than 930 investors have filed claims worth $316 million with PricewaterhouseCoopers, the trustee overseeing Greg Martel’s bankruptcy, that firm’s ability to recover Martel’s assets has so far “been minimal and is not expected to improve.”
Fitzpatrick emphasized there are no allegations that any of the investors participated in the scheme or even knew Martel was perpetrating a fraud.
“No investor here is a ‘winner’ in the true sense — each is a victim,” she wrote, saying the scheme “wreaked havoc and ruin on the lives of many of the investors.”
She said some of the investors managed to reap profits from the scheme “often only by blind luck in terms of the timing of the scheme’s collapse, and only by reason of Mr. Martel raising that money by perpetrating the fraud on later investors.”
Fitzpatrick’s ruling gave the trustee the green light in June to start reaching out to 561 of the investors to arrange the return of $71 million in fraudulent payments made from the scheme.
The 561 investors are among an estimated 1,700 caught up in the scheme.
Over the next month, the trustee will provide each investor affected by the ruling with a calculation of what’s known as the “clawback” funds they owe. Each will have 30 days to dispute the calculation.
Those investors who do not dispute the calculation will be deemed to have received excess funds or preferential payments, and will have 45 days to pay what’s owed the estate. That 45-day period may be extended by agreement with the trustee.
The court had earlier dismissed an application from a group of investors to adjourn proceedings against them.
The group seeking the adjournment claimed, among other things, that they had not had enough time to investigate the claims of the trustee.
PricewaterhouseCoopers hopes to collect the $71 million so it can be more equitably redistributed to the broader investor group.
The trustee claims the money was either excess funds or preferential payments, the result of Martel and My Mortgage Auction Corp.’s fraudulent activities.
The trustee’s funds-flow analysis of Martel’s activities determined where more than $300 million in investor money went after it was entrusted with Martel and My Mortgage Auction — the vehicle through which Martel took investor money with the promise that funds would be used to provide short-term loans for real estate transactions and construction.
The analysis, which took the better part of a year and analyzed 65,000 banking transactions involving 33 banks and credit instruments, concluded no bridge loans ever existed.
Martel was, in fact, running a massive Ponzi scheme: Funds received from investors were used to pay other investors, while some of the money was used to fuel Martel’s lifestyle.
The funds-flow analysis showed 1,709 investors put $301 million into My Mortgage Auction Corp., and $210 million was returned to investors.
It found 480 investors received $68.25 million more than they invested, while 1,229 lost $149 million.
The trustee identified another 81 investors who received payments totalling $3.12 million from Martel between March and June 2023.
Fitzpatrick said concerns and complaints directed at the trustee by some of the investors during the process were “ill-conceived and unjustified.”
“By any measure, PwC’s investigation has been thorough and, while the information garnered from that process has not been entirely complete or accurate, and the news has not been positive for the investors, that result is not for lack of effort by PwC,” she wrote.
Martel left Canada for Thailand shortly after PwC was appointed as a trustee over his bankrupt company. In August 2023, he was deported and travelled to Dubai, U.A.E.
Martel has not appeared in person since the hearings into his Ponzi scheme began and has refused to confirm his whereabouts, according to Fitzpatrick.
