Panel finds that respondents deceived investors and operated a Ponzi scheme
CALGARY, March 6, 2018 /CNW/ - The Alberta Securities Commission (ASC) has found that Arnold Breitkreutz, Susan Elizabeth Way and Base Finance Ltd. (Base Finance) breached Alberta securities laws.
The respondents raised over $137 million from more than 250 investors between 2004 and September 2015. An ASC panel determined that the respondents perpetrated a fraud on investors by:
- deceiving investors into thinking that they were investing in mortgages held by Base Finance rather than in a loan to an undisclosed entrepreneur involved in oil and gas developments in the U.S.; and
- operating a Ponzi scheme that recirculated investors' funds to pay purported returns to existing investors.
In issuing its decision, the panel considered "the pattern of communications with investors to have been carefully tailored to maintain a façade that they were investing in first mortgages in real estate and not in oil and gas plays in the [U.S.]" and that the respondents paid "promised returns to Base Finance investors under the guise of interest payments directed from an undisclosed borrower" when "[i]n reality, such payments were merely the re-circulation of funds received from other investors".
Staff withdrew allegations that Breitkreutz made misleading or untrue statements to Staff investigators. The panel dismissed allegations that Base Mortgage & Investments Ltd., an administrator for Base Finance, engaged in conduct that perpetrated a fraud on investors.
Staff and the three respondents are to contact the ASC by March 19, 2018 to set a date for the second phase of the hearing, which will address what (if any) orders for sanctions and costs should be made. An Interim Cease Trade Order issued by the ASC in November 2015 will remain in effect until the proceeding is finally determined or otherwise concluded.
The ASC is the regulatory agency responsible for administering the province's securities laws. It is entrusted to foster a fair and efficient capital market in Alberta and to protect investors. As a member of the Canadian Securities Administrators, the ASC works to improve, coordinate and harmonize the regulation of Canada's capital markets.
SOURCE Alberta Securities Commission
For further information: For Media Inquiries: Hilary McMeekin, Communications Manager, 403-592-8186; For Investor Inquiries: ASC Public Inquiries, Toll Free 1.877.355.4488