Investors involved with Victoria mortgage broker Gregory Martel may have to wait as long as two years to find out how much of their money, if any, they will get back.
According to PricewaterhouseCoopers, the firm overseeing the receivership of Martel and nine of his companies, the receivership process could take 16 to 24 months.
That estimate was included in a “questions-and-answers” document posted this week to give investors caught up in proceedings as much information as possible about what’s happened to their money.
Hundreds of investors are waiting to find out what happened to as much as $226 million invested through Martel’s company My Mortgage Auction Corp. According to several lawsuits, discussions with investors and the receiver’s reports, it appears Martel’s clients invested money with him on the understanding it would be used to provide short-term bridge loans for commercial and residential real estate deals.
The money was to be repaid with high interest. Many of the investors claim they have been waiting months for repayment.
The receiver has indicated there could be more than 1,205 investors.
Martel, who has been uncooperative in the proceedings and reluctant to hand over information and records to the receiver, has been ordered by the courts to start working with PricewaterhouseCoopers or face consequences that could include jail time. He had been given until the end of this week to cooperate with the court-appointed receiver trying to determine where millions of investment dollars entrusted to him have gone.
The court has expanded the receiver’s investigative powers to include nine of Martel’s companies — My Mortgage Auction doing business as Shop Your Own Mortgage, Shop Your Own Corp., Martel Investments, 2289548 Alberta Ltd., Shair Your Car, Snail Team One, Snail Team Six, G&G Discount Merchandise and Martel Capital.
The questions-and-answers document said all shareholders would be treated equally, as unsecured creditors, meaning if there is money recovered it would be meted out to all on a pro rata basis after secured creditors had been paid, and that no creditors will be paid anything if the receiver cannot collect and monetize Martel’s assets.
The document further pointed out it could not confirm if Martel was running a Ponzi scheme as it has not been able to locate any loan records.
In a statement sent to the Times Colonist this month, Martel said his company, My Mortgage Auction “is not insolvent nor, as has been alleged, is it a Ponzi scheme.”
The only agency that has made public it is investigating Martel is the B.C. Financial Services Authority, which enforces mortgage broker suitability requirements and compliance.
The authority can impose penalties for misconduct including monetary penalties and licence cancellations. The B.C. Securities Commission would not comment on whether an investigation has been started; however, it is likely given what Martel appears to have been doing is selling securities without being registered.
While Martel is registered as a mortgage broker, there is no record of him on the Canadian Securities Administrators’ national registration search — the primary source to determine if an individual or firm is registered to sell securities.
Peter Brady, the commission’s executive director, said its mandate includes regulating investment contracts — when one person gives money to somebody else with the expectation of profit from the efforts of others. “That’s an investment contract, and that’s a security,” and they can take a number of forms and be called several things including bridging loans, he said.
Brady said the commission has a detection and disruption unit that is on the lookout for people who may be selling securities without registration or without a prospectus.
“They are looking for it and sometimes they get tips, sometimes they detect things on their own, but of course they can’t be everywhere,” he said. “They’re not sitting in private meetings between two people.”
When the commission gets a tip, it may conduct an investigation and then prosecute for non-compliance in front of the securities commission, enter into a settlement or it can refer the file to Crown counsel for prosecution.
Brady said they regularly see violations of securities legislation and have to take enforcement action. “I would say it’s incredibly frustrating to me personally and all of our staff,” he said, because they do so much work on the education front to protect investors. “We have a dedicated website, Investright.org, that provides unbiased information about investing, we do campaigns on social media, to raise fraud awareness. And we urge people over and over to do their research.”
But they are one voice in a noisy arena and coming off the pandemic and given the inflationary environment, people may be feeling desperate, Brady said. “People in this environment are looking for ways to get higher returns,” he said. “Inflation is hitting everybody hard and they’d like to have a little more income. So there’s a lot of reasons why I think despite information, education and our efforts, people are still getting taken in.”
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