Two sons of 100 Huntley Street founder David Mainse have been named in an Ontario Securities Commission case involving a tangled $15-million (U.S.) Ponzi scheme, but an official for the Christian television talk show says the men were also duped in the alleged fraud.
The OSC has alleged Ronald and Reynold Mainse promoted two investment schemes to dozens of their acquaintances, and were jointly paid a total of $248,000 (Canadian) in commissions for their referrals.
The OSC claimed Thursday the investments were in fact a Ponzi scheme operated by Gordon Driver, calling him "the directing mind of the fraudulent scheme" which ran from February, 2006 until March, 2009.
The Mainse brothers "were not party to the fraud," the OSC said, but they allegedly breached securities rules because their actions constituted trading in securities, and they were not registered in Ontario to do so.
The statement of allegations issued Thursday also named David Rutledge, an ordained minister who was previously employed by the Christian charitable organization that operates 100 Huntley Street. He is also accused of trading in securities without registration, but is not accused of participating in the fraud.
Don Simmonds, chief executive officer of Crossroads Christian Communications Inc., which runs 100 Huntley Street, said no money from any Crossroads donors was used in the alleged fraud, which was a personal business matter involving the Mainse brothers.
He said the men were naive in trusting Mr. Driver, and now believe he befriended them because they could introduce him to investors.
"We feel it was a targeted situation," Mr. Simmonds said in an interview Thursday.
"One of our strong points in the Christian community is that we're known for trust, but that trust can be taken advantage of or turn into naiveté at times. They were trusting, perhaps to a fault at that point."
David Mainse launched 100 Huntley Street in 1977 in downtown Toronto, and the show now claims a weekly audience of more than one million viewers. Ronald Mainse remains an executive with Crossroads, but Reynold has left the company, Mr. Simmonds said.
He added the brothers did not know they needed to be registered with regulators before they could promote the securities in Mr. Driver's two investment funds.
He said Ronald Mainse has been "very co-operative with the OSC" and is poised to settle the allegations.
The OSC allegations against Mr. Driver are similar to allegations levelled last year by the U.S. Securities and Exchange Commission involving the same Ponzi scheme. Mr. Driver, who lives in the United States, settled the SEC case last December without admitting or denying the allegations.
Mr. Driver said Thursday he could not comment on the OSC allegations.
The OSC alleged he traded "e-mini" S&P 500 futures through two schemes known as Axcess Automation Investment and Axcess Fund Investment. He promised investors they would recoup their entire upfront investment plus receive 25 per cent of the returns he generated, the OSC said.
Instead, the commission alleged Mr. Driver lost $3.55-million (U.S.) of the $3.7-million he invested in the market and misrepresented the losses to investors while issuing false client statements. Mr. Driver allegedly used $10.4-million of investor funds to pay other investors their non-existent trading gains, and "misappropriated" about $1.1-million for his own use, the OSC said.