The Alberta Securities Commission has ruled two Calgary men ran an “unsustainable” Ponzi scheme that raised $52-million from investors.
In a decision released Monday, and ASC hearing panel found Dale St. Jean and Gregory Tindall “perpetrated a fraud” on investors after luring them into investing with promises of lucrative returns ranging from 15 per cent to 22 per cent.
The men raised the funds between 2005 and 2009 through their Calgary-based companies TransCap Corp. and Strata-Trade Corp., telling investors they were investing in bonds and promissory notes carrying high rates of interest. The two companies, which said they were in the business of bond-trading and providing bridge financing to other firms, were also named in the case and found to have committed fraud.
The ASC decision said investors’ funds were “placed at serious risk” after they were lured to invest with “deceptive or false information” about the investment schemes. Although investors were told their interest payments would come from business activity, the panel decision said payments to early investors was made with money invested by later investors, which is typical of a Ponzi scheme.
“There appears to be no money remaining to pay any them any interest owing or repay their principal investments,” the hearing panel noted in its ruling.
About $25-million was raised from investors in Alberta, and the remainder from investors in other locations.
Some victims who testified at the March hearing in the case said they had lost all their money, recouping nothing from their investments, while others received some funds in interest payments but did not recover any principal. One victim, an engineer from Edmonton, said he and his wife lost $1.22-million and received no returns, telling the hearing panel they now cannot give any money to “our future generation” as they had hoped. One woman, who invested a total of $130,000, testified she borrowed funds against her family home which she is now working to repay.
The ASC has not decided on penalties yet in the case, giving both men until May 27 to notify the commission whether they plan to make any submissions on a penalty. While Mr. St. Jean participated in the hearing in the case in March, Mr. Tindall was not represented and the ASC said his current whereabouts are not known.
The ASC said Mr. St. Jean acknowledged he was the “guiding mind” of the two companies, while Mr. Tindall played a “secondary” role, the panel decision said.