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A Toronto Police badge is seen in this file photo.Mark Blinch/The Globe and Mail

Toronto police have charged two men with operating one of the largest pyramid schemes in Canadian history, alleging they raised $93-million (U.S.) from investors worldwide through a sham business purporting to sell banner ads for websites.

Christopher George Smith, 45, of Toronto and Rajiv Dixit, 45, of Vancouver have been charged with fraud, possession of the proceeds of crime and laundering the proceeds of crime, all laid under the Criminal Code.

They are also charged with operating a pyramid scheme and making false representations under Canada's Competition Act. The two men made an initial appearance in a Toronto court on Wednesday after their arrest earlier in the morning.

Toronto police Detective Sergeant Ian Nichol, who heads the mass-marketing section of the Toronto Financial Crimes Unit, said the men are accused of raising funds from thousands of people around the world for years before finally shutting down their "Banners Broker" website in August, 2014.

He said investors believed they were investing in an Internet advertising business, but there was no evidence that the operation – which was run out of a Church Street office in Toronto's downtown core – ever offered legitimate services.

"There was really no genuine effort here. We're not talking about people who tried and failed," Det. Sgt. Nichol told reporters Wednesday. "We're alleging this was a pyramid scheme from the get-go."

Participants in a pyramid scheme earn fees for bringing others into the scheme behind them, building a pyramid of investors who earn "returns" paid from money contributed by newer members rather than from legitimate business profits.

Of the $93-million allegedly raised from investors by Banners Broker, police say $45-million was paid out to early investors, who then attracted others to the scheme. The remainder was funnelled to a series of offshore bank accounts in Belize, St. Lucia, Cyprus and other locations, police say. The company maintained its head office in the Isle of Man and had far-flung offices in Ireland and India.

Det. Sgt. Nichol said he doubts any of the missing funds will be recovered for investors. He said some people invested a few hundred dollars, while others invested thousands.

Banners Broker claimed in its promotional materials to have more than 250,000 members in its network in 2012. A report by the court-appointed receiver overseeing the wind-down of Banners Broker International Ltd. said the company "is believed to have hundreds of thousands of individual unsecured creditors."

When the alleged scheme was first launched in 2010, Det. Sgt. Nichol said, it should have been obvious to all participants that there was no real business and that the structure was simply a pyramid scheme using funds from new investors to pay fees to earlier investors.

But as time went on, he said, the marketing strategy changed and investors worldwide, including some in the Toronto area, were led to believe there was an active business selling banner ads. The company built a more sophisticated website to look like a real operation and gave members frequent updates on the state of the business.

"There was an effort to give the appearance of conducting business, but we're saying there was no real business being conducted. … It was smoke and mirrors," Det. Sgt. Nichol said. "There was nothing real being posted up there."

The charges were laid following a complex two-year investigation involving the Toronto Police, RCMP, Competition Bureau, government ministries, the U.S. Federal Trade Commission, Canada Revenue Agency, and the Financial Transactions and Reports Analysis Centre of Canada.

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