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A second mortgage brokerage firm that raised money to finance projects for Fortress Real Developments Inc. has closed its doors, marking another setback for the troubled real estate developer.

FDS Broker Services Inc. filed for bankruptcy effective Sept. 17, according to licensing information filed with the Financial Services Commission of Ontario, the province’s mortgage industry regulator.

FDS, initially known as Fortress Distribution Services Inc., was owned by its chief executive Zafar Khawaja, a licensed mortgage broker. Mr. Khawaja could not be reached for comment on Monday and FDS’s main phone number went straight to voicemail.

Mississauga-based FDS was one of three brokerage firms that were dedicated to raising syndicated mortgage funds from investors to provide loans to real estate developers for new projects being co-ordinated by Fortress, a real estate consulting firm based in Richmond Hill, north of Toronto.

Another of the three firms, FMP Mortgage Investments Inc., told clients in April it was surrendering its mortgage brokerage licence and suspending business operations. A third firm, FFM Capital Inc., is still in business.

Fortress raised a total of $920-million from investors between 2009 and 2017 to help finance new real estate developments, including many condominium construction projects.

Much of the financing was arranged by mortgage brokers at FDS, FMP Mortgage and FFM Capital. In 2016 alone, FDS raised $67-million from 1,174 syndicated mortgage investors, according to regulatory filings.

FDS reported having 102 brokers and agents as of Dec. 31, 2016, including 23 who worked full-time, according to its filings with FSCO. The firm’s bankruptcy filing lists liabilities of $550,453 and assets of $16,000 as of Sept. 12.

Many of the Fortress development projects financed by syndicated investors have faced long delays and investors have not been repaid their principal or accrued interest payments, spurring many complaints to regulators.

The RCMP searched Fortress’s head office location in April, and also executed search warrants at the offices of FDS, FMP Mortgage and FFM Capital. The search warrant application said the force is investigating alleged syndicated mortgage fraud. No charges have been laid.

FDS, FMP Mortgage and FFM Capital were founded between 2011 and 2013 by former employees of mortgage brokerage firm Building & Development Mortgages Canada Inc. (BDMC), which was based at Fortress’s head office location and co-ordinated all syndicated mortgage financing for the real estate projects. An affidavit filed in court by FSCO in April said BDMC’s owner directed employees to leave and set up the companies to “provide some degree of separation” between the brokers helping investors lend money for Fortress projects, and BDMC, which represented Fortress and the project borrowers.

FSCO reached a settlement agreement in March with the four brokerages following an investigation into syndicated mortgage investments. Under the voluntary settlement, FDS, FMP Mortgage and FFM Capital agreed to pay $235,000 each and BDMC agreed to pay $400,000. The principal brokers for FDS, FMP Mortgage and FFM Capital had their mortgage broker licences revoked, while the owner and principal broker for BDMC agreed to surrender her licence.

Since March, senior lenders on many Fortress projects have filed court applications to take control of the projects because the loans are in default. Among the development projects in Ontario that are under the control of a receiver are Fortress Brookdale and Harmony Village Sheppard in Toronto; Union Waterfront in Port Dalhousie; and Glens of Halton Hills.

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