B.C. financial regulators received complaints about accused fraudster Greg Martel — including that a high-return investment opportunity might be a “scam” — years before his alleged $300-million Ponzi scheme collapsed in 2023.
The complaints about Martel’s investment schemes were made to the B.C. Financial Services Authority and the B.C. Securities Commission in early 2017 and mid-2021, according to financial services authority records obtained by Postmedia through a freedom of information request.
On learning complaints had been made well before the scheme collapsed, one investor, Kelly, who wished to be identified only by her first name, said if regulators had dug deeper, maybe investors could have saved tens of millions of dollars.
She acknowledged the regulator is not 100 per cent responsible for money she invested, as she has to own some of that responsibility.
But Kelly, whose family lost $1 million in the alleged Ponzi, said: “I get angry when I hear that people have filed previous complaints and nothing was done about it. I get very angry.”
In the summer of 2021, more than 18 months before investors began suing Martel and the scheme came to public attention, two complaints to the financial services authority outlined concerns over a bridge-loan investment scheme.
It’s the same one that collapsed in the spring of 2023, and which investors and bankruptcy receiver PricewaterhouseCoopers now believe was a Ponzi.
Millions continued to be invested in the scheme after the 2021 complaint up until May of 2023, B.C. and U.S. court records show.
If Martel’s scheme proves to be a Ponzi, it would be the largest in B.C. and one of the largest in Canada.
The 2017 complaint was over short-term investments in properties in Eastern Canada.
The financial services authority regulates entities such as credit unions and insurance companies in B.C., as well as mortgage brokers. Martel, 47, had been a mortgage broker since 2006 in Victoria.
In response to Postmedia questions, the financial services authority says it investigated the complaints in 2017 and 2021 and found no wrongdoing under the laws for which they are responsible.
The financial services authority “determined, based on the evidence, that there was no breach of requirements under the Mortgage Brokers Act,” Raheel Humayun, director of investigations, said in a written statement.
The authority did not make someone available for an interview.
It began another investigation in April 2023 into non-compliance with the Mortgage Brokers Act after receiving more complaints about Martel and his company Shop Your Own Mortgage, also known as My Mortgage Auction.
The authority said it referred potential securities-related information to the securities commission. The authority said it later learned the Victoria police had started a criminal investigation. These actions came after the alleged Ponzi had collapsed.
The financial services authority did not answer questions on whether it followed up with the securities commission or police on the 2017 and 2021 complaints.
Humayun said their investigations, by law, are limited to activities within the jurisdiction of the financial services authority.
Matt Malone, an assistant law professor at Thompson Rivers University, says for the financial services authority to serve as a modern, effective and efficient consumer protection regulatory body, at minimum, it should publish more data showing the number of mortgage-broker complaints, and the percentage of complaints that are well-founded, not well-founded, abandoned by the complainant, referred to police or other authorities, or not investigated by the authority.
“British Columbians deserve a better look into what complaints the [financial services authority] is — and is not — investigating,” said Malone, who has expertise in regulatory oversight.
In both the 2017 and 2021 cases, the financial service authority records show complaints were also made to the B.C. Securities Commission, which regulates B.C.’s investment markets.
The B.C. Securities Commission would not answer whether it knew of the 2017 and 2021 complaints, if it had investigated them, what any investigation found or whether it took action. The commission also would not answer whether it passed on concerns in 2017 or 2021 to other regulatory bodies or the police.
“As this matter is the subject of an active criminal investigation, we cannot discuss any actions we took, beyond confirming that an investigation is in progress,” B.C. Securities Commission spokesman Brian Kladko said in a written statement, referring to its own criminal investigation started after the scheme collapsed.
Postmedia has also filed a freedom of information request for securities commission records of complaints related to Martel and his companies back to 2017, for which a response is expected later.
In the alleged Ponzi, by the end of 2023 more than 1,300 investors claimed they lost more than $312 million, according to court files in B.C. and the U.S.
Many investors were from the Victoria area, other parts of B.C. — including Vancouver — plus Alberta, California and New York.
So far, receiver PricewaterhouseCoopers has collected less than $200,000 and has been unable to find any evidence the bridge loans existed.
Martel, who spent most of his time in the last several years in the Newport Beach area in California, was last seen in August in Thailand. He has since disappeared.
In Ponzi schemes — named after 1920s-era fraudster Charles Ponzi — earlier investors are paid off with later investors’ money and not from the profits of any real business.
The heavily redacted records from the financial services authority show that on July 8, 2021, a complainant told the B.C. Financial Services Authority he was referred to Shop Your Own Mortgage on an investment in short-term mortgages that would return in excess of 10 per cent monthly. “His primary concern is if the offer is legitimate or this is a scam,” say notes from a compliance officer.
The compliance officer confirmed that Martel was a mortgage broker but could offer no opinion to the complainant on the “veracity” of the investment opportunity, according to the case file.
The compliance officer noted the offer was for the complainant to invest in a $4.2-million short-term advance to complete a multi-family development, which appeared to be a syndicated mortgage, which the company was not permitted to do.
The authority was told by a company representative, whose name is redacted, that they were not advertising or soliciting mortgage investment business.
Instead, the opportunities were presented as short-duration bridge loans to individuals and developers that were not registered with Land Titles — meaning they were not mortgage-secured against a property. “Says this activity has been vetted by the [B.C. Securities Commission] and is compliant with their regulations,” the compliance officer noted.
A second complaint came on Aug. 27.
The complainant said the company’s pitch for the short-term, high-return bridge loans came across his desk from one of the investors.
The complainant flagged the offer as odd, saying it was three to four times what the industry was promising to investors.
“To give you a simple analogy, this would be like BMO quoting conventional mortgages at 10% when TD, RBC, Coast Capital are charging 2% for the same product. This doesn’t pass the smell test on several levels. Brokers wouldn’t take clients here and arguably these folks would not be doing any business because their pricing is WAY off market. I’ll leave it to your team to look into,” said the complainant in an email to Ina Shoemaker, director of mortgages for the financial services authority.
The complainant included samples of the short-term bridge loan offers in 2021.
One was for a $7.1-million bridge loan for an apartment building in Victoria, offering a 16 per cent return over 14 weeks, while another was for $1.875 million for three Shawnigan Lake homes, offering a 22 per cent return over 4.5 months.
Both amount to a nearly 60 per cent return annually.
The outcome of the financial services investigation, completed on Jan. 28, 2022, was cited as “neutral” in the case file.
In the outcome, under the heading “Caution Flags to Remain?,” the financial service authority checked off “No.”
The 2021 case file includes a reference to the 2017 file.
In that file, a complaint on Feb. 7 was directed against Zilla Capital for taking money to invest in properties for the short term in Eastern Canada, where the complainant had not seen any returns. The complainant had also claimed that a representative of the company (the name is redacted) may not be able to do this type of investment.
The complaint outlines that in 2016, $525,000 was lent for a three-month period, with $200,000 reinvested for another two-month period. “Multiple communications from the subject with excuses for nonpayment,” says the case file.
Later, the complainant withdrew the complaint on March 13, saying they were made “as a result of misunderstandings between the complainant and Zilla Capital.
A few days later, the file was closed, with the outcome labelled as “abandoned.”
Zilla Capital’s directors in 2017 were Martel and Avdeep (Av) Singh Hundle, according to B.C. company registry records.
In an interview, Hundle, now a mortgage broker in Kelowna, said he and Martel formed the company but he never had anything to do with it.
Hundle was removed as a director in April 2018, according to registry records. Hundle says he ceased to be a director in 2016.
“It was all his baby, whatever it was about,” said Hundle.
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