Investors risked up to $27 million in Ponzi scheme run by Calgary company
As much as $27 million in investments was put at risk by investors duped by two Calgarians who convinced them to put up cash in what turned out to be a Ponzi scheme, court heard Monday.
Arnold Breitkreutz and Susan Elizabeth Way each pleaded
guilty to a single charge of fraud in connection with a scam they perpetrated
under the company name Base Financial Inc.
Reading from a statement of agreed facts, Crown prosecutor
Brian Holtby detailed how Breitkreutz and Way took in investments which were
supposed to be secured by mortgages on residential properties.
Breitkreutz asserted that prior to May 1, 2014, his company
did indeed hold first mortgages, something the prosecution wasn’t disputing.
But Holtby said that between May 1, 2014, and Sept. 30,
2015, the company took in about $27 million from 107 people investing in Base
Financial even though the company “held no such mortgages.”
“Nevertheless, Arnold Breitkreutz continued to induce
investors to invest in Base Finance. He falsely represented that the
investments would be secured by first mortgages place by Base Finance on
residential properties and that Base Finance would pay them the mortgage
interest received from the mortgagors.”
During that time period auditors discovered $27 million was
invested and $26.3 million was paid out, some of which went to people who put
in money prior, Holtby said.
“The use of investors’ funds to pay investors, without
actual revenue, is typically referred to as a ‘Ponzi’ scheme.”
The prosecutor said while Breitkreutz was the company
president, Way “played a significant role in the operations of Base Finance.”
In 2019, the Alberta Securities Commission ordered the pair
to pay penalties totalling more than $4 million for what it said was a Ponzi
scheme which attracted a total investment of $137 million.
Both Breitkreutz and Way remain at liberty pending
sentencing. Way’s lawyer, Shamsher Kothari, asked that her hearing proceed on
June 18.
Lawyer Eleanor Funk requested up to a six-month delay for
Breitkreutz to get his affairs in order and his sentencing hearing will be
scheduled July 8.
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