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Michael Nowina’s litigation practice focuses on a broad range of commercial disputes including advising on the recovery from fraudulent investment schemes, mortgage fraud and credit fraud. Michael’s fraud-related and investigations experience includes representing victims of a Canada-wide investment fraud and ultimately securing recovery of a majority of the proceeds from the fraud, advising numerous creditors in proceedings commenced to recover fraudulent conveyances and preferential payments in multi-jurisdictional litigation, and representing financial institutions in identity fraud cases and in proceedings to recover funds from fraudulent borrowers. Michael also frequently advises clients on insolvency matters involving fraud.

In Wong v. Luu, the British Columbia Court of Appeal upheld an order requiring the production of a redacted trust ledger to the bankruptcy trustees for Luu Hung Viet Derrick (“Luu”) on the grounds that the trust ledger was not presumptively privileged and that production would not violate the bankrupt’s right to communicate in confidence with his lawyers.

In 2012, Luu had been adjudged bankrupt in Hong Kong and his bankruptcy trustees had been hunting for his assets when the trustees became aware of more than $3 million dollars paid into the trust account of Luu’s lawyers in British Columbia in 2013. This had not been disclosed by Luu. When the bankruptcy trustees sought information from Luu’s lawyers about the monies received, they refused to provide any information on grounds of legal privilege.

The trustees successfully sought an order from the British Columbia Supreme Court compelling Luu’s lawyers to produce accounting records of the amount of trust funds held for or at the direction of Luu, and records showing the receipt of any trust funds and any payments made from trust to Luu or anyone at Luu’s direction. Luu’s lawyers appealed the order requiring production of the trust ledger.
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In Akagi v. Synergy Group (2000) Inc. (“Akagi“), the Ontario Court of Appeal set aside a series of ex parte orders made by Toronto’s Commercial List Court granting broad investigative powers to a court-appointed receiver.  The receiver had been empowered under section 101 of the Courts of Justice Act which gives the court powers to make such an order “where it appears to a judge of the court to be just or convenient to do so”.  The Court of Appeal ruled in its decision released on May 22, 2015, that there are situations where it is appropriate to appoint a receiver to investigate the affairs of a debtor or to review certain transactions including even, in proper circumstances, the affairs of and transactions concerning related non-parties.  However, the Court of Appeal ruled that the receivership in Akagi had morphed into an expansive investigation on behalf of non-parties which the Court found to be improper and misguided.
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On May 5, 2014, Ontario’s Divisional Court dismissed the appeal of Otto Spork, Konstantinos Ekonomidis, and Natalie Spork from the decision of the Ontario Securities Commission (“OSC”) that they had breached Ontario’s securities law and engaged in conduct contrary to the public interest. Otto Spork, Konstantinos Ekonomidis, and Natalie Spork were  ordered to disgorge $6.75 million, $325,000 and $165,000, respectively, out of a total $23 million that had been obtained from investors.  Virtually all of the $23 million was lost.
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In a previous post, we reported on a then-ongoing Calgary trial involving an alleged $300 million Ponzi scheme affecting as many as 2,000 people, many of them Canadian.  The fraud represents one of the largest Ponzi schemes in Canadian history.  The accused individuals had already been sanctioned by the U.S. Securities and Exchange Commission and the Alberta Securities Commission.
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A Calgary trial is nearing conclusion on criminal charges against Gary Allen Sorenson (“Sorenson”) and Milowe Brost (“Brost”) relating to an alleged $300 million Ponzi scheme that operated between 1999 to 2008 with money from thousands of investors across the United States and Canada. The alleged scheme was orchestrated utilizing the sale of promissory notes issued by Syndicated Gold Depository, Inc. (“SGD”), an entity formed in 1999 by Sorenson and Brost. The two men were arrested in 2009 for what police called “the largest Ponzi-type scheme” in Canadian history.

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A panel of the British Columbia Securities Commission has imposed an administrative penalty of $33 million against Rashida Samji for committing a $100 million fraud on at least 200 investors in its recent sanction decision. The scheme which the panel determined was a Ponzi scheme earned her the nickname the ‘magic lady’. The panel also ordered that Samji be permanently banned from participating in B.C.’s capital markets and ordered disgorgement of aproximately $10.8 million. This was the difference between the monies deposited by the investors pursuant to the fraud and the monies paid out to them.
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Under section 380.1(1) and (1.1) of the Criminal Code, courts are required to consider the following non-exhaustive list of factors as being aggravating circumstances in the context of fraud:

  • significant magnitude, complexity, duration or degree of planning of the fraud;
  • an actual or potential adverse effect on the Canadian economy or financial system, or on investor confidence;
  • large numbers of victims, particularly if the fraud had a significant impact due to the victims’ personal circumstances;
  • failure to comply with applicable professional standards;
  • concealment or destruction of documents related to the fraud; and
  • whether the total value of fraud exceeds one million dollars.
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The RCMP’s Greater Toronto Area Financial Crime team has arrested and charged six people in an alleged fraudulent investment scheme. The RCMP has reported that the alleged fraud worked by enticing investors to purchase business tax losses valued far in excess of their investments. The companies used by the accused included: Integrated Business Concepts (IBC), Synergy Group 2000, Cason Global Wealth Association (CGWA) and IBCA 2009.
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In Hryniak v. Mauldin, released January 23, 2014, the Supreme Court of Canada upheld the finding of fraud against Toronto businessman Robert Hyrniak on a summary judgment motion. The unanimous SCC found that a shift in culture is needed to embrace summary judgment motions as an alternative model of adjudicating disputes. The SCC ruled that findings of fraud can be made when the judge is able to reach a fair and just determination on the merits on a summary judgment motion. This will be the case when the motion:

  1. allows the judge to make the necessary findings of fact;
  2. allows the judge to apply the law to the facts; and
  3. is a proportionate, more expeditious and less expensive means to achieve a just result.

In a call to action to improve access to justice, the SCC also called upon lower court judges to take a more active role in case-managing disputes by seizing themselves of cases where they have dismissed a motion for summary judgment. This is a significant departure from current practice. 
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