It may have taken almost a year, but the provincial regulatory authority responsible for financial markets regulation in the Canadian province of Ontario has finally put an end to the fraudulent activities of Rezwealth Financial Services, along with associated entities Pamela Ratmoutar, Justin Ratmoutar, Tiffin Financial Corporation, Daniel Tiffin, the dubiously named 2150129 ONTARIO INC., Sylvan Blacket, equally ambiguously named 1778445 ONTARIO INC, and Willougby Smith.
The case against this somewhat long list of defendants whose Ponzi scheme sought to bilk investors using a complex web of deceipt, along with boasts of successful FX trading by Sylvan Blackett, who held himself out as a successful foreign currency trader. He solicited investments from Ontario residents, purportedly to engage in FX trading by using investor funds between August 22, 2006 and December 31, 2009.
The original proceedings against these individuals took place on September 17 last year, with final proceedings having been concluded last week with a verdict against the defendants.
The Ontario Securities Commission (OSC) cited that all respondents engaged in illegal distribution of securities, contrary to public interest and has ordered that Mssrs Blacket, Ratmoutar and Ratmoutar resign any position that they hold as a director or officer of any financial services firm, and that they to be permanently banned from becoming or acting as a director or officer of any registrant, issuer or fund manager.
Additionally Sylvan Blackett has been ordered to pay an administrative penalty of $500,000, whilst Ms. Ratmoutar must hand over $400,000 and Mr. Ratmoutar a further penalty of $250,000.
As far as disgorgements are concerned, Mr. Blackett and 215 Ontario Incorporated is liable for $1,635,527 and the Rezwealth respondents are jointly liable for $2,239,111 to the OSC.
Furthermore, Mr. Blackett must pay a total of $110,000 for the costs of the investigation and hearing, for which he and his company 215 Ontario Incorporated are jointly liable.
The Rezwealth respondents are jointly liable for $90,000 of the costs of the investigation and hearing.
For their part as accomplices in the fraud, Mr. Smith and his company 177 Ontario, Inc along with Mr. Tiffin and his firm, these parties are now subject to a 5 year prohibition from trading in any financial instruments, and that Mssrs. Smith and Tiffin must resign from any position that they hold as a director or officer of an issuer. Mr. Tiffin and Tiffin Financial implicated themselves in many ways, partially by receiving commission payments from Rezwealth for referring investors. Rezwealth agreed to pay Tiffin a trailer fee of 2% per month (or 24% per annum) of the principal invested by the Tiffin Investors. During the material time, Mr. Tiffin and Tiffin Financial received a total of approximately $548,000 in trailer fees from Rezwealth Financial Services.
The 5 year ban extends to any position as an investment manager or director of financial services firm, and that Mssrs. Smith and Tiffin must pay an administrative penalty of $25,000 each to be allocated for the benefit of third parites.
Mr. Smith must disgorge $137,383 and 177 Incorporated must discorge $41,150 whilst the Tiffin respondants are liable for $517,000 in disgorgements to the OSC.
The illegality of the business activities of these parties came to light as a result of a FX Ponzi scheme which was perpetrated through 215 Ontario Inc, in which Mr. Blackett sold investment products known as “loan agreements” which investors understood to be for the purpose of trading FX under a scheme referred to as the “Blackett Investments.”
The OSC stated in its filing that Mr. Blackett and 215 Ontario Incorporated raised $3,018,649 from at least 56 investors and the entities paid out $1.3 million to investors as represented returns when only $27,540 had been received from FX entities.
Those representing Rezwealth Financial Services in this case had been found by the court to have raised $2,910,305 from at least 45 investors, with Ms. Ratmoutar having been responsible for creating the investment contracts which were sold to investors.
From July 2009 to December 2009, despite not making payments to or receiving payments from any FX traders, Rezwealth continued to solicit new investments, used investor funds to pay other investors and repapered existing investment contracts that were not in compliance with the law. The OSC considers this to represent multiple breaches of the legal framework which covers financial services, conducted by Rezwealth over a sustained period of time.
The OSC ruled that all parties in this case cannot be trusted to participate in the capital markets business sector in Ontario, and that Mr. Blackett has shown disregard for Ontario securities laws as well as demonstrating no remorse for his actions.
The ruling by OSC has cost these entities dearly for their web of deceit, which unfolded as the investigations took place, marking out Ontario as a jurisdiction which not only plays host to Toronto, North America’s third largest financial center, but also to a highly organized financial markets sector in which good business ethic is the only method to use in order to succeed.