The Ontario Securities Commission today commenced proceedings against Portus Alternative Asset Management Inc., Portus Asset Management Inc., and Boaz Manor, the “chief architect” of Portus.

OSC staff also filed charges with the Ontario Court of Justice against Manor under the Securities Act.

Staff allege that between January 2003 and August 2005, the two companies and a shell company incorporated in the British Virgin Islands, PAAM BVI , engaged in an illegal distribution of securities.

Portus did so by offering units of non-prospectus qualified mutual funds directly to retail investors. In addition, retail investors were not given adequate disclosure as to the investments being made and the fees associated with those investments. Staff allege that investors were misled into believing that the investment structures offered by Portus would provide them with principal protection, favourable tax treatment and 100% Canadian content for registered accounts.

In total, approximately 26,000 Canadian investors, the majority of whom reside in Ontario, invested approximately $750 million in the domestic structures offered by Portus and US$52 million in the offshore structure offered by Portus. With respect to the domestic structure, staff allege that approximately $95.4 million was improperly diverted by Portus to pay fees, to fund Portus’ ongoing administrative costs, and to fund redemptions.

Staff also allege that Portus’ use of these funds shows that its operations could not be sustained without the continual infusion of new investor money.

OSC staff allege that none of the funds collected by Portus for investment in the purported offshore structure was actually invested. Instead, Manor, the directing mind and chief architect of all of the investments offered by Portus, personally withdrew approximately 1.6 million euros in cash, used approximately US$2.7 million for the payment of his legal fees in connection with the matters at issue, and used approximately US$11 million for the purchase of gems and precious metals. Manor has failed or refused to return these funds and assets to investors.

OSC staff allege that Manor intentionally and irreparably frustrated their investigation by destroying all data associated with the offshore structure and numerous client and other records relating to the domestic investment structures. Manor is also alleged to have created numerous false documents in an effort to hide the true use of investors’ funds.

Manor fled to Israel in early April during the OSC’s investigation and has not returned to Canada.

OSC staff allege that the three other individuals named in the proceedings knew or ought to have known of the improper conduct engaged in by Portus.

Staff allege that Michael Mendelson was a directing mind of all of the entities in the Portus group. Mendelson was officially designated as President and/or CEO of PAM. Michael Labanowich was Portus’ registered Investment Counsel and Portfolio Manager and was designated as Portus’ Chief Compliance Officer until May of 2004, at which time John Ogg assumed the designation of Chief Compliance Officer.