A British Columbia Securities Commission panel has found that Steven Peter Kyllo perpetrated a fraud when he sold securities to investors with promises of impossibly high returns and lied about how he would use their funds.

Kyllo, while a resident of B.C., used Frey Mining Company Ltd., Moenkopi Resources Inc., and Mercury Capital S.A. to raise money from Canadian and U.S. investors between 2002 and 2006. He controlled the flow of funds into and out of the three companies and managed their affairs.

Kyllo sold the investments in Frey, Moenkopi, and Mercury both directly and through individuals to whom he paid commissions. In total, Kyllo raised US$1.14 million from 40 investors without being registered and without filing a prospectus.

Investors in the Moenkopi and Mercury investment programs were told they would earn high returns that are not legally possible, according to expert testimony. They were also told that their funds would not be put at risk, and that their funds would be invested with traders dealing in large private high-yield trading programs. This was untrue, the BCSC says.

The BCSC panel found that Kyllo perpetrated a fraud on the investors when he lied to them, and used their funds to enrich himself and his family members, and for other purposes.

The panel also found that Kyllo, Moenkopi, and Mercury made misrepresentations when they lied to investors about how their funds would be invested, the returns offered, and the risk associated with the investments.

The panel found that all of the respondents illegally distributed securities to investors.

The panel directed the parties to make submissions on sanctions.