An Ontario Securities Commission (OSC) panel has concluded that a foreign exchange trading scheme was actually a fraud. The panel will hand down penalties in the case next year.

The OSC released its decision in the case of New Found Freedom Financial (NFF) Tuesday, ruling that the operation was essentially a Ponzi scheme.

“This matter is yet another example of investors persuaded to advance money for investment in foreign exchange trading on the promise of unrealistic returns. As with many such schemes, funds from investors late to the program were used to pay earlier investors and the proponents of the scheme, to their detriment,” it says.

According to the decision, from April 2008 until the end of October 2009, NFF raised approximately $1.8 million from 57 investors. It reports that of the $1.8 million invested in NFF only $1.1 million was transferred to the scheme’s traders, the other $700,000 was used to fund monthly payments to earlier investors, for payments to Martinez and Singh, or for other purposes.

After a hearing on the merits, the panel found that NFF, and its founders, Ron Deonarine Singh and Wayne Gerard Martinez traded without registration, distributed securities without a prospectus, and “participated in acts… that they knew or reasonably ought to have known perpetrate a fraud…”. It also found that a mortgage agent who directed some clients to the firm, Pauline Levy, traded without registration and distributed securities without a prospectus too.

The decision reports that Singh called no evidence, did not testify and did not appear to make final submissions. It says that Martinez “virtually acknowledged” breaches of securities law, but denied that he committed fraud, and said they had no intention of defrauding anyone. And, it says that Levy questioned the fairness of the proceeding against her, claiming others had referred investors to the program too; and that she blamed Singh and Martinez for what happened to the investors she introduced to the program.

The panel concluded that their conduct was contrary to the public interest and harmful to the integrity of the capital markets in Ontario, and it ordered that a hearing to determine sanctions and costs will be held on March 13, 2013.