Fraud
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The court-appointed receiver of a Victoria-based company, My Mortgage Auction Corp. (MMAC) — that allegedly amounted to a Ponzi scheme — will not be suing the financial institutions used by the firm. That challenge will have to fall to investors themselves.

Earlier this year, PricewaterhouseCoopers Inc. (PwC), which was appointed receiver of MMAC by the Supreme Court of British Columbia in 2023 and later as its trustee in bankruptcy, declared that its analysis of fund flows involving roughly 65,000 banking transactions by the company led it to conclude that MMAC was a Ponzi scheme that resulted in an estimated $80.8 million of investor losses.

Now, PwC has told investors that it will not be pursuing legal action against the financial institutions used by MMAC — so investors can consider whether to take this kind of action instead.

“The receiver wishes to make the investors aware of this decision so the investors can consider whether they wish to pursue a claim against the [financial institutions],” PwC said in a note to investors. 

Indeed, PwC said that, while there is some precedent for legal action against financial institutions in these kinds of cases, “the results are mixed” — and the actions that have been successful have generally been brought by investors rather than by a receiver.

“This is largely a result of the fact that the receiver steps in the shoes of MMAC and it can be difficult for the company that committed the Ponzi scheme (MMAC) to, in turn, claim that a [financial institution] is liable to MMAC (or its receiver) for something the company did,” it said.

By contrast, investors can bring claims that allege that a financial institution did not meet its duty of care to investors, the note said.    

The case is already pitting investors against one another after PwC found that certain investors profited from the Ponzi scheme while most investors suffered losses. 

The firm’s analysis concluded that 480 investors made a combined $68.25 million from the scheme, while 1,229 other investors lost $149.0 million (and 81 investors received $3.13 million in so-called “preference payments”). 

PwC has filed an application seeking a court order to claw back money from investors that benefited from the scheme.

Following a hearing in mid-March, the court adjourned the application for claw back orders until May, scheduling a hearing for May 12 to 16 to consider the receiver’s proposal.

The allegation that MMAC was operated as a Ponzi scheme hasn’t been proven in court.