Trustee concludes Victoria’s Greg Martel ran a massive Ponzi scheme

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Victoria mortgage broker Greg Martel was running a massive Ponzi scheme and investors who are out more than $317 million will never see a dime of that money, which Martel never used to make bridge loans as promised.

Those were among the highlights of a scathing report prepared by trustee PricewaterhouseCoopers and filed with the Office of the Superintendent of Bankruptcy to be considered as it contemplates discharging Martel from bankruptcy, a move PwC opposes.

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According to PwC, a person is often eligible for an automatic discharge from bankruptcy, and released from certain financial obligations, at the end of nine months from the date of commencement of personal bankruptcy unless there is opposition. That nine-month period ends May 31.

The report explains the causes of the bankruptcy and Martel’s conduct. It pulls no punches and makes clear that investors and creditors are not getting any of their money back.

The report, signed by PwC partner Neil Bunker, said Martel failed to comply with many of the duties required in his own bankruptcy and that of his company My Mortgage Auction Corp.

My Mortgage Auction was the vehicle through which Martel took investor money with the promise the funds would be used to provide short-term loans for real estate transactions and construction. PwC said no loans were issued.

“Martel orchestrated a massive Ponzi scheme through MMAC and raised over $270 million from investors on false pretences which has resulted in claims from at least 930 investors totalling more than $317 million,” the report said. “The trustee does not expect that the investors will receive any recovery from the bankruptcy estates of Martel or MMAC.”

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PwC tracked more than 50,000 transactions through 40-plus accounts at financial institutions.

The report said “investor funds loaned to MMAC for the purpose of funding bridge loans were not used to fund bridge loans but instead were used for other purposes.” Those other purposes included paying other investors, funding related companies and funding large operating expenses. “The flow of funds indicates that MMAC operated as a Ponzi scheme,” it said. A Ponzi scheme is a fraud where existing investors are paid with money from new investors.

Martel was solely responsible for the fraud, failed to provide records for his personal finances or those of My Mortgage Auction and lived an extravagant lifestyle, PwC said. “Martel often mixed his personal affairs with those of MMAC and the other corporations which he owned and controlled — all of which were or ultimately became insolvent.”

Martel’s spending between 2018 and 2023 included $3.1 million on travel, $3.1 million on vehicles, $1.1 million on rent, $261,000 on meals, $200,000 on jewelry and $150,000 on recreation and vacations.

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The report accuses Martel of committing a number of offences under the Bankruptcy and Insolvency Act including concealing documents, obtaining credit or property by false representation and concealing property.

PwC said during a year of investigation, it has only found a fraction of the money lost.

Some money was recovered from the sale of three Martel properties. Martel’s Las Vegas property was sold for $5.1 million US — enough to pay off an RBC mortgage estimated at about $3.84 million US.

The remaining proceeds are being held in escrow until U.S. tax officials respond to a PwC request for a reduction in tax withholdings.

The sale of Martel’s Victoria home for $2.47 million netted just $109,606, while the sale of an Ontario property jointly held by Martel and his former spouse Lesley netted $82,698.

Money collected has covered legal fees, but is less than what is owed to PwC for its work. The minutes of a bankruptcy inspectors’ meeting held in December show PwC was owed $1.8 million, of which only $103,000 had been paid.

Martel’s whereabouts are unknown to PwC, but it said it learned he had been exiled from Thailand after Aug. 30, and later travelled to Dubai. Warrants for Martel’s arrest have been issued in Canada and the U.S.

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PwC noted both the B.C. Securities Commission and Victoria police are investigating.

Brain Kladko, spokesman for the B.C. Securities Commission confirmed their criminal investigation into misconduct related to trading securities is ongoing. “Generally speaking, depending on the complexity of the matter under investigation, it can take several years to complete an investigation and produce a result that can be disclosed to the public.”

Kladko said the commission is hoping more investors and others with personal involvement with Martel’s companies Shop Your Own Mortgage and My Mortgage Auction Corp will come forward.

aduffy@timescolonist.com

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