Up to $27 million in investments was put at risk by investors duped by two Calgarians who convinced them to put up cash in what turned out to be a Ponzi scheme, court heard Monday.
Arnold Breitkreutz and Susan Elizabeth Way each pleaded guilty to a single charge of fraud in connection with a scam they perpetrated under the company name Base Financial Inc.
Reading from a statement of agreed facts, Crown prosecutor Brian Holtby detailed how Breitkreutz and Way took in investments which were supposed to be secured by mortgages on residential properties.
Breitkreutz asserted that prior to May 1, 2014, his company did indeed hold first mortgages, something the prosecution wasn’t disputing.
But Holtby said that between May 1, 2014, and Sept. 30, 2015, the company took in about $27 million from 107 people investing in Base Financial even though the company “held no such mortgages.”
“Nevertheless, Arnold Breitkreutz continued to induce investors to invest in Base Finance. He falsely represented that the investments would be secured by first mortgages place by Base Finance on residential properties and that Base Finance would pay them the mortgage interest received from the mortgagors.”
During that time period auditors discovered $27 million was invested and $26.3 million was paid out, some of which went to people who put in money prior, Holtby said.
“The use of investors’ funds to pay investors, without actual revenue, is typically referred to as a ‘Ponzi’ scheme.”
The prosecutor said while Breitkreutz was the company president, Way “played a significant role in the operations of Base Finance.”
In 2019, the Alberta Securities Commission ordered the pair to pay penalties totalling more than $4 million for what it said was a Ponzi scheme which attracted a total investment of $137 million.
Both Breitkreutz and Way remain at liberty pending sentencing. Way’s lawyer, Shamsher Kothari, asked that her hearing proceed on June 18.
Lawyer Eleanor Funk requested up to a six-month delay for Breitkreutz to get his affairs in order and his sentencing hearing will be scheduled July 8.
On Twitter: @KMartinCourts