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BCSC to return $1.1-million to Michaels's fraud victims

2019-01-17 12:17 ET - News Release

Mr. Doug Muir reports

INVESTORS TO RECEIVE REIMBURSEMENT FOR LOSSES

Investors defrauded by David Michaels will get some money back after the B.C. Securities Commission (BCSC) obtained money from the sale of Mr. Michaels's Hawaiian property and a cash payment from Mr. Michaels.

The BCSC's court-appointed receiver, Grant Thornton Ltd., holds about $1.1-million from Mr. Michaels to return to investors, about 20 per cent of the net amount Mr. Michaels obtained from the fraud. These payments will not affect the BCSC's ability to continue to collect against Mr. Michaels's outstanding sanctions.

Grant Thornton has sent a notice explaining the claims process to investors, most of whom are seniors living in or around Victoria. Each investor will receive a prorated share of the $1.1-million (minus the fee for the receiver), based on the money he or she lost.

In 2014, a BCSC panel found that Mr. Michaels committed fraud against more than 480 investors. It banned him from the securities industry and ordered him to pay $23.3-million in fines. When Mr. Michaels did not pay his fines, the BCSC started two lawsuits relating to property in Hawaii and Victoria.

Mr. Michaels settled the lawsuits with the BCSC in June, 2018, agreeing to hand over the Hawaii property and to pay $50,000. The Hawaii property was sold in December, 2018, and the money was given to the receiver.

"We've been persistent in our efforts to collect from Mr. Michaels, and we're now at the stage where we can return some money to the hundreds of investors who suffered losses because of their investments through him," commented Doug Muir, director of enforcement at the BCSC. "To get money to people as quickly as possible, we obtained court approval for a simplified claims process that should be efficient and straightforward. We urge investors to respond to the receiver's notice, which is required for them to participate in the distribution."

The BCSC panel found that Mr. Michaels, a former mutual fund salesman who conducted weekly radio infomercials, illegally and fraudulently advised clients to purchase high-risk securities that were exempt from requirements to have a prospectus (a formal document that provides details of an investment). He also advised them to borrow against their homes to purchase these investments.

The panel said Mr. Michaels lied to his clients and betrayed their trust. It determined that at least $40-million of the $65-million his clients invested was lost; Mr. Michaels was paid $5.8-million in fees and commissions for those activities. In addition to banning him from most market activities, it ordered him to pay the $5.8-million that he had been paid in fees and commissions, plus a $17.5-million administrative penalty.

About the B.C. Securities Commission

The BCSC is the independent provincial government agency responsible for regulating capital markets in British Columbia through the administration of the Securities Act.

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