A Ponzi scheme, as the court described it, pays early investors with money from new ones until the flow of new money dries up and nearly everyone loses except the operators.
The defendants reject the fraud claim. They argued the investors had not given the first judge a full and fair account, leaving out that they were sophisticated investors, had already earned $1.2 million in returns, and had signed 20 agreements acknowledging the investments were risky. A delay in a financing or a sale, they wrote in their factum, is not fraud.
The judge stressed that he was deciding only the terms of a 54-day adjournment, not the merits, and that his findings were made without prejudice. Even so, he said he had doubts the investors could clear the high bar of a strong prima facie case of fraud needed to keep the order in place. He pointed to a July 31, 2025 memo from an administrator appointed by Ontario’s Financial Services Regulatory Authority to oversee certain Valour mortgage investments. The administrator called the firm’s strategy a “Hail Mary pass” but did not call it fraudulent.
Weighing the potential harm to each side, the court found the greater risk over the next two months fell on the defendants. The individuals face a notice of sale on their home, told the court that RBC is ending its banking relationship with them later this year, and said their realtors had cancelled property listings. The plaintiffs, by contrast, are small unsecured investors whose roughly $4 million represents less than 1 percent of the corporate defendants’ holdings.
The court also noted the reputational stain that a fraud-linked freezing order leaves on people who have not been found to have done anything wrong.
