Investors with B.C. Ponzi schemer Greg Martel now facing court clawback of profits

Over 500 investors who made money with Victoria, B.C., Ponzi schemer Greg Martel are facing a newly announced court action seeking to claw back combined profits in the tens of millions of dollars.

Documents posted by PricewaterhouseCoopers (PwC), the receiver appointed to the case, say 480 Martel investors have been deemed "winners" in the fraud, a title indicating that they received more cash back than they originally put in.

They make up the bulk of investors who will be subjected to court orders aimed at recouping funds to be pooled in Martel's bankruptcy estate.

Another 81 investors who received "preference payments" in the dying months of Martel's fraud have also been identified as targets for clawbacks in accordance with the Bankruptcy and Insolvency Act.

The vast majority of Martel's investors — 1,229 in total — have been categorized as "losers" who received less cash back than their original investment. "Loser" investors are entitled to a share of whatever funds the receiver can collect in the asset pool.

A Ponzi scheme is a scam enterprise where early investors are typically paid out with money put in by those who buy in later. 

Under B.C. law, "winner" investors in a Ponzi scheme are not entitled to keep their investment proceeds regardless of whether they were aware of the fraud.

In total, Martel brought in $301 million from investors and paid out $210 million. Investigators say the remaining $91 million went to options trading losses, other failing business ventures, and to pay for his extravagant lifestyle.

In determining the "winners" and "losers" designations, PwC analyzed 65,000 banking transactions related to Martel's bogus company, My Mortgage Auction Corp. 

Lawyer Ron Usher, who has worked on past Ponzi cases, said PwC's analysis leaves little doubt as to the size of Martel's financial fraud.

"The good news is they dealt with an incredibly complicated accounting document process, and they've got some pretty solid numbers now in terms of the investors and, more interestingly, differentiating between winners and losers," he said.

"If I were an investor in such an obviously and completely fraudulent scheme, I would be delighted if I got clawed back to just the money I invested. So the winners will still be better off than most of the losers."

Usher said the law allows PwC to separately target the 81 "preference payment" investors for clawbacks because they received payouts in the three months before the scam collapsed, likely when Martel already knew his house of cards was crumbling.

"Typically, at that point, the person who's running this scheme knows it's a problem, and often they'll pay out money to family and friends just to guard them," said Usher.  "At that point in time, it's deemed that the whole thing is already insolvent, and so those are especially egregious payments."