Class action launched against Royal Bank and B.C.'s financial services regulator over $300M Ponzi scheme
Three B.C. investors have launched a proposed class-action lawsuit in the province’s supreme court against Royal Bank of Canada (RBC) and the British Columbia Financial Services Authority (BCFSA) over what they claim are failures in stopping a massive Ponzi scheme.
The plaintiffs, Dustin Frank Renz, David Cumby, and Andy Todd Wilson, state in the Notice of Civil Claim that the lawsuit stems from Gregory Martel’s Canada-wide Ponzi scheme that was run through his B.C.-based company, My Mortgage Auction Corp. (MMAC).
The claim alleges that the scheme defrauded $300 million from over 1,800 investors across the country, and Canadian and American authorities are currently seeking Martel on an arrest warrant for contempt of court. His last known whereabouts were in Dubai, United Arab Emirates.
Greg Martel/Vimeo
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“These failures, by the bank responsible for processing the majority of investor funds, and the regulator responsible for supervising the mortgage broker, enabled the scheme to persist unchecked for years, resulting in massive and avoidable investor losses,” reads the court filing.
“The plaintiffs seek to recover losses on behalf of the 1,229 Net Losers identified by PricewaterhouseCoopers Inc. (PWC), meaning those individuals who received back less than they originally invested.”
The Notice of Civil Claim states that MMAC was registered as a mortgage broker with the British Columbia Financial Services Authority. Until he stopped holding his licence in 2023, Martel promoted and solicited investments using the pretense of mortgage-backed “bridge loan” opportunities.
The B.C. Supreme Court appointed PWC as receiver of MMAC, which confirmed that no legitimate bridge loans were ever made after analyzing over 65,000 transactions.
Stefan Malloch/Shutterstock
“Instead, Martel operated a classic Ponzi scheme: new investor funds were used to pay earlier investors, while millions were diverted to failed ventures and Martel’s personal expenditures,” read the Notice of Civil Claim.
“The Plaintiffs plead that BCFSA failed to meet the standard of care expected of a reasonable regulator exercising operational oversight. BCFSA’s failure to investigate and act upon known red flags materially contributed to the prolonged operation of the scheme and to the losses suffered by Class Members.”
Court filings also allege that RBC provided banking services to Martel and his affiliated entities and processed the majority of investor deposits and transfers associated with the Ponzi scheme.
Greg Martel
“RBC owed a duty of care to the plaintiffs and class members to act with reasonable diligence in preventing its accounts from being used to facilitate fraud. RBC’s failure to fulfill its legal obligations enabled the Scheme to operate undetected, causing significant financial losses to the plaintiffs and class members.”
The Notice of Civil Claim states that the plaintiffs and class members relied on RBC as a financial system gatekeeper and on BCFSA to supervise Martel as he was a licensed mortgage broker.
“The Defendants breached their duties by failing to implement or enforce effective
systems to detect, prevent, or act on numerous indicia of fraud, despite having access
to transaction data, investor complaints, and licensing authority. These breaches directly enabled the MMAC scheme to operate over several years.”
Renz, Cumby, and Wilson claim several reliefs for themselves and fellow members if the class action proceeds, including a declaration that the defendants owed and breached duties of care, general damages and special damages, and “further and other relief as this Honourable Court may deem just.”
None of the allegations in the proposed class-action lawsuit have been proven in court. RBC and the B.C. Financial Services Authority have not yet filed a response to the Notice of Claim.