Class action claims financial institutions failed in their oversight duties, enabling one of Canada's largest Ponzi schemes
A group of investors who claim they were defrauded in a $300 million Ponzi scheme run by Greg Martel have filed a class action lawsuit against the Royal Bank of Canada (RBC), the British Columbia Financial Services Authority (BCFSA), Martel himself, and his company, My Mortgage Auction Corp. (MMAC).
According to court documents filed in the BC Supreme Court, representative plaintiffs Dustin Frank Renz, David Cumby, and Andy Todd Wilson allege that RBC and BCFSA share responsibility for the massive investor losses because they failed to detect or stop Martel’s misconduct despite having regulatory oversight roles.
“The plaintiffs allege that the scheme could not have resulted in such extensive losses without the involvement — and badge of credibility — provided by a major bank and a licensed regulator,” their lawyer, Meldon Ellis, said in a statement to CBC.
The lawsuit claims that 1,229 investors lost money through MMAC’s so-called bridge loan offerings, which promised interest rates of 9% to 14% on short-term loans. But as later uncovered by court-appointed receiver PricewaterhouseCoopers, the loans didn’t exist.
Instead, Martel allegedly operated a classic Ponzi scheme, using money from new investors to pay earlier participants and pocketing millions for personal expenses, a failed car-share business, and trading losses.
The court filings state that RBC, where MMAC held its accounts, was required under anti-money laundering laws to monitor suspicious activity, verify client identities, and report red flags. The lawsuit points to signs like unusually high investor deposits, circular fund flows, and activity inconsistent with normal mortgage brokerage business.
The BCFSA, meanwhile, is accused of conducting only superficial investigations after receiving complaints in 2017 and 2021. The plaintiffs argue that if those concerns had been properly investigated, the fraud might have been exposed sooner.
Martel disappeared in 2023 as MMAC collapsed, leaving behind $301 million in investor funds, of which only $210 million was paid back. Authorities in Canada and the US have issued arrest warrants, though Martel has not been criminally charged.
Read more: Victoria mortgage broker ran $317m Ponzi scheme, bankruptcy files find
RBC declined to comment while the matter is before the court. BCFSA told CBC that its investigations had found no misconduct within its jurisdiction at the time.
The class action, if certified, would include the other 1,226 investors who, like the lead plaintiffs, received less money back than they invested. The lawsuit seeks both general and specific damages for the affected investors.
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