Investors who were defrauded of more than $40 million at the hands of disgraced adviser David Michael Michaels could get a small portion of their money back as early as this summer.
According to the B.C. Securities Commission, the proceeds of a sale of Michaels’ Hawaiian property and a $50,000 cash payment from the fraudster will mean investors — many of them seniors living in Victoria — will receive a portion of $1.1 million.
“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,” said Doug Muir, director of enforcement for the commission. “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.”
Muir said there is no fixed timeline for cheques to be sent, but he expects investors could start to see them this summer.
The court-appointed receiver, Grant Thornton Limited, is holding the money, which represents about 20 per cent of the fees and commissions Michaels obtained from the fraud.
Grant Thornton has sent a notice explaining the claims process to investors, who will receive a pro-rated share of the $1.1 million based on the money they lost.
The notice asks victims of the fraud to confirm the amount they had invested with Michaels.
In 2014, a commission panel found Michaels committed fraud against more than 480 investors.
He was banned from the securities industry and ordered to pay $23.3 million in fines.
When Michaels did not pay his fines, the commission started two lawsuits relating to property in Hawaii and Victoria.
Michaels settled the lawsuits in June 2018, agreeing to hand over the Hawaii property and to pay $50,000. The Hawaii property was sold in December 2018 for US $1.19 million. The commission recovered US $855,236 after the mortgage was paid out.
Muir said the money the commission has collected so far wraps up only the lawsuit process and does not preclude it from pursuing Michaels for more.
“The next step is we will probably interview him again as we believe there may be some more assets worth going after,” Muir said.
In its findings, the commission panel ruled Michaels sought clients through a weekly radio infomercial, Creating Wealth with David Michaels, and that he illegally and fraudulently advised clients to sell their stocks, bonds and mutual funds, and purchase high-risk exempt market securities instead.
He also advised his clients to borrow against their homes to purchase risky investments.
The panel said 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; 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 refund $5.8 million that he had been paid in fees and commissions, plus a $17.5-million administrative penalty.