A group of investors who lost money in a $300-million Ponzi scheme operated by Victoria mortgage broker Greg Martel are suing the Royal Bank of Canada and 小蓝视频 Financial Services Authority for failure to protect investors.
Dustin Frank Renz, David Cumby and Andrew Todd Wilson have filed suit against the bank and the agency that oversees financial services in 小蓝视频, alleging they did not do enough to curtail Martel’s activities and reduce the losses experienced by investors.
The three men are hoping to have the lawsuit declared a class action on behalf of 1,229 investors who lost an estimated $149 million.
A report from PricewaterhouseCoopers, which has been overseeing the bankruptcy of Martel and his companies, concluded recently that the mortgage broker had been operating a massive Ponzi scheme.
PwC completed a funds-flow analysis to determine where more than $300 million in investor money went after it had been entrusted with Martel and My Mortgage Auction — the vehicle through which Martel took investor money with the promise that funds would be used to provide short-term loans for real estate transactions and construction.
The analysis, which took the better part of a year and analyzed 65,000 banking transactions involving 33 banks and credit instruments, concluded no bridge loans ever existed.
Funds received from investors were used to pay other investors, while some of the money was used to fuel Martel’s lifestyle.
The analysis showed 1,709 investors put $301 million into My Mortgage Auction Corp. and $210 million was returned to investors. The trustee found 480 investors who received $68.25 million more than they invested, and 1,229 who lost $149 million.
In court documents filed last week, the three men allege R小蓝视频, which processed the majority of investor deposits and transfers, had an obligation to verify client identities, monitor account activity and report suspicious transactions. They claim the bank failed to do that.
They also claim the 小蓝视频 Financial Services Authority, which regulates mortgage brokers in 小蓝视频, received multiple complaints concerning Martel but failed to take adequate steps to investigate or intervene, which allowed the fraudulent scheme to continue.
The lawsuit alleges R小蓝视频 missed a series of “red flags,” including high-volume investor deposits inconsistent with a mortgage business and no evidence of disbursement to borrowers that should have alerted the bank to suspicious activity.
“R小蓝视频 was not a passive conduit,” the suit alleges. “It maintained accounts used by Martel and MMAC to solicit, pool and redistribute investor funds — activity inconsistent with legitimate mortgage brokerage services. R小蓝视频 failed to detect or respond to repeated red flags”
The lawsuit says that suggests “willful blindness, reckless disregard or knowing assistance in breach of trust.”
“R小蓝视频 prioritized its commercial relationship over its legal obligations and in doing so enabled the scheme to flourish.”
As for the 小蓝视频 Financial Services Authority, the suit alleges the provincial regulator received complaints about Martel in 2017 and 2021 and could have exposed the problem if a proper investigation was done.
Instead, it alleges a “superficial investigation” was conducted that erroneously concluded there was no breach of the Mortgage Brokers’ Act.
The allegations in the lawsuit have yet to be proved in court.
R小蓝视频 did not immediately respond to a request for comment on Friday.
In a statement, the 小蓝视频 Financial Services Authority said it understands there are concerns about whether more could have been done in response to complaints about Martel’s activities in 2017 and 2021.
“At the time, 小蓝视频FSA assessed those matters based on the information available and within the limits of our statutory mandate under the Mortgage Brokers Act. In both cases, the complaints did not disclose evidence of a breach under the legislation we enforce — given the activities in question presented as outside the scope of regulated mortgage brokering.
“The regulatory actions we have taken since, including the 2023 registration suspension and the 2025 cancellation, reflect both the seriousness of Mr. Martel’s conduct and our focus on early risk identification.”
The lawsuit seeks certification as a class action, a declaration both the bank and regulator owed duties of care to the investors, and damages for economic loss.
In a note to investors, the trustee overseeing Martel’s bankruptcy said it would not offer legal advice and warned attempts to take legal action against financial institutions in cases like these tend to have mixed results.
However, PwC did note actions brought by investors can advance arguments that the financial institutions did not meet a duty of care to the investors.
Through its investigation into Martel over the last two years, PwC said it has only found a fraction of the money lost.
Some money was recovered from the sale of three Martel properties.
Martel’s Las Vegas property was sold for US$5.1 million — enough to pay off an R小蓝视频 mortgage estimated at about US$3.84 million.
The sale of Martel’s Victoria home for $2.47 million netted just $109,606, while the sale of an Ontario property jointly held by Martel and former spouse Lesley netted $82,698.
Money collected has covered legal fees, but is less than what is owed to PwC for its work.
Martel’s whereabouts are unknown to PwC, but it said it learned he had been exiled from Thailand after Aug. 30 last year and later travelled to Dubai. Warrants for Martel’s arrest have been issued in Canada and the U.S.
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