Category: Articles of Interest

CBC Article quoting David Debenham, President of the ACFI, counsel of Low Murchison Radnoff, LLP (Ottawa) 

The audit that led to an Ottawa Hospital lawsuit, with explosive allegations about a fraud conspiracy involving its contractors and two hospital managers, cost taxpayers more than $500,000, according to new information obtained by CBC.

The hospital has fought CBC’s efforts to obtain information about the true cost borne by the public for a case that began in 2016 and was settled more than four years later without going to trial. 

A CBC appeal under Freedom of Information legislation resulted in access only to the cost of the audit itself, however.

This likely represents only a small portion of the total cost of the suit, including legal fees and any settlements, according to lawyer and forensic auditor David Debenham.

“They spent a lot of money on this, and the question is, is it well spent?” he said. “Did they get value for money? We have no way of telling.”

Continue reading “Ottawa Hospital paid $500K to auditor for lawsuit that never went to trial”

By David Debenham, President of the ACFI, counsel of Low Murchison Radnoff, LLP (Ottawa)

Lawyers presume that all of their professional witnesses have to be qualified as experts. Do they?

Under Rule 701 of the American Federal Rules of Evidence, a witness is not testifying as an expert, if the witness testimony is limited to one that is (a) rationally based on the witness’s perception; (b) helpful to clearly understanding the witness’s testimony or to determining a fact in issue; and (c) not based on scientific, technical, or other specialized knowledge.

Lay testimony has surprising breadth. For example, most courts have permitted the owner or officer of a business to testify to the value or projected profits of the business, without the necessity of qualifying the witness as an accountant, appraiser, or similar expert, [1]  as it is based on his knowledge and participation in the day-to-day affairs of the business). Such opinion testimony is admitted not because of experience, training or specialized knowledge within the realm of an expert, but because of the particularized knowledge that the witness has by virtue of his or her position in the business. 

In Brown[2], the court declared that the distinction between lay and expert witness testimony is that lay testimony “results from a process of reasoning familiar in everyday life,” while expert testimony “results from a process of reasoning which can be mastered only by specialists in the field.” 

The Federal Rules do not distinguish between expert and lay witnesses, but rather between expert and lay testimony. Certainly, it is possible for the same witness to provide both lay and expert testimony in a single case. [3] (law enforcement agents could testify that the defendant was acting suspiciously, without being qualified as experts; however, the rules on experts were applicable where the agents testified on the basis of extensive experience that the defendant was using code words to refer to drug quantities and prices). The amendment makes clear that any part of a witness’ testimony that is based upon scientific, technical, or other specialized knowledge is governed by the standards of expert testimony.

A summary is typically presented as a chart, summary, or calculation, often presented by the witness who prepared it and is familiar with its contents; a summary can, however, simply take the form of a witness’s oral testimony.7 There are three types of summary evidence: (1) summaries of voluminous records [4](2) pedagogical summaries of evidence allowed by the court through its discretion under Federal Rule of Evidence 61 1(a); and (3) “hybrid” summaries which perform both functions in an effort to reliably assist the factfinder. Summaries contain voluminous writings, recordings, or photographs which cannot conveniently be examined in court so they may be presented in the form of a chart, summary, or calculation.  These charts are only admissible where the underlying documents they purport to summarize would be admissible.  Although the Federal Rules of Evidence do not explicitly allow – or require – the proponent of a summary chart to have the preparer come into court as a witness to explain the chart, courts have held that such testimony

is within the broad discretion of the trial court to admit or exclude evidence. These witnesses need not be experts to sift through the documents being summarized. 

By contrast, pedagogical summaries are not evidence themselves, but are demonstrative evidence used  used merely as an aid to the jury by allowing a witness to review testimonial or other evidence that has been introduced during a trial.   These pedagogical summaries apparently serve the twin aims of (a), the efficient “ascertainment of the truth” and (b) the avoidance of “needless consumption of time.

The third category is the hybrid secondary-evidence summarizing evidence and explaining its significance to the fact finder.

In R. v. Vuong [1]the crown was prosecuting a fraud over $5,000 in relation to a large-scale investment scheme. Owing to there being no prejudice, the Court of Appeal for Ontario dismissed the appellants’ application that the trial judge erred by permitting a forensic accountant to testify as a non-expert witness. The ruling permitting the forensic accountant to testify as a fact witness was focused on a “Source and Application of Funds” Analysis. His evidence was limited to following the flow of money deposited by the various complainants through the accuseds’ bank accounts.In his report, the accountant made findings, for example, that payments to investors could only have been funded by other investor deposits. That is an opinion. He also opines that the trading was speculative and not profitable. Those are also conclusions made based on his review of the underlying facts and not just a resuscitation of the facts based on his experience and knowledge as a forensic accountant. The trial judge originally found that the opinions rendered the accountant an expert.  Then the Court of Appeal released its decision in R. v. Ajise, [2] In Ajise, the majority held that a Canada Customs and Revenue Agency (“CCRA”) investigator did not have to be qualified as an expert witness because the witness offered only factual information that did not require expertise to present and could be assessed by the jury as a matter of logic and common sense. The trial judge then reversed herself and held that the accountant could be called as a non-expert witness, so long as he not to proffer any opinion evidence at trial.

Conclusion

In your case, are you really proffering an opinion that depends on your expertise, an opinion that any lay witness could come to, or simply a summary of facts?  The answer to this question can make all the difference in the world regarding whether you testify, and how.

 

[1] R. v. Vuong and Quach, 2018 ONSC 3631 (CanLII), <https://canlii.ca/t/ht7kj>

[2] 2018 ONCA 494, 361 C.C.C. (3d) 384, aff’d 2018 SCC 51, [2018] 3 S.C.R. 301.

[1] See, e.g., Lightning Lube, Inc. v. Witco Corp. 4 F.3d 1153 (3d Cir. 1993)

[2]  836 S.W.2d 530, 549 (1992),

[3] See, e.g., United States v. Figueroa-Lopez, 125 F.3d 1241, 1246 (9th Cir. 1997)

[4] as provided in Federal Rule of Evidence 1006;

 

 

by Norman Groot, Investigation Counsel PC

On Saturday February 3, 2024, CTV’s W5 aired an episode entitled “The Crypto Bros”. The program informed Canadians about the Forex (foreign exchange) and cryptocurrency Ponzi scheme perpetrated by the self-proclaimed “Crypto King” Aiden Pleterski. The program also focused on the schemes perpetrated by two of Pleterski’s associates – Colin Murphy of Oshawa, Ontario, and Ryan Rumble of Chatham, Ontario.

Link: https://www.ctvnews.ca/video/c2860068-w5–the-crypto-bros

The W5 program raised the questions of why it was that Pleterski was living the high life while a bankrupt and why all three “Crypto Bros” were not subject to criminal charges. The W5 program reported on how Ontario’s civil courts have jailed Murphy[1] and issued an arrest warrant for Rumble,[2] yet Canada’s criminal system has not issued charges against Pleterski, Murphy or Rumble, and Canada’s bankruptcy system has not imposed sanctions on Pleterski to curb his wild spending.

The purpose of this blog post is to answer inquiries that we have received from the public and Pleterski investors arising from the airing of the W5 “Crypto Bros” program. Our law firm and our investigators, led by Keith Elliott of Reed Research, were interviewed for the W5 production due to our involvement in the bankruptcy process with Pleterski and with the civil court prosecutions of Rumble and Murphy.

While the W5 program is very informative, there are gaps in it that we fill in this post and which explain why Pleterski is running free as a bankrupt while Rumble and Murphy’s lives are restricted by means achieved through Ontario’s civil courts. This blog post explains why Canada’s civil justice system is the practical place to seek justice when it comes to a timely response to fraud recovery projects.

The W5 episode also mentioned the fascinating allegations that bankruptcy inspector Akil Heywood was involved in a “self-help” form of recovery from Pleterski in which threats were made against not only Pleterski, but also against Pleterski’s bankruptcy trustee Rob Stelzer. These kinds of shenanigans are a first of their kind. We also discuss Akil Heywood’s role in the bankruptcy below.

Pleterski’s Scheme

The W5 program informatively explains the life story of Aiden Pleterski, from being a teenage baseball enthusiast, to a Fanshawe College drop-out, to a self-promoting “crypto king”. The W5 story told how Pleterski initially dabbled in foreign exchange and cryptocurrency trading, and then began to accept investor money solicited on claims that he was obtaining phenomenal returns at low risk. The story states that Pleterski promoted himself by purchasing a story to run in Forbes Magazine describing himself as the “Crypto King”.

The reality is that Pleterski was never a “Crypto King” or any kind of “King” for that matter. The bankruptcy court filings indicate that Pleterski did very little foreign exchange or cryptocurrency trading. Instead, he operated a Ponzi scheme in which phenomenal “investment return” payments was actually just the return of part of an investor’s own funds. Pleterski used the remainder of investor funds for various purposes including exorbitant personal spending that created the illusion that he was actually wildly successful as a foreign exchange and crypto trader. Pleterski’s act of genius was not forex trading, but how he figured out how to rip so many people off.

Like most Ponzi schemes, it eventually imploded. Starting around March 2022 Pleterski stopped communicating with most of his investors. By May 2022 a “fixer” operating under the name “Mike” who had been hired by some of the Pleterski investors, created sufficient disruption to Pleterski’s life that he went underground. Pleterski’s non-communication resulted in investors contacting lawyers. By June 2022, civil litigation commenced. More on “Mike” the “fixer” is explained below.

The Pleterski Mareva Injunction

In July 2022 our office received an inquiry from an investor who had transferred approximately $1.1M to Aiden Pleterski for foreign exchange and cryptocurrency trading. Our investor had signed contracts with Pleterski personally and later with his alter ego company AP Private Equity Limited. Our client’s funds were sent by wire transfer to bank accounts as directed by Pleterski. Our client received some returns on his investment but became concerned when Pleterski stopped communicating with him.

Our firm undertook the usual litigation searches and learned that in June 2022 an investor named Sacha Singh had commenced an action in Oshawa and obtained a Mareva injunction against Pleterski and AP Private Equity. A Mareva injunction is an asset freezing order which restrains a defendant from dealing with their assets pending the outcome of legal proceedings. Another investor named Akil Heywood had also joined along with a third investor named Ryan Rumble and his company Banknote Capital Inc. Between Mr. Singh,[3] Mr. Heywood, and Mr. Rumble[4], approximately $9.215M had transferred to Pleterski for foreign exchange and cryptocurrency trading.

In an updated litigation search we learned that a fourth investor group headed by Braden Martyniuk also sought to join Mr. Singh, Mr. Heywood, and Banknote Capital on the Mareva injunction.[5] However, Mr. Singh and his counsel would not share information they received through the Mareva injunction process with Mr. Martyniuk. In retaliation Mr. Martyniuk filed an application to assign Aiden Pleterski and AP Equity into bankruptcy, which effectively ended Mr. Singh’s civil litigation.

A bankruptcy has the effect of staying civil litigation, which in Pleterski’s case resulted in him being freed from the civil court restrictions. The bankruptcy assignment date was August 29, 2022. Had Pleterski remained subject to the civil system, there would have been a better chance of curtailing his conduct and drilling down to his source of funds. Undoubtedly Mr. Martyniuk did not foresee the wild bankrupt Pleterski spending that was about to unfold. As the saying goes, hindsight is 20-20.

The Pleterski Bankruptcy

Based on the recommendation of Mr. Martyniuk, Rob Stelzer of Grant Thornton LLP was appointed as the trustee of the Pleterski and AP Private Equity bankruptcies. No other investor had a say in hiring Mr. Stelzer as the trustee. Who gets to pick a trustee is a feature of the bankruptcy system. Our client wanted to know whether Mr. Stelzer had experience in dealing with large-scale Ponzi scheme frauds, what Mr. Stelzer’s strategy was, and the scope of the Pleterski scheme.

In furtherance of our client’s objectives, our firm posted an investor notice on our firm website requesting information on Pleterski. Within days we were flooded with approximately 150 investor inquiries reporting losses in excess of $21M in addition to the $9M reported by the Singh litigants. The rumors of Pleterski’s downfall were spreading like wildfire through investor circles because many of them had become investors on the recommendation of prior investors. This is why our firm received more investor complaints than the bankruptcy trustee.

While we were receiving the investor complaints, we learned that the Mareva injunction obtained by Mr. Singh had only preserved approximately $343,000.[6] The obvious question was: where is the money?! It could not all be spent on ‘lifestyle’. As mentioned, as a result of Mr. Martyniuk assigning Pleterski and AP Private Equity into bankruptcy, the civil action of Mr. Singh was stayed and the efforts to trace money through the civil courts stopped. Our client wanted trustee Stelzer to advise on the substance of his recovery plan and his experience in such cases.

In furtherance of our client’s objectives, we contacted Mr. Stelzer and made these inquiries. Mr. Stelzer’s plan was not to take any action against Pleterski until after the first meeting of creditors – approximately a month away. The only steps taken by Mr. Stelzer was to contact Pleterski and ask him to voluntarily provide a list of investors, their contact information, and their investments. The Civil Courts had already declared Pleterski a rogue – so relying on Pleterski for information was never going to be effective. Our client was very disappointed with the trustee’s strategy.

The reality is that to increase the chances of recovery, investigations related to Ponzi schemes require locating and preserving the rogue’s data through an Anton Piller order, which is akin to a civil search warrant. Mr. Singh had not attempted to obtain an Anton Piller order through the civil court process. Mr. Stelzer did not wish to take use the bankruptcy court processes to preserve Pleterski’s data before a first creditors’ meeting. During this period of time, Pleterski was not feeling the pressure of the law.

There is some legal debate as to whether tracing and preserving funds and searching for and preserving data and paper evidence is slower in the bankruptcy process than what can be achieved through the civil court. Given our client’s frustration with the lack of action being taken by Mr. Stelzer, our client asked us to assist him in being appointed as an inspector in the bankruptcy and to hold a vote to replace Grant Thornton as the trustee with a more proactive bankruptcy trustee.

The Pleterski Bankruptcy Investigation

On August 29, 2022, the first meeting of creditors was held. It was somewhat of a gong show. Aiden Pleterski did not show up in person as required. Pleterski did not turn over his phone, electronic devices, or any other evidence to Grant Thornton. Mr. Stelzer had not put Pleterski under surveillance and could not independently verify his whereabouts. Pleterski showed up by video link and provided no meaningful responses to investor inquiries. Some investors yelled death threats at Pleterski.

Given the lack of meaningful information obtained by investors at this first meeting of creditors, a vote was held to replace Grant Thorton as the trustee. Our client was not the only investor who wanted to replace Rob Stelzer – investor Akil Heywood also proposed an alternative trustee. To foreshadow, Akil Heywood is alleged to have engaged in self-help recovery to get ahead of investors.

For now, we return to the story of the first meeting of creditors. As there were three trustees that investors could vote for, a vote splitting occurred resulting in Grant Thornton remaining the trustee. Upon being confirmed as the trustee, inspectors were nominated and voted on. Our client, Mr. Singh, Mr. Heywood, Mr. Martyniuk, and a fifth investor were voted in as inspectors.

Thereafter a meeting of inspectors was held. Solicitor Leanne Williams was retained as counsel to the trustee. Trustee Stelzer made demands of Pleterski to surrender his iPhone and relevant data.  When that was ignored, Mr. Stelzer made an application to the bankruptcy court for an order that he do so failing which Pleterski be jailed. The application was scheduled for September 13, 2022.

On the eve of the September 13, 2022, hearing Pleterski turned over a phone (there were multiple phones he was using). As one would expect, given that the application was on notice and the passage of time since the Singh Mareva injunction, the phone was devoid of any useful data to assist a recovery. On September 13, 2022, the bankruptcy court adjourned Mr. Stelzer’s application for Pleterski’s arrest given that he had partially complied and promised to more fully comply.[7]

Shortly thereafter, Trustee Stelzer brought a second application for Pleterski’s arrest for non-cooperation with the bankruptcy process. The application was scheduled for October 6, 2022. At this hearing, Justice Kimmel of the Bankruptcy Court noted that Pleterski had not turned over all of his data or made the required disclosures to his trustee, and as a result trustee Stelzer was seeking his arrest to obtain compliance; i.e. to coerce him to do so. Trustee Stelzer’s motion was brought under sections 168(2), 198, and 205 of Canada’s Bankruptcy and Insolvency Act.[8]

Again, on the eve of the application, Pleterski feigned cooperation such as a promise to turn over some property, a second iPhone, and to attend to meet with his trustee. Justice Kimmel held that sections 168(2), 198, and 205 of Canada’s Bankruptcy and Insolvency Act operate similarly to contempt of court prosecutions in Ontario’s civil courts. Justice Kimmel stated:

The Court does not grant warrants for the arrest, detention and incarceration of individuals in civil matters, even when they have acted in contempt of the Court’s orders, except in very extenuating circumstances… A custodial sentence [for contempt of court] is typically reserved for the most serious contempt or where there is no choice but to jail a contemnor in order to coerce compliance or to express deterrence and denunciation.

 So far the two times the Trustee has brought forward its motion it has resulted in the primary objective of compliance being achieved… While the extreme remedy of an arrest warrant and an order for detention and incarcerate on of Pleterski has not been found to be warranted today, I do not foreclose that as a possible future remedy if this pattern of conduct continues.[9]

Thereafter, no timely applications were made by trustee Stelzer to the Bankruptcy Court to incarcerate Pleterski as a means to coerce him to disclose assets or surrender data. Without judicial deterrence, Pleterski started travelling the world creating and posting videos essentially mocking Canada’s bankruptcy system. These Pleterski-made videos were featured in the W5 program.

The most recent of the Grant Thornton reports dated October 18, 2023, indicates that the Trustee has paid out $3.15M in dividends to creditors. Trustee Stelzer further reported that he “considers the administration of the estate to be substantially complete with the exception of a small number of unresolved litigation matters… and that in late 2023 or early 2024, prior to the statutory deadline, the Trustee will appear at Pleterski’s discharge hearing.”[10]

The most comprehensive reporting by Grant Thornton is contained in its Third Report of the Trustee dated March 14, 2023. In this report trustee Stelzer disclosed that Pleterski’s bank accounts contained $41.5M of receipts and disbursements,[11] of which $15.9M (38.4%) were investor repayments (Ponzi payments), and of which $13.5M (32.7%) was spent on Pleterski’s extravagant lifestyle. Only $670,706 (or 1.6%) was “invested” (meaning traded per his investor contracts). Other transfers were to his associates, including Colin Murphy.[12]

Neither the most recent of the Grant Thornton reports dated October 18, 2023, nor the prior reports disclose precisely how much Grant Thornton has recovered from Pleterski or what has the trustee or its counsel has charged Pleterski’s estate for their recovery efforts. Our understanding is that approximately $4 to 5M has been recovered, that Grant Thornton and its counsel have charged $1 to $1.5M in fees and disbursements, leaving a total of approximately $3.5 to 4M (or 10%) being returned to creditors. The number of creditors and the amount of creditor claims also not been reported.

What is clear, however, and what was discussed in the W5 episode, is that Pleterski continues to live an extravagant lifestyle as a bankrupt and that the trustee does not know his source of funds to support this lifestyle. The obvious inference is that Pleterski is using investor funds not reported to the trustee to support his spending. The ineffectiveness of the bankruptcy process to control Pleterski is what the focus of the W5 episode was about.

It is suspected that the cash and cryptocurrency that Pleterski obtained from investors that has not been reported to his trustee is the source of funds that Pleterski is using to fly around the world posting his lifestyle on livestreams. Pleterski, on his postings, alleges that he is still trading, but that seems comical given his known conduct before the bankruptcy. That said, why would Pleterski fail to continue to pay investors with his unreported stash of cash and crypto to avoid the implosion of his Ponzi scheme? Theories on this issue are discussed below.

For now, we note that not all investors have filed losses with the trustee. As the W5 production mentioned, some investors are concerned about disclosing their source of funds and therefore have not filed claims in Pleterski’s bankruptcy. Other investors hope to receive a private “self-help settlement” with Pleterski. Other investors are so concerned about their personal safety that they opted out of filing claims. All of this to say that the $40M of reported losses is likely a very conservative estimate of all investor losses, and that Pleterski may be living off what was not disclosed to date.

Civil Court Prosecutions: Sutherland’s Complaint About Colin Murphy

The complainant Craig Sutherland is featured on the W5 story. We are counsel to Mr. Sutherland in his civil litigation against Colin Murphy. The discussion below is developed from facts that are in the public record that we filed in the civil courts. Mr. Sutherland has not waived any privilege.

Mr. Sutherland provided funds to Colin Murphy based on Mr. Murphy’s representation that Pleterski was a successful trader, that his funds would be invested in Forex trading, that Pleterski made significant returns, and that Murphy could obtain significant returns. Mr. Sutherland swore an affidavit indicating that Murphy had shown him a crypto wallet or account on his (Murphy’s) iPhone containing in excess of $4M of Bitcoin. We knew from the Pleterski bankruptcy that Pleterski had transferred $1.3M+ to Murphy, and that Murphy was engaging in cash transactions with Pleterski.

Mr. Sutherland filed his complaint with our office because the Pleterski bankruptcy would only accept claims from investors who transferred funds directly to Pleterski. As Mr. Sutherland transferred his funds to Murphy, Mr. Sutherland asked our firm if we would attempt a recovery against Murphy. As Murphy was not a bankrupt, it was open to him to use the civil court process.

When we carried out standard litigation searches on Murphy, we learned that a Mareva injunction already existed against him by a claimant named Anthony Milne. He (Mr. Milne) had obtained a Mareva injunction against Murphy but had not located him or forced him to attend court. Mr. Milne had not commenced contempt of court proceedings against Murphy or attempted to obtain his data.

A reasonable attempt at recovery from Murphy required an Anton Piller order (civil search order) to attempt to preserve digital and paper evidence and digital and cash assets. Similar to Mr. Singh’s Mareva injunction against Pleterski, Mr. Milne’s Mareva injunction against Murphy was lacking in results. Mr. Stelzer was not pursuing Murphy for recovery of the $1.3M that Pleterski had transferred him. We therefore located Murphy and placed him under surveillance while we filed materials to obtain an Anton Piller order in the civil courts.

The Murphy Anton Piller Order Execution

At the time that the Anton Piller order was issued, Murphy was residing with his girlfriend at her mother’s residence. Given Murphy’s online postings of firearms, the court authorized use of a firearms expert to seize weapons from Murphy. The court also authorized the attendance of police to keep the peace in the event that the Anton Piller order execution escalated to violence.

The execution of the Anton Piller order was videotaped and later shown in open court. The W5 program shows parts of the Anton Piller order execution. The “door knock” at the residence was shown. The video then cuts to the confrontation in the kitchen when Murphy refused to surrender the iPhone targeted by the search order. Not shown was a 30-minute standoff at the front door with the mother of Murphy’s girlfriend. When the standoff ended, a search commenced, and the target iPhone was located – the iPhone with the wallet or digital account holding the $4M of Bitcoin.

The target iPhone was located by investigator Keith Elliott. However, Murphy snatched it back and another standoff commenced. Murphy threated to use force on any member of the search team who attempted to obtain the iPhone from him. The video shown by W5 includes the cautions given to Murphy about being jailed for contempt of court by the civil court for failing to surrender the iPhone.

Notwithstanding the cautions, Murphy refused to surrender his iPhone. Rather, he attended at the civil court the following day and turned over his iPhone with all of its contents ‘wiped’. During the Anton Piller order execution, we had obtained a screenshot of the iPhone’s contents before Murphy grabbed it back, meaning we knew the number of applications on the phone. The following day, upon attending court, any crypto wallets, exchange accounts, or other accounts were removed, and all communication data relevant to the Pleterski crypto scheme had been deleted.

The Prosecution of Murphy for Contempt of Court

Justice O’Connell declared Murphy in contempt of court for failing to comply with the evidence and asset surrender provisions of the Anton Piller order. After his first court appearance, Murphy was subject to multiple examinations in aid of contempt proceedings. Notwithstanding that the iPhone had been wiped, we knew that Murphy had preserved data. Murphy admitted in his examinations to “air dropping” the data to another device.

As depicted in the W5 program, our firm prosecuted the sentencing phase of Murphy’s contempt of court. This required multiple court attendances and filings of additional evidence. On February 2, 2024, Murphy was sentenced to five months in jail with a condition to return to court upon the completion of his sentence to disclose the location of a missing Lamborghini and other assets, and to otherwise comply with the Mareva injunction reporting. The ordeal is not over for Murphy.

Unlike what has occurred in the Pleterski bankruptcy, where Pleterski runs around free posting his spending exploits, the consequence of incarceration has been imposed on Murphy through the civil courts. Murphy remains under the court’s coercive powers as the contempt proceedings continue upon his release from prison. This could have occurred in Pleterski’s bankruptcy had the trustee continued filing additional evidence and pressing the bankruptcy court to uphold the rule of law.

In Pleterski’s bankruptcy proceedings, Justice Kimmell held that Pleterski could be incarcerated if evidence of contempt for the bankruptcy process continued. A court needs evidence to incarcerate for contempt and Pleterski’s trustee simply has not provided the bankruptcy court with sufficient evidence to incarcerate him as was done in the civil courts with Murphy.

In an effort to detract responsibility for the fraud, during the civil contempt proceedings Murphy turned over to us data that he alleged he had obtained from Pleterski’s iCloud through an unauthorized hack. We turned that data over to the trustee. According to Mr. Stelzer, this data did not assist his investigation in locating any of Pleterski’s missing crypto or cash, or any other kind of recovery. We have not reviewed the data from Pleterski’s iCloud ourselves.

At Murphy’s contempt sentencing hearing, the entire video of the execution of the Anton Piller order was shown to the court by investigator Keith Elliott. CTV sought permission of the civil court to publish extracts from this video, given privacy interests of filming inside of the residence where this took place. The Court held that the “open court” policy of the courts permitted CTV to show parts of the Anton Piller order execution. This was the first airing of an Anton Piller order execution in Canada.

At Murphy’s sentencing hearing we also called data forensics expert Tom Warren as a witness. Mr. Warren was qualified by the Court as an expert on data forensic issues. Mr. Warren’s evidence included his opinion that the data on the iPhone was downloaded to be stored elsewhere before Murphy’s iPhone was wiped. Mr. Warren also testified about the location of a parking lot where the iPhone was taken and the time the iPhone data was downloaded and wiped.

Murphy testified that in fact he had downloaded data from his iPhone after the Anton Piller order execution was abandoned, but he refused to disclose where it was (or is) stored. No one believes this. Murphy remains in contempt of court. Perhaps he will change his mind and disclose assets and evidence when he attends for his return hearing after serving his five-month sentence. There is no early release for contempt.

Hime’s Complaint about Ryan Rumble

Emily Hime is also featured in the W5 story. We are counsel to Ms. Hime in her civil litigation against Ryan Rumble, Banknote Capital Inc., and others. The discussion below is developed from facts that are in the public record that we filed in the civil courts. Ms. Hime has not waived any privilege.

Ms. Hime provided funds to Banknote Capital Inc. whose operating mind was Ryan Rumble. Unlike the Murphy and Pleterski stories, there was data evidence available from Banknote with which to trace investor funds. One of Banknote’s former employees, Brock Tedford, who was also featured on the W5 program, downloaded Banknote’s data and provided it to the Ontario Securities Commission and to our firm. To state otherwise, an Anton Piller motion was not used to obtained Banknote data.

The Banknote scheme obtained approximately $13M from approximately 125 investors. By the time the Hime litigation started, the Pleterski bankruptcy had been ongoing for approximately 8 months recovering approximately 10% of losses and imposing no meaningful restrictions on Pleterski’s lifestyle. In fact, by the time of filing the Hime litigation, Pleterski was posting videos of his extravagant lifestyle while a bankrupt.

The reason Ms. Hime came to us with her complaint was because Banknote had transferred approximately $5M to Pleterski. Banknote had filed a claim in the Pleterski bankruptcy. Hime learned that Banknote was going to be paid a dividend from the Pleterski bankruptcy. Given that Banknote was a Ponzi scheme itself, Ms. Hime wanted to preserve the dividend from the Pleterski bankruptcy and any other Banknote assets before Rumble or others could dissipate them through Banknote.

We were of the view that a class proceeding in the civil courts was a better option for Ms. Hime than attempting to assign Banknote or Rumble into bankruptcy. Ms. Hime agreed to be the representative plaintiff for a class proceeding against Banknote, Rumble, and others. Armed with data evidence from Banknote produced by its former employee Mr. Tedford, the civil court issued a Mareva injunction against Banknote and an order that Rumble attend for examination. Banknote did not challenge Mr. Tedford’s data disclosure. Approximately $500,000 in Banknote assets was preserved.

As a result of Rumble’s conduct, and further evidence developed during the Banknote Mareva injunction, we later applied to the civil courts for, and received, a Mareva injunction against Rumble personally. We received evidence that upon the issuing of the Mareva injunction Rumble left the country for Dubai. We applied for and were granted an order that Rumble immediately surrender his passport to us. We applied for, and received, the same passport surrender order for Murphy as well. Pleterski’s trustee has not applied for an order that Pleterski surrender his passport.

After the order to surrender his passport was issued, Rumble attended the come-back motion via Zoom. Rumble boldly told the Court that he had no intention of surrendering his passport. Rumble alleged that he was in Dubai. The Court held the rule of law must prevail. The Court issued a warrant for his arrest that remains outstanding. It can be said that Rumble remains a fugitive to this day.

After the civil court’s Mareva injunction process had run its course, we had Banknote assigned into bankruptcy. We did not have Rumble assigned into bankruptcy. A contempt proceeding remains outstanding against Rumble. While the warrant for his arrest is outstanding, Rumble is not exhibiting the uncontrolled spending that Pleterski displays through the bankruptcy process.

The reason the Rumble fugitive story and the Murphy contempt story are important and were told by W5 is because many of the creditors in the Pleterski bankruptcy do not understand why it is that the criminal process and the bankruptcy courts are not imposing restrictions on Pleterski.

Akil Heywood and Allegations of Kidnapping and Extortion against Pleterski

Inspectors in a bankruptcy act as a “board of directors” to the trustee. In a bankruptcy, inspectors are elected at a first meeting of creditors. Inspectors are often creditors, and as such they have an interest in a bankruptcy making an optimal recovery. Inspectors have private meetings with the trustee and discuss their investigations and recovery plan. Inspectors are supposed to act in the best interests of all creditors. It is not supposed to be an opportunity to get ahead of other creditors.

Akil Heywood has a criminal record for drug trafficking. It is available on the internet for anyone to find.[13] When Mr. Heywood was elected an inspector in the Pleterski bankruptcy, we informed trustee Stelzer of this issue. Mr. Stelzer advised that the Bankruptcy and Insolvency Act does not contain any provisions to remove inspectors who pose a threat to the integrity of the bankruptcy process.

It is now common knowledge that inspector Akil Heywood has been arrested and charged by the Toronto Police with being a conspirator to the kidnapping of Pleterski. The video image of a beaten Pleterski is on the internet. CBC reports that:

The 39-year-old [Heywood] is also charged with threatening Grant Thornton bankruptcy trustee Rob Stelzer to induce him to pay $2 million in cryptocurrency later that month and faces the same threat-for-money charge involving another man connected to the case. [14]

Heywood has told the CBC that he is innocent. Mr. Stelzer did not respond to W5’s interview request.

An issue in the criminal proceeding against Akil Heywood is how it was that Pleterski was found by the kidnappers? Did Akil Heywood learn of Pleterski’s location through the bankruptcy investigation as a result of his role as an inspector? We are not aware of any bankruptcy story quite like this one.

“Mysterious Mike” aka Kristopher Cadiano

Above we mentioned that Pleterski’s Ponzi scheme imploded in part because of a ‘fixer’ using the name “Mike”. We have since learned that ‘anonymous Mike’ is actually Kristopher Candiano. Mr. Candiano is a defendant in the Sutherland v. Murphy litigation.

Evidence related to “Mike’s” calls to our office has been filed by affidavit in the Sutherland v. Mrphy litigation. According to “Mike”, he was tasked by persons who preferred to operate outside the judicial process to recover their ‘investment’ from Pleterski. In order to do so, “Mike” had to locate Pleterski. Through his inquiries, “Mike” contacted Murphy. They hatched a plan to download Pleterski’s cloud data, and Murphy sent aspects of Pleterski’s data to “Mike”. It was through the hack of Pleterski’s cloud data that “Mike” learned that Pleterski was not using investor funds for forex trading, and that in reality Pleterski was operating a Ponzi scheme.

“Mike” then used non-judicial methods to persuade Pleterski to payback those whose source of funds was not to be exposed. “Mike” made some form of recovery, directly or indirectly, from Pleterski. This all took place in March to May of 2022. As mentioned above, given the intervention of “Mike”, Pleterski stopped communicating with most of his investors and his Ponzi scheme imploded. This is why it may be that Pleterski has retained some of his loot to support his spending today. The Pleterski bankruptcy process has not reported to creditors on the “Mike” issue.

Fraud Recovery – Comparing the Bankruptcy and Criminal Process to the Civil Process

What the W5 program did not have time to explore was which judicial process has better controlled the wild spending of the “Crypto Bros” rogues. As explained above, in the case of Pleterski and his associates, the civil courts have been most effective to date dealing with Murphy and Rumble.

No criminal charges have yet been laid. Criminal investigations operate under a veil of secrecy, and we have no insight into what will occur in the future. Obviously, the police do not disclose the status of their investigation or whether charges will be laid. Criminal investigations and prosecutions are to serve the public interest, not the private interests of individual creditors.

What is known generally is that criminal investigations can take an extensive amount of time due to the processing of production orders for banking and other documents domestically and abroad, and due to the R. v. Jordan decision mandating that criminal trials must be held in defined periods of time, resulting in police being required to file completed investigations before making arrests.[15]

In some criminal cases, those arrested are placed under release conditions that would curb the type of conduct that Pleterski currently displays. That said, as mentioned above, given that the criminal process is ‘handcuffed’ by the Jordan decision, creditors of Pleterski cannot look to the criminal process for timely controls being placed on Pleterski. This leaves the creditors watching the W5 program to hope the civil or bankruptcy process places restraints on Pleterski’s spending.

As mentioned above, Pleterski is no longer under the control of the civil courts due to the stay of proceedings imposed by his bankruptcy. Given the number of creditors in Pleterski bankruptcy, it is not reasonable for a creditor to attempt to lift the stay of proceedings and attempt recovery through the bankruptcy courts. Only Pleterski’s bankruptcy trustee has the authority to seek timely control of Pleterski’s conduct.

The W5 program asked how it is that Pleterski can continue to spend lavishly on lifestyle while a bankrupt. Mr. Stelzer is no longer the trustee of the Pleterski bankruptcy. The new trustee at Grant Thornton has not scheduled a discharge hearing or any other court dates in the Pleterski bankruptcy. Creditors of Pleterski must wait until Pleterski’s trustee files its next report.

The duty of a bankruptcy trustee is to all creditors. Unlike cases in the civil courts where plaintiffs such as Mr. Sutherland and Ms. Hime can direct their lawyers to pursue contempt proceedings against Murphy and Rumble and thereby control their behaviour, a bankruptcy trustee takes its direction from the inspectors. The bankruptcy trustee has to weigh whether the spending required for contempt declarations and coercion (sentencing) passes the ‘cost-benefit’ test.

Whether inspectors actually give instructions to trustees is seen by some as a form of legal fiction. Inspectors are often creditors without experience in investigating Ponzi schemes. Accordingly, inspectors are looking for direction from a trustee and their lawyer for what steps should be taken. That inspectors in the Pleterski bankruptcy are frustrated by the bankruptcy process and the lack of controls on the Pleterski’s spending is understandable.

The W5 episode is helpful as it educated Canadians about the problems a bankruptcy trustee has with bankrupts who are not ‘honest but unfortunate debtors’. Significant return of investor funds were recovered from the Madoff recovery scheme because there were banking records and data used to trace funds. When dealing with Ponzi schemers who have obtained cash and crypto currency, the task of the bankruptcy trustee to trace and recover is much more difficult.

Inquiries

At Investigation Counsel, we investigate and litigate fraud recovery cases. If you discover you are a victim of fraud, contact us to have your case assessed and a strategy for recovery mapped out before contacting police or alerting the fraudster. We also promote victim advocacy and academic discussion through various private and public professional associations and organizations. If you have an interest in the topics discussed herein, we welcome your inquiries.

www.investigationcounsel.com

February 15, 2024

 

[1] https://www.cbc.ca/news/canada/toronto/crypto-king-associate-colin-murphy-contempt-sentencing-1.7075987

[2] https://toronto.ctvnews.ca/arrest-warrant-issued-for-crypto-king-associate-who-claims-he-fled-to-dubai-1.6687833?cache=ityrlpnlmderht%3FautoPlay%3Dtrue

[3] Singh v. Pleterski / Court File No. CV-22-000000915-0000 / alleged a $4,565,000 liquidated loss

[4] Re Bankruptcy of AP Private Equity / Court File No. BK-22-00208581-OT31 / alleged a $4,650,500 loss

[5] Re Bankruptcy of AP Private Equity / Court File No. BK-22-00208581-OT31 / alleged a $2,895,000 loss

[6] Motion Record of Grant Thornton LLP dated October 21, 2022, Second Report of the Trustee, paragraph 34

[7] Motion Record of Grant Thornton LLP dated October 21, 2022, Exhibit F, Endorsement of September 13, 2022

[8] Endorsement of September 13, 2022, paragraphs 1 to 3

[9] Endorsement of September 13, 2022, paragraphs 7 and 8

[10] Motion Record of Grant Thornton LLP dated October 18, 2023, Fifth Report, paragraphs 31 to 33

[11] Third Report of the Trustee, paragraph 18

[12] Third Report of the Trustee, paragraph 18

[13] https://nowtoronto.com/music/meet-carnivals-youngest-band-leader-ovos-akil-heywood/

[14] https://www.cbc.ca/news/canada/toronto/investor-lost-money-among-5-men-charged-kidnapping-ontario-crypto-king-1.6907548

[15] R. v. Jordan, [2016] 1 SCR 631

By Dave Oswald, Forensic Restitution

 

 

By Dave Oswald, Forensic Restitution

 

 

By Dave Oswald, Forensic Restitution

For more articles from Forensic Restitution, check out their blog Forensic Insights

 

 

 

 

By David Debenham

In our paper last month, we found that the difference between those who committed opportunistic fraudsters were more likely to be overconfident to pull off a fraud than those who might actually have the ability to do so, but who feared all of the “unknown-unknowns” that could catch them out.   These overconfident people falsely transfer their brilliance in one field into their abilities in fields they know nothing about such as fraud.  Their body language, vocal tone, and rates of participation suggest confidence because of this false transference. This means that these overconfident individuals speak more often, speak with a confident vocal tone, provided more information and answers, and acted calmly and relaxed as they work with their peers in the midst of perpetrating a fraud. In fact, overconfident individuals were more convincing in their displays of ability than individuals who were actually highly competent in their tasks, who, when questioned, become nervous when their conduct is called into question.  The over-confident do not say “I’m really good at this.” Because for them they are past that stage: Instead, they led their “ability” speak for itself as they explain in great detail what they do, and how they do it, in a calm and relaxed way.’  These status seekers who believe their competence at coding transfers into their ability to play poker, chess, or commit fraud, will want to demonstrate this by simply participating more and exhibiting more comfort with any task you put to them, and that is the key to catching them out.  [1]

The key is to enlist the fraudster’s advice in solving the various issues in your case, much as Columbo does in virtually every episode.   So long as you don’t appear to be as capable as the suspect (and how could you be considering their status and yours?) you can simply pose a serious of problems and let the fraudster solve them for you, all the while incriminating himself. Consider Columbo’s “Bye-bye Sky High IQ Murder case”. Genius accountant Oliver Brandt has been embezzling funds in order to keep his high-maintenance wife in fine frocks and tropical getaways. His business partner Bertie Hastings has just found out – and he must be killed.  Oliver shoots him and rigs an umbrella to take the murder weapon up a chimney. He puts a heavy dictionary on the arm of a chair, balancing precariously.  Oliver then starts a record player playing by pushing the start button, which eventually leads to the sound of two shots fired sometime later when Oliver is safely ensconced in a room full of witnesses who have just entered the adjoining room.  The sound of a body falling between the two shots alarms the witnesses.   The group runs into the room to see Bertie shot. In the confusion Bertie pockets the Dictaphone. Later Oliver recovers the umbrella and disposes of the murder weapon.  Columbo asks if the record had the shots. Of course not.  There were caps in the umbrella that were exploded as soon as the arm of the record player moved.  So too the dictionary was pushed off the arm of the chair by the movement of the arm of the record player, so in sequence it was cap explosion, dictionary fall (“the body”), and second cap explosion. At each stage Columbo suggests a hypothesis and the overconfident “high IQ” Oliver sets him straight, until at the end there is no more mystery to resolve.  Interview technique has outwitted the overconfident murder.   So too, for you.  Enlist the overconfident fraudster to incriminate himself.

[1] https://newsroom.haas.berkeley.edu/why-are-people-overconfident-so-often-it%E2%80%99s-all-about-social-status/