The Ontario Securities Commission (OSC) has ordered that evidence collected as part of its investigation into an alleged Ponzi scheme can be disclosed to purported victims of the scheme, who are now seeking to sue lawyers who represented both the perpetrators of the alleged scheme and the purported victims.
The OSC released its decision on Tuesday on an application for disclosure from Davide Amato and S.A. Capital Growth Corp., who claim to be victims of a Ponzi scheme that the OSC investigated. Amato and S.A. Capital Growth were seeking disclosure of evidence that the OSC had collected in a compelled examination of the perpetrators of an alleged Ponzi scheme as part of a civil lawsuit seeking damages from the lawyers who represented both the alleged victims and perpetrators of the Ponzi scheme.
According to the OSC decision, Amato and S.A. Capital are suing their own former lawyers, who also represented the alleged perpetrators of the scheme, claiming that the lawyers breached their fiduciary duties to them by making misleading statements to the OSC during compelled interviews of the alleged Ponzi schemers. Those allegations have not been proven.
The decision notes that OSC staff did not oppose disclosure, as they have concluded their investigation and say no harm would come from it.
The OSC ruled that the evidence in question is “clearly relevant to the issues to be determined” in the civil case. Furthermore, it noted that the applicants are not seeking to sue the subjects of an OSC investigation, but rather to sue the lawyers involved with the case.
“The applicants seek disclosure not to advance a claim against the perpetrators of the alleged Ponzi scheme [i.e., the subjects of the investigation], but to assist in their claim against their own lawyers in respect of the lawyers’ conduct during the investigation,” the OSC says.
Although the OSC doesn’t opine on the merits of the civil lawsuit, it does say that the case “strike[s] at the integrity of the commission’s processes.”
Adds the OSC: “Lawyers appearing before the commission are officers to the commission, as they are to a court. While they are free to represent their clients’ interests vigorously, they must nevertheless conduct themselves in a frank and honest manner. The investigative process would be compromised if it were otherwise.”
Ultimately, the OSC authorized the disclosure of certain evidence collected in the investigation, including documents involving the lawyers interaction with OSC staff in the course of their investigation, “provided that anything disclosed shall be used only in the discovery, trial and adjudication of the [civil lawsuit].”