The operators of an apparent Ponzi scheme have been permanently banned and ordered to pay almost $2.75 million in disgorgement, penalties and costs by the Alberta Securities Commission (ASC).
An ASC hearing panel handed down its decision on sanctions today against Brian Arthur Kitts and Vesta Capcorp Inc., which it previously found had defrauded investors.
The panel ordered them to pay almost $2 million in disgorgment, a $600,000 penalty and $150,000 in costs. It also banned them from the markets.
Earlier this year, the panel found that Kitts and Vesta Capcorp took approximately $4.3 million and US$850,000 from 38 investors in what amounted to a Ponzi scheme, as they misappropriated investors’ funds to make payments to other investors, while also diverting money for personal use.
“Kitts’ attempts to delay the inevitable collapse of his Ponzi scheme by repeatedly lying to investors, together with the absence of any underlying business, confirmed for us that he planned to defraud innocent investors from the outset,” the panel said in its decision on sanctions.
The panel noted that Vesta repaid about $2.8 million and just over US$450,000 to investors.
Ultimately, it concluded that $1.96 million was obtained through securities law violations, and it ordered that amount to be disgorged, and said a penalty of $600,000 is “appropriate, proportionate and in the public interest.”
“Ponzi schemes such as this pose a serious risk of harm to individual investors and to Alberta’s capital market, and deserve strong and unequivocal condemnation,” the panel said.