Justice scales and gavel by books

Two men face criminal charges in connection with a failed syndicated mortgage investment scheme that police now allege was fraudulent.

The RCMP’s Integrated Market Enforcement Team announced that two men, Jawad Rathore and Vince Petrozza, have been charged with fraud and receiving secret commissions for their alleged roles in failed syndicated mortgage investments from Fortress Real Developments.

“It is alleged that the founders of Fortress Real Developments engaged in fraud by orchestrating an ongoing scheme whereby they did not disclose the various risks to brokers and investors,” police said in a release.

The allegations have not been proven.

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The accused are scheduled to appear in the Ontario Court of Justice in Toronto on Aug. 3.

Police said the charges follow a long-running investigation, known as Project Dynasty, that was launched in 2016 in response to a complaint about the Fortress Real scheme.

In 2020 the Financial Services Regulatory Authority of Ontario (FSRA) entered a settlement with Fortress Real, which saw the firm agree to pay $250,000 in administrative penalties to resolve allegations that it violated the law governing mortgage brokers.

“Between 2009 and 2018, [Fortress] and its predecessor (Fortress Real Capital Inc.) assisted borrowers in connecting to mortgage brokers and administrators, which allowed these brokers to raise over $900 million in syndicated mortgage loans,” FSRA said in a release at the time.

Prior to that, in 2018, the Financial Services Commission of Ontario — FSRA’s predecessor — settled with several mortgage brokerage firms for their role in syndicated mortgage investments involving Fortress Real.

That settlement involved the brokerages paying a combined $1.1 million in monetary penalties. At the time, several individuals, including Petrozza, consented to surrendering their mortgage broker licences.

Rathore and Petrozza were both previously sanctioned by the Ontario Securities Commission in 2011.

In a settlement with regulators, they agreed to 15-year market bans, along with monetary sanctions, for securities violations, including unauthorized trading.

The respondents in that case, including Rathore and Petrozza, were jointly fined $250,000 and ordered to pay costs of $100,000. Rathore and Petrozza were both ordered to disgorge $100,000, and their companies (including Phoenix Credit Risk Management Consulting Inc. and Phoenix Capital Resources Inc. among others) were ordered to disgorge $2.7 million.