Cangap et al., a Toronto, Ontario-based private equity group that seeks secured lending opportunities with a focus on management buyouts, acquisitions and consolidations, was placed in receivership on November 15 on application by Creative Wealth Monthly Pay Trust and Creative Wealth Capital (together the "Trust"). The Trust discovered that it is likely the victim of a scheme perpetrated by the respondents to misappropriate approximately $10.7MM in investments. As part of an overarching investment vehicle between the applicants and respondents, the Trust invested substantial funds in the respondent limited partnership, Cangap Merchant Capital LP ("CMC LP"). However, since August 2015, CMC LP has failed to remit any payments to the Trust; furthermore, the Trust has discovered that CMC LP is no longer listed as an active entity, contrary to its contractual obligations. To date, CMC LP and its general partner, Cangap Merchant Capital Corp. ("CMC GP"), as well as the sole director and officer of CMC LP and CMC GP, Emlyn David, have refused to provide the Trust with any financial statements, reports or responses. The Trust also allege that Mr. David has apparently started to sell or dissipate assets, and that he has co-mingled finances. In the past several months, the Trust discovered that CMC LP and/or CMC GP had allegedly bought out Skyservice Investments - Canada's largest operator and provider of aviation services - as well as related senior and subordinated debt. Skyservice eventually sold a majority of its equity interest to InstarAGF Asset Management. The Trust alleges that it believes that Mr. David financially benefited from the sale and never advised it of this transaction. Given the compete absence of correspondence and financial reporting of CMC LP, CMC GP and Mr. David, as well as the applicants' suspicion that Mr. David has misappropriated the Trust's funds, the applicants can no longer reasonably have confidence in Mr. David. Fuller Landau was appointed receiver. Counsel is Gardiner Roberts for the applicants and Woolgar VanWiechen Cosgriffe Ducoffe for the respondents.
Money Gate Mortgage Investment Corporation, a North York, Ontario-based mortgage investment corporation, was placed in receivership on November 6 on application by the Ontario Securities Commission ("OSC"). Between 2014 and 2017, the company raised approximately $11.0MM from approximately 155 investors. These funds were then pooled and loaned to borrowers, which loans were secured by residential and commercial mortgages. It is alleged, however, that the company was operating a far riskier mortgage investment business than the one represented to investors. Morteza Katebian and his son, Payam Katebian - the company's principals - are respondents in an enforcement proceeding before the OSC, in which it is alleged that they defrauded investors through misrepresentations contained in disclosure documents and committed other violations of Ontario securities law. In April 2017, the OSC obtained a temporary cease trade order, which is still in effect and which prevents the company from raising any more capital. The company later advised investors that it was winding down its operations; despite this announcement, however, the company continued to make loans and it is alleged that the principals diverted over $1.3MM in corporate funds for their personal benefit. As a result of this recently discovered evidence, the allegations in the OSC proceedings have been expanded to include fraud. In October 2018, the OSC issued a freeze direction. Grant Thornton was appointed receiver and manager. Jamie Gibson and Dihim Emami are counsel to the OSC.
First Access Funding, an Ontario and Alberta-based privately held finance company that specializes in the origination and servicing of non-prime auto loans, filed a proposal on July 27, listing approximately $50.MM in liabilities. The company helps its customers establish or re-establish credit through non-traditional auto financing, and provides lending through dealerships across several provinces. Grant Thornton is the proposal trustee. Counsel is Foglers for the company and BLG for the proposal trustee.
982 Film Fund, a Calgary, Alberta-based company that finances prints and advertising for completed motion pictures, filed for bankruptcy on June 12. Grant Thornton is the bankruptcy trustee.
Gemma Communications, Gemma GP Corp and Akron Insurance, the wholly owned subsidiaries of Dealnet (TSX-V:DLS), a Toronto, Ontario-based consumer finance company, filed for bankruptcy on March 9 to allow for an orderly, court supervised wind-up of the businesses. Since Dealnet acquired the companies in September 2015, they have incurred ongoing and significant operating losses. PwC is the bankruptcy trustee. Counsel is Aird & Berlis for the trustee and Gardiner Roberts for the companies.