Motion to claw back funds from winners of alleged Ponzi scheme

Grant Thornton as bankruptcy trustee of Douglas Grozelle and Douglas Grozelle operating as Grozelle Enterprises (together, “Grozelle”) and receiver of related company K&M Venture Capital Group Inc. (“K&M”) has brought a motion to claw back funds received by investors who profited from an alleged Ponzi scheme.

Grant Thornton was appointed receiver of Grozelle and K&M in July 2023 and later bankruptcy trustee of Grozelle in September 2024. Since its appointment, the receiver has been investigating a “Ponzi-like investment scheme” operated by Grozelle. The receiver’s investigations have been complicated by a lack of adequate books and records. However, the receiver has been able to identify 236 individuals and entities who invested more than $24.5 million in funds over a period of approximately two years between November 2020 and November 2022. Grozelle allegedly induced investors to contribute capital by promising extraordinary returns. However, none of the investments, save for one, resulted in any legitimate returns or income. The receiver states that Grozelle repaid early investors their promised extraordinary returns with funds received from later investors, creating the impression that the scheme was successful and inducing others to become investors.

Based on the receiver’s analysis, 116 of 236 investors (“Net Losers”) suffered aggregate losses of nearly $25 million, while 120 investors (“Net Winners”) made approximately $22 million in profits (a range of approximately 5% to 6,700% of their principal contributions). Some Net Winners contributed little, if any, capital to the scheme.

The receiver acknowledges that some of the Net Winners had no knowledge that this was a Ponzi scheme, but takes the position that this is irrelevant to the question of whether the funds should be clawed back.

Interestingly, according to the Hamilton Spectator (paywalled article), some of the top Net Winners (numbers 1, 2, 6 and 7 respectively) include Halton regional police officers. Over a dozen other officers (some Net Losers) invested in the scheme, including a former fraud detective who was the top Net Loser.

The Net Winners have opposed the clawback motion, arguing that each investment should be looked at individually, and that the clawback should also apply to Net Losers who profited from any single transaction.

The motion is scheduled to be heard after April 22, 2025.

Further information can be found HERE.

Professionals involved: Miller Thomson for Grant Thornton as receiver, Klotz & Associates and Masterson Law for the applicants in the Grozelle receivership, TWL Law for Doug Grozelle and Ross Grozelle, and Necpal Litigation for K&M Venture Capital Group and the McMullens, Rosemount Law for Nick Tansley, Naymark Law for Robyn Lee, and Longo Lawyers for Ganesh Singh