Go-To Developments Holdings Inc (Re), 2025 ONCMT 8

Capital Markets Tribunal / Tribunal des marchés financiers

Citation: Go-To Developments Holdings Inc (Re), 2025 ONCMT 8 Date: 2025-05-06 File No.: 2022-8

IN THE MATTER OF GO-TO DEVELOPMENTS HOLDINGS INC., GO-TO SPADINA ADELAIDE SQUARE INC., FURTADO HOLDINGS INC., and OSCAR FURTADO

REASONS AND DECISION

(Subsection 127(1) of the Securities Act, RSO 1990, c S.5)

Adjudicators: M. Cecilia Williams (chair of the panel) Geoffrey D. Creighton Cathy Singer

Hearing: July 8, 9, 10, 11, 15, 16, 17, 19, 22, 23, 24, 25, 26, and December 10, 2024; final written submissions received December 13, 2024

Appearances: Erin Hoult, Trevor Alcove, Alvin Qian For the Ontario Securities Commission

Ian Aversa, Jeremy Nemers, Calvin Horsten For Go-To Developments Holdings Inc., Go-To Spadina Adelaide Square Inc., Furtado Holdings Inc., for the Receiver, KSV Restructuring Inc.

Melissa MacKewn, Dana Carson, Alexandra Grishanova, Maxim Tchoudnovski, Joshua Shneer For Oscar Furtado

TABLE OF CONTENTS

1......... Overview.. 1

2......... Background. 1

2.1 The respondents 1

2.2 The Adelaide Project 2

3......... preliminary issues. 3

3.1 Late disclosure of documents 3

3.2 Reasons for ruling on the admissibility of the Furtado affidavit 3

4......... Evidence. 5

4.1 Credibility of witnesses 5

5......... issues & analysis. 6

5.1 Introduction. 6

5.2 Did the respondents defraud investors in the Adelaide and other Go-To LPs? 7

5.2.1 The test for fraud. 8

5.2.2 Fraud analysis 12

5.3 Did Furtado and GTDH engage in the business of trading in securities without being registered?. 24

5.4 Did the respondents make false or misleading statements to investors about the use of invested funds?. 29

5.5 Did Furtado mislead the Commission during the investigation?. 30

5.6 Did Furtado authorize, permit or acquiesce in the Corporate Respondents’ non-compliance with Ontario securities law?. 34

5.7 Did the respondents engage in conduct contrary to the public interest?. 35

6......... conclusion. 35

REASONS AND DECISION

1. Overview

1The Commission alleges that Go-To Developments Holdings Inc. (GTDH), Go-To Spadina Adelaide Square Inc. (Adelaide GP), Furtado Holdings Inc. (Furtado Holdings) (collectively, the Corporate Respondents), and their sole director and officer Oscar Furtado, defrauded investors in their capital raising for, and activities related to, limited partnerships for the purchase and development of real estate projects.

2The Commission also alleges that, through Furtado’s control over the Corporate Respondents and related entities, the respondents traded securities without the necessary registration and made prohibited representations to investors. The Commission further alleges that Furtado made misleading statements to the Commission during its investigation of this misconduct and that Furtado authorized, permitted or acquiesced in the Corporate Respondents’ alleged breaches of the Securities Act (the Act)¹.

3For the reasons that follow, we find that the respondents did perpetrate a securities fraud in breach of the Act in five different ways. Three of those ways defrauded investors in the Go-To Spadina Adelaide Square LP (Adelaide LP). One defrauded investors in two other GTDH projects. The final one was a fraud on the Adelaide LP itself.

4We also find that Furtado made misleading statements to the Commission during its investigation. However, we dismiss the Commission's other allegations.

2. Background

2.1 The respondents

5The Corporate Respondents are related Ontario corporations. GTDH is a real estate development company which operates through its corporate subsidiaries and project-specific limited partnerships (each, an LP). The Adelaide GP is a wholly-owned subsidiary of GTDH incorporated to serve as the general partner of the Adelaide LP. Furtado Holdings owns GTDH and is Furtado’s personal and family holding company.

6For each of its nine real estate projects, GTDH set up a limited partnership and incorporated a subsidiary to serve as the general partner (GP). The Go-To LPs, Go-To GPs, and GTDH were used by Furtado to carry out GTDH’s real-estate development business in southern Ontario.

7Furtado is the founder, sole director and officer, and directing mind of the Corporate Respondents. As CEO and president, Furtado was responsible for overseeing all aspects of the GTDH business. Furtado is a chartered accountant with over 30 years of experience, primarily at the Royal Bank of Canada before he left and eventually established his own business.

2.2 The Adelaide Project

8One of the projects undertaken by GTDH was the proposed acquisition and development of a land assembly of two properties in the heart of downtown Toronto, 355 Adelaide Street West and 46 Charlotte Street (collectively, the Adelaide Properties).

9The Adelaide LP was formed to pursue this project (the Adelaide Project), and the Adelaide GP was the general partner of this limited partnership. Beginning in the fall of 2018, Furtado and GTDH sought financing, partners and investors for the Adelaide Project. The Adelaide Properties were acquired by the Adelaide LP on April 5, 2019.

10Capital raising by the Adelaide LP continued periodically into 2020. However, between April 30, 2019 and December 10, 2020, the Commission obtained investigation orders related to Furtado's and GTDH's conduct and delivered summonses to produce documents.

11Furtado attended three compelled examinations by the Commission, the first of which was in September 2020.

12On December 6, 2021, the Commission brought an application in the Ontario Superior Court of Justice to have a receiver appointed over GTDH and several other GTDH entities including the other Corporate Respondents and the Adelaide LP. The Court appointed KSV Restructuring Inc. as the receiver over the Corporate Respondents and related entities on December 10, 2021. This receivership continues.

3. preliminary issues

3.1 Late disclosure of documents

13On the second day of the hearing, the Commission objected to the admissibility of various documents on which the respondents sought to rely in the merits hearing. The basis of the objection was that they were not disclosed by Furtado until shortly before the hearing.

14The respondents submitted that the documents in question were only delivered to them by the Receiver on July 4, 2024, and they were promptly provided to the Commission. The Receiver noted that the respondents requested the documents only on July 3, 2024 and the Receiver provided them the next day. The respondents also submitted that the Commission had itself disclosed some documents late.

15Each party reserved their right to object to documents delivered late, as those documents were introduced into evidence during the merits hearing. We determined that we would deal with the admissibility and weight of any such documents when deciding any issue to which those documents might relate, based on the closing submissions and in the specific context for which their use was sought.

16As the hearing unfolded, neither party made any further objections to specific documents based on late delivery. Only four of the disputed documents became exhibits. Neither party addressed the issue in closing submissions.

17Ultimately, none of those four documents were material to any decision the panel made. Accordingly, we did not need to make any findings on their admissibility or weight.

3.2 Reasons for ruling on the admissibility of the Furtado affidavit

18When Furtado took the stand, the Commission objected to the admissibility of portions of his affidavit on the basis that those portions attempt to:

a. relitigate issues decided by the Court in the receivership proceedings;

b. introduce irrelevant facts from withdrawn motions; or

c. introduce hearsay opinion evidence from experts, particularly concerning medical matters addressed on adjournment motions.

19We allowed the affidavit to be filed as is. These are our reasons for doing so.

20Furtado submitted that the challenged portions of his affidavit were not included to relitigate any issue in the receivership proceeding, or prior determinations in this proceeding. Rather, he submitted, they were included to lay out the procedural history, for background and context. Furtado submitted that he makes no request for relief with respect to any of those earlier decisions.

21Furtado also submitted that in some respects the evidence was responsive to matters already canvassed in evidence by the Commission’s own witnesses.

22The Commission replied that Furtado’s submissions did not address its concern that Furtado refused to confirm that he would seek no findings based on what the Commission submits is irrelevant or inadmissible evidence.

23We had some sympathy for the Commission’s concerns. The volume and detail of material provided in Furtado’s affidavit in relation to the receivership, the procedural history, and evidence on adjournment motions, was particularly extensive. It contains material which is irrelevant to the issues we need to determine in relation to the Statement of Allegations.

24However, it is typical to summarize, both in evidence and in reasons, the procedural background and context for a proceeding.² It is also permissible to append exhibits which confirm information in associated paragraphs in the affidavit.

25The issues before us are framed and limited by the Statement of Allegations. Anything beyond that is irrelevant. We have kept this guiding principle in mind as we have reviewed the evidence, including Furtado’s affidavit, and as we have determined the issues before us. We considered the impugned portions of the affidavit only for background and context, and as documentary confirmation of matters to which Furtado provided direct testimony, susceptible to cross-examination.

4. Evidence

26The evidentiary portion of the merits hearing took place over 13 days and involved testimony from seven individuals. The Commission called six witnesses, including its investigator – a forensic accountant from the Enforcement division of the Commission – and five investor witnesses with various levels of involvement and sophistication. The respondents called Furtado as their only witness.

27The documentary record was voluminous. Both the Commission's investigator witness and Furtado provided evidence-in-chief by way of affidavit. With exhibits, the investigator's affidavit extended to 16 volumes. Furtado's affidavit appended over 175 additional exhibits.

28There are also several ongoing proceedings in the civil courts arising out of the circumstances surrounding the GTDH business, including the receivership of the Corporate Respondents and the other GTDH projects. Both the Commission and Furtado cautioned us that the other, and their respective witnesses, were attempting to secure findings in this proceeding which would assist them in the civil court cases.

29Mindful of the other proceedings, we have restricted our findings to only those necessary to dispose of the issues properly before us in the Statement of Allegations. Despite the volume of evidence, the salient facts related to those allegations, as we find them, can be summarized in relatively brief form. We have done so in respect of our findings for each allegation.

4.1 Credibility of witnesses

30In assessing the credibility of witnesses, the Tribunal has accepted the guidance that “the most satisfactory judicial test of truth lies in its harmony or lack of harmony with the preponderance of probabilities disclosed by the facts and circumstances in the conditions of the particular case.”³

31We may accept some, all or none of a witness’ evidence. We may find the evidence of a witness credible in some respects and not in others. Where there are sufficient instances of questionable evidence, we may, with appropriate caution, make an overall assessment of a witness’ credibility and reliability.⁴

32Considering all the evidence, we concluded that Furtado lacked credibility on matters that related to his potential liability. When faced with contemporaneous documents that challenged the accuracy of his evidence, he often found someone else to blame for the discrepancy, suggested a strained interpretation, or professed a lack of recall.

33Given these frailties in Furtado's credibility, we gave more weight to the conclusions we could draw from the consistency of the substantial documentary record.

34We found the investor witnesses generally credible. We recognized, however, their self-interest in parallel civil proceedings, and approached their evidence in those areas with particular care.

35The Commission's investigator's evidence was credible, documented and dispassionate.

5. issues & analysis

5.1 Introduction

36We now turn to our analysis of the substantive issues raised in this hearing.

37The following questions are before us:

a. Did the respondents defraud investors in the Adelaide and other Go-To LPs contrary to s. 126.1(1) (b) of the Act?

b. Did Furtado and GTDH engage in the business of trading securities without registration contrary to s. 25(1) of the Act?

c. Did Furtado, GTDH and the Adelaide GP make prohibited representations to investors contrary to s. 44(2) of the Act?

d. Did Furtado breach s. 122(1) (a) of the Act by making false and misleading statements to the Commission?

e. Did Furtado, as officer and director of the Corporate Respondents, breach s. 129.2 of the Act by authorizing, permitting or acquiescing in the Corporate Respondents’ breaches of the Act?

f. Did the respondents engage in conduct that is contrary to the public interest?

38For the reasons below, we find that the respondents did defraud investors in the Adelaide LP and in two other Go-To LPs, Elfrida and Eagle Valley, contrary to s. 126.1 (1) (b) of the Act. We also find that Furtado breached s.122(1)(a) by making misleading statements to the Commission.

39However, we find that Furtado and GTDH did not engage in the business of trading securities without registration contrary to s. 25(1). Nor, we find, did they and the Adelaide GP make prohibited representations contrary to s. 44(2). We also dismiss the allegations under s. 129.2 with respect to authorizing corporate breaches, and the general "public interest” allegation.

5.2 Did the respondents defraud investors in the Adelaide and other Go-To LPs?

40The Commission alleges that Furtado committed fraud in five ways by:

a. failing to tell investors that he stood to benefit (or in respect of later investors, had benefited) from the Adelaide LP’s purchase of the Adelaide Properties;

b. redeeming Anthony Marek’s units contrary to representations made to other Adelaide LP investors;

c. acting contrary to representations made to investors in the Elfrida and Eagle Valley LPs by misusing their properties as security for obligations of the Adelaide GP and LP;

d. dishonestly soliciting a new $12 million investment from Marek in August-September 2019; and

e. personally benefiting from the Adelaide LP’s acquisition of the Adelaide Properties, which amounts to a fraud on the Adelaide LP.

41For the reasons that follow, we find that Furtado did commit fraud in each of these five ways.

5.2.1 The test for fraud

42We begin our analysis by considering the test for fraud and what the evidence must demonstrate.

43The governing provision in the Act, s. 126.1(1)(b), provides:

A person or company shall not, directly or indirectly, engage or participate in any act, practice or course of conduct relating to securities, derivatives or the underlying interest of a derivative that the person or company knows or reasonably ought to know,

(b) perpetrates a fraud on any person or company.

44That section brings within its reach two categories of actors:

a. those who perpetrate a securities-related fraud; and

b. others who participate, directly or indirectly, in securities-related conduct that they know or reasonably ought to know perpetrates a fraud.

45The first step is to determine whether one or more persons have perpetrated a fraud. The term “fraud” is not defined in the Act. Previous Tribunal decisions⁵ have applied the framework found in the Supreme Court of Canada’s decision in R v Théroux.⁶ Those Tribunal cases set out these elements to prove a fraud:

a. the actus reus, or objective element, which consists of:

i. an act of deceit, falsehood, or some other fraudulent means; and

ii. deprivation caused by that act, which may come in the form of an actual loss, or the placing of the victim's pecuniary interests at risk; and

b. the mens rea, or subjective element, which consists of:

i. subjective knowledge of the act referred to above; and

ii. subjective knowledge that the act could have as a consequence the deprivation of another.

46The second step is to inquire whether the respondent has, as required in s. 126.1(1)(b), directly or indirectly participated in any act or conduct, related to securities, that they knew or ought reasonably to have known perpetrated a fraud.

47This second step is more straightforward where, as in this case, the respondent is the person who perpetrated the fraud under the Théroux framework in step one. In this case, we find that Furtado, as the directing mind of the Corporate Respondents, was the actor who perpetrated the fraud directly. Accordingly, in the second step, in this case, we only need to consider if the fraudulent conduct related to securities.

5.2.1.a Attribution to Corporate Respondents

48In this case there are four respondents: Furtado, and the three Corporate Respondents. There was no issue that Furtado is the sole directing mind of the Corporate Respondents. The allegations of fraud against the Corporate Respondents are based on attributing Furtado's acts to those entities.

49After evidence was complete but before closing submissions, the Tribunal’s Bridging Merits decision was released, as was the Supreme Court of Canada's decision in Aquino v Bondfield Construction Co.⁷ These cases discussed situations where the actions of a directing mind might not be attributed to a corporation. Bridging Merits cited the “identification doctrine” from the Supreme Court of Canada case, Canadian Dredge & Dock Co v The Queen.⁸ The Tribunal declined to find attribution in Bridging Merits, as gaps in the evidence created doubt about several factors: whether the actions of the directing mind were in fraud of the corporation (the "total fraud” exception), whether they were not for its benefit (the "no benefit” exception), and whether attribution would serve the public interest. The Aquino decision synthesized the prior law and established guiding principles for attribution. It concluded that attribution should be applied purposively, contextually and pragmatically.

50The Commission provided us with additional submissions on this issue. The respondents did not address it.

51The Commission submitted that Aquino superseded Canadian Dredge, and that the “total fraud” and “no benefit” exceptions which troubled the Tribunal in Bridging Merits should not be applicable to a s. 126.1 allegation in a s. 127 proceeding driven by public interest considerations. Alternatively, it submitted, those exceptions are not engaged on the facts before us.

52The circumstances in Bridging Merits were different from those before us. In that case, the corporation was a broader operating corporation rather than a holding company or similar entity. As a factual matter, in any event, neither the “total fraud” nor the “no benefit” exceptions would have any application in this case where the individual respondent is the directing mind of the Corporate Respondents. Furtado is the directing mind of the Corporate Respondents. There is no suggestion he acted in fraud of his own companies or that they received no benefit. To the extent we find Furtado’s actions to be fraudulent, we find the Corporate Respondents to have engaged in the same fraud.

53We decline to determine whether the Aquino line of cases should apply to a s. 126.1 allegation in a s. 127 proceeding. Such a determination is not necessary in this case and has not been the subject of full argument.

5.2.1.b Is reliance required?

54Another issue which overlays the allegations of fraud is whether there is any difference between fraud by “deceit or falsehood”, on the one hand, and by “other fraudulent means”, on the other. The respondents submit there is. For fraud by deceit or falsehood, they submit, the evidence must establish that investors relied upon the misstatement, to their detriment. For this principle, the respondents cite the Ontario Court of Justice’s decision in Ontario Securities Commission v Katmarian.⁹

55The Commission counters that reliance is not a necessary element of fraud by deceit or falsehood. It urges us not to follow Katmarian, as that case is under appeal and is inconsistent with governing Supreme Court of Canada and Ontario Court of Appeal authorities. In any event, the Commission submits that most if not all the alleged frauds can be characterized as “other fraudulent means”.

56The Commission cites R v Riesberry,¹⁰ which concerned an accused who had injected performance enhancing drugs into racehorses. In finding Riesberry liable, the Court rejected the contention that fraud required inducement or reliance. It focused on the causal connection.¹¹ In finding that there was a direct causal link between Riesberry's conduct and the risk of financial deprivation to the betting public, the Court held that "the absence of inducement or reliance is irrelevant.”¹²

57Riesberry was a case of fraud by “other fraudulent means”. Closer to the circumstances of this case, the Commission points to R v Drabinsky.¹³ That case related to a misrepresentation in a balance sheet used in an initial public offering. Finding the accused liable, the Court approved the trial judge's observation that the inclusion of a balance sheet that is false is an act of deceit, falsehood and dishonesty. Since members of the public were entitled to rely on the statements before risking their funds, the deceit created potential risk to the public.¹⁴ If the balance sheet was false, it was no defence that investors would only look to other statements.

58We agree that these cases demonstrate that reliance is not a necessary element of a finding of fraud, whether by deceit, falsehood, or other fraudulent means. This conclusion is consistent with the purposes of the Act, which provides protection to investors from unfair, improper or fraudulent practices. Neither s. 126.1(1)(b) of the Act, nor the framework for determining fraud set out by the Supreme Court in Théroux, suggest any distinction between frauds effected by deceit, falsehood or other fraudulent means.

59With this framework to determine if a fraud occurred, we now turn to the five acts by Furtado which the Commission alleges constitute fraud.

5.2.2 Fraud analysis

5.2.2.a Non-disclosure of Furtado's expected benefit on the purchase

60The first allegation turns on what Furtado knew and intended, and told, or more to the point, did not tell, potential investors when they were considering their investments in the Adelaide LP.

61The Commission alleges that Furtado expected, intended and planned to profit from the purchase by the Adelaide LP of the Adelaide Properties. By failing to tell investors of his intent to profit (or by failing to tell later investors that he had benefited already), the Commission submits he perpetrated a fraud.

62We consider first the objective element of this allegation: did Furtado engage in deceit, falsehood, or other fraudulent means?

5.2.2.a.i Step one - objective element

63In the capitalization and operation of the Adelaide LP, from at least October 2018 onwards, Furtado worked closely with Alfredo Malanca. Malanca had a company called Goldmount Financial Corp. His spouse, Kasia Pikula, was a mortgage broker through her company Goldmount Capital Inc. Together they had a family holding company called AKM Holdings Inc. Malanca was also the representative or agent of a company called Adelaide Square Developments Inc.

64Prior to the Adelaide LP, Goldmount had arranged financings for GTDH projects and Furtado considered Malanca his "primary person” for debt financings.

65While there was conflicting evidence around timing and details, the preponderance of the documentary and oral evidence makes clear that, by October 2018, Malanca or a company he represented had agreements in hand to acquire the Adelaide Properties at an aggregate purchase price in the mid-$50 million range. Furtado knew this.

66The evidence also makes clear that Malanca and Furtado contemplated a purchase of the Adelaide Properties by the Adelaide LP for an aggregate purchase price in the mid-$70 million range. The parties took us through various communications and draft agreements throughout the relevant period, highlighting changes to amounts and parties and respective roles, and disputing who knew or said precisely what and when. What did not change, however, was that the basic structure in all cases involved a significant difference between what would be due to the existing owners of the Adelaide Properties from Malanca or a company he represented, and the price at which the Adelaide LP would acquire them. That difference was referred to by the parties before us, and was referred to at the time, in 2018 and early 2019, by Furtado and Malanca, as a "lift".

67In the fall of 2018, Hans Jain became involved in the discussions concerning the Adelaide Properties. Jain testified at the hearing. He is an experienced real estate developer. For a time, he assisted with the development of the Adelaide LP's project and guaranteed its mortgage debt. He also indirectly made a $2 million equity investment in the Adelaide LP. His dealings with the Adelaide LP and Furtado are the subject of separate civil proceedings.

68Throughout the period from no later than November 2018 onwards, Furtado and Malanca, and sometimes Jain, engaged in discussion of the "lift” that was built into the proposed acquisition of the Adelaide Properties. For example, on December 28, 2018, Furtado sent to Malanca an email with comments on the draft limited partnership agreement for the Adelaide LP. Among his comments he stated that:

“Section A — Class A unit holders: $16.8 million comes from the equity investors (this includes the $6.1 million in lift we would allocate to them to re-invest in the LP). The net number of $10.7 million is the real cash they have to invest.

Section A — Class B unit holders: $10.15 million comes from us (assuming all cash is reinvested from the flip).

Section A — designed in such a way that if Hans invests, he knows about the lift. If the Bahrain guys invest, we can ask them to put the full 16.8 million into the deal (possibly).”

69These discussions of a "lift", which Furtado understood meant an immediate profit, had occurred and were continuing as investors were sought for the Adelaide LP. By December 28, 2018, the Adelaide LP had signed a purchase agreement with Adelaide Square Developments to purchase the Adelaide Properties for $74.25 million, with the amount then due from Adelaide Square Developments to the existing owners of the properties being approximately $58 million. By December 28, 2018, the anticipated "lift” had been quantified in the amount of approximately $16.25 million. Furtado was aware of this.

70When Furtado was questioned on cross-examination by the Commission on the meaning of his December 28 comments, Furtado indicated he could not recall what "the flip” in these comments referred to, nor did he recall who “us” was meant to designate. We find his evidence in this regard not credible, and that the notes in their context speak for themselves. The “flip” was the purchase of the properties by Adelaide Square Developments followed by their immediate transfer to the Adelaide LP at a higher price. Put another way, it was the payment to the original owners followed by the purchase by the Adelaide LP at prices which created an immediate profit, in other words a “lift”.

71Likewise, in an email from Furtado to Malanca, the meaning of “us” clearly refers to Furtado and Malanca. Furtado was discussing how the profit from the “flip” would be shared.

72Furtado submitted that the scenarios in which he or GTDH shared in a “lift” were scenarios that never proceeded and that did not involve outside investors. They were a “back up” plan. We do not agree with this distinction. The purchase of the Adelaide Properties, as it finally occurred with the involvement of outside investors, included an assignment fee of $20.95 million paid to Adelaide Square Developments by Adelaide LP, representing the “lift” between the price paid by Adelaide Square Developments to the original owners and the price paid by the Adelaide LP to Adelaide Square Developments.

73To secure the closing, as we will describe below, Furtado and Malanca obtained a short-term investment from Marek, who viewed his investment in units of the Adelaide LP as a “day loan”. Because Marek required immediate payout of his investment with a large fee on closing of the purchase, the assignment fee to be paid by Adelaide LP to Adelaide Square Developments was, in the first instance, directed to the payment of Marek. The assignment fee payment owing to Adelaide Square Developments was replaced by a demand loan from the Adelaide LP to Adelaide Square Developments (the Demand Loan).

74Within less than two weeks of the purchase, Adelaide Square Developments issued new shares to Furtado Holdings and AKM Holdings, and paid each of them approximately $388,000 in the form of dividends. By October 2019, Furtado had secured a further $12 million investment from Marek, as we will describe below, and caused the Adelaide LP to use it to pay out $12 million of the Adelaide Square Developments Demand Loan. Adelaide Square Developments then used that receipt to pay dividends, in the amount of $6 million each, to Furtado Holdings and AKM Holdings.

75Furtado’s explanation, of why he was given shares of Adelaide Square Developments and why he received the dividends, changed over time. Ultimately it was, in essence, that Adelaide Square Developments had made a lot of money on the deal because of his efforts and it wanted to thank him for his contribution to ensuring the deal closed.

76We do not find that to be a credible explanation, considering the voluminous documentary record, and the evident sophistication of the parties involved. The existence of a “lift” on closing was an obvious element of the purchase of the Adelaide Properties. Furtado had been involved in continuous discussions of scenarios, all of which recognized this “lift” and how it would be shared or applied. No later than his notes of December 28, 2018, set out above, those scenarios contemplated that a GTDH or Furtado entity would have some claim on a portion of the “lift”.

77Based on all the documents and testimony, we conclude that Furtado did expect, intend and plan to profit from the purchase by the Adelaide LP of the Adelaide Properties. In fact, after closing, he received almost $6.4 million from Adelaide Square Developments.

78Furtado at no time told any of the investors in the Adelaide LP (other than Jain) about the “lift”, or of any intent that he had of sharing in it. This is so with respect to investors who purchased units both before and after Furtado Holdings had received dividends of almost $6.4 million.

79Did this non-disclosure, in the circumstances, perpetrate a fraud on the investors in the Adelaide LP? We find that it did.

80The information provided to investors was found in various investor packages, oral discussions with Furtado, and in the limited partnership agreement itself. Generally, the documents and oral representations:

a. touted the Adelaide Project, GDTH’s existing projects and experience, and Furtado’s experience, integrity and trustworthiness;

b. confirmed that the Adelaide GP, which Furtado controlled, was a fiduciary of the Adelaide LP and would act in its best interests; and

c. indicated that investors “got paid first”.

81Non-disclosure can constitute “other fraudulent means” where a person, through their silence, hides fundamental and essential elements such as would mislead a reasonable person.¹⁵

82Furtado was a fiduciary of the Adelaide LP, the purchaser of the Adelaide Properties. However, he also expected, intended and planned to profit from the “lift” represented by the assignment fee paid by the Adelaide LP to Adelaide Square Developments on that purchase. Furtado was on both sides of the transaction. As a fiduciary of the LP, his failure to disclose this conflict of interest was objectively dishonest and hid a fundamental and essential element of the purchase transaction.

83The second aspect of the objective element of a fraud is that the victim’s pecuniary interests have been placed at risk. In this case, Furtado’s non-disclosure of the “lift” and his intent to share in it, and the fact that he was on both sides of the transaction, exposed investors to the risk that the purchase of the Adelaide Properties had not been, and would not be, pursued solely in the best interests of the Adelaide LP. This was a pecuniary risk for which they had not bargained.

5.2.2.a.ii Step one - subjective element

84Addressing briefly the subjective element of the fraud, we conclude that Furtado was aware of his failure to disclose the “lift” and his intent to share in it, and that the non-disclosure could place investors’ pecuniary interests at risk.

5.2.2.a.iii Step two – remaining elements of s. 126.1(1)(b)

85Finally, moving to step two of the analysis laid out above, there is no question that Furtado’s fraudulent conduct described above related to securities, in this case the sale of units of the Adelaide LP.

86We accordingly find that the Commission has established this first alleged fraud.

5.2.2.b Redemption of units contrary to representations to investors

87The Commission's second allegation is that the respondents committed fraud by redeeming the units of one investor, Anthony Marek, in contravention of representations made to investors.

88Marek came on the scene shortly before the closing of the purchase of the Adelaide Properties by the Adelaide LP. He is an experienced real estate developer. He made a substantial investment of $16.8 million for a brief period, demanding a fee of $2.7 million.

89Although Marek viewed his investment as a "day loan” to permit the closing, he purchased units in the Adelaide LP. He testified that Furtado told him that, "this is the way they have to show it on their books". He accordingly agreed and signed a subscription agreement for units.

90Furtado testified that he did not tell Marek this. We prefer Marek's evidence in this regard, as it is consistent with the documents. Specifically, the mortgage financing that had been arranged for the purchase of the Adelaide Properties required a certain amount of equity as a pre-condition to funding.

91In any event, there is no dispute that Furtado agreed to the subscription for units, accepted the subscription agreement from Marek, and then, after closing, authorized the redemption of the units by the Adelaide LP. To do so, he entered into the Demand Loan on behalf of the Adelaide LP with Adelaide Square Developments.

92The limited partnership agreement for the Adelaide LP, which governed the relationship between the investors and the Adelaide LP, had detailed provisions for the payment of distributions as a return of capital invested. The key element of those provisions, paraphrased by Furtado, was that "the investors got paid first."

93More specifically, s. 4.1 of the agreement provided for what the parties called a "waterfall" of payments, in order and priority. After a nominal payment to the general partner, the first distribution was to repay each unitholder, on a pro-rata basis, any capital contribution made by such unitholder. Furtado also told investors (other than Marek) that their investment was illiquid, and they could not get it out until the end of the project. Section 4.1 of the limited partnership agreement reiterates this point.

5.2.2.b.i Step one - objective element

94Turning to the objective element of the alleged fraud, we note that the redemption of Marek's units was a clear breach of the terms of s. 4.1 of the limited partnership agreement. It was contrary to the bargain that had been placed before investors, that all investors were in it together until the project came to fruition, at which point investors would be paid out on a pro-rata basis. This was a dishonest act which satisfies the first aspect of the objective element of a fraud.

95The capital structure of the Adelaide LP was also materially altered by the Adelaide LP entering into the Demand Loan and using most of the proceeds to pay Marek on redemption of his units, substituting debt for equity. This early, material payment to Marek placed the pecuniary interests of the other investors at risk. This satisfies the second aspect of the objective element of a fraud.

5.2.2.b.ii Step one - subjective element

96As to the subjective element of fraud, Furtado knew that the agreement provided for pro-rata distribution, and he knew that he had told investors that they would be paid first. He nevertheless authorized the redemption of Marek's units and their replacement by the Adelaide Square Developments Demand Loan. We find that he understood this would put the pecuniary interests of the investors other than Marek at risk. The subjective element is satisfied.

5.2.2.b.iii Step two – remaining elements of s. 126.1(1)(b)

97Turning to the second step in the analysis under s. 126.1(1) (b) of the Act, Furtado urges us to determine that this is not conduct which is "relating to securities”, but rather is a simple matter of an alleged breach of contract, for which investors have contractual remedies that should be sought in the courts.

98We do not agree. Conduct may constitute fraud under s. 126.1 even though it may give rise to other remedies in other forums. The conduct in this case related to representations made and agreements entered with investors in relation to their purchase of securities, the limited partnership units. We find the conduct alleged is in relation to securities, within the meaning of s. 126.1, and accordingly that Furtado committed a fraud by the redemption of Marek’s units.

5.2.2.c Misuse of assets of other partnerships by using their properties to secure obligations of the Adelaide GP and LP

99The Commission's third allegation of fraud relates to the use of the assets of two other limited partnerships created by GTDH, to secure obligations in respect of the Adelaide GP and LP.

100The Elfrida LP and Eagle Valley LP were limited partnerships created by GTDH to develop two other projects. Their structures were similar to the Adelaide LP in that GTDH created a subsidiary to be the general partner of each limited partnership. All the GTDH entities, including these general partners, were affiliates as they were all controlled by Furtado.

101The limited partnership agreements for each of the Elfrida LP and the Eagle Valley LP contained a specific covenant by the general partner that it shall not “cause the Partnership to guarantee the obligations or liability of, or make loans to, the General Partner or any Affiliate of the General Partner”.

102The investment opportunity documents for each of the Elfrida LP and Eagle Valley LP also state in their “Summary of Key Considerations” section that, “The General Partner holds the property in trust for the Partnership”.

103Despite these provisions, Furtado caused the Elfrida LP to agree to the registration of a charge for over $7 million on its property and agree to certain restrictions, to support an obligation in respect of the Adelaide Project.

104Furtado also caused the Eagle Valley LP to agree to the registration of a charge for over $13 million on its property, as collateral security for one of the Adelaide LP’s mortgages.

105Furtado obtained no benefit for the Elfrida LP or the Eagle Valley LP in exchange for these provisions of security. Nor did he obtain investor approval from those LPs. They were not disclosed to investors in those LPs until late 2020, after Furtado was questioned about the charges by the Commission.

106The Commission submits that in appropriating the assets of the Elfrida LP and the Eagle Valley LP in an unauthorized manner, Furtado acted dishonestly in a manner that is a fraud by “other fraudulent means”.

107Furtado submits, to the contrary, that what is alleged is no more than an unintentional breach of contract which does not engage the jurisdiction of the Tribunal. In any event, he submits, the charges were removed, with no damage occurring, once the Commission raised the issue. Finally, he submits, there was never any real risk of deprivation to the relevant unitholders in those partnerships, as the value of the Adelaide LP properties was sufficient to support payment of all the debts in question.

5.2.2.c.i Step one – objective element

108The investors in the Elfrida LP and the Eagle Valley LP were entitled to rely on the general partner's representations and agreements made in respect of their purchase of securities. Those representations included that the properties would be held in trust and not encumbered for the benefit of the general partner or any of its affiliates. The cross-collateralization caused by Furtado was an unauthorized use of those partnerships’ properties, at odds with the bargain that was presented to investors when they purchased the units. It was a dishonest act that satisfies the first aspect of the objective element of a fraud.

109Turning to the second aspect of the objective element, whether investors’ pecuniary interests were subjected to risk because of this conduct must be tested at the time of the conduct. Furtado was adamant in his testimony that there was no real risk to investors in the Elfrida LP and the Eagle Valley LP because the value of the Adelaide LP's properties was sufficient to support the payment of all debt.

110Furtado's assessment of the risk, however, does not determine the issue. Properties subject to a charge in support of an affiliate of the general partner is precisely what the investors in the Elfrida LP and the Eagle Valley LP had not bargained for. They had bargained to receive property held in trust and unencumbered by the general partner or its affiliates. An encumbered property obviously carries a greater risk than one not encumbered. It involves a greater risk of deprivation if for any reason the chargee determines to enforce against the property.

5.2.2.c.ii Step one – subjective element

111As an experienced real estate developer, Furtado must have known the potential pecuniary risk of charges on the other LPs’ properties, however he may have quantified (or dismissed) that risk. The second aspect of the objective element is satisfied.

5.2.2.c.iii Step two – remaining elements of s. 126.1(1)(b)

112As to the second step in the analysis, we have already noted above that conduct may constitute fraud under s. 126.1 as “relating to securities”, even though it may give rise to other remedies in other forums. Here, Furtado’s dishonest acts related to the rights and expectations of investors in limited partnership securities, based on the representations and documents provided by the general partner. We find this conduct by Furtado to be “relating to securities”.

5.2.2.d Dishonestly soliciting a further $12 million investment from Marek

113The Commission alleges that Furtado undertook further dishonest acts in soliciting a new investment from Marek in August-September 2019. He did so, it submits, by making misrepresentations about the Adelaide LP's financial picture and failing to disclose important facts including his indirect personal interest in Adelaide Square Developments, the existence of the Adelaide Square Developments Demand Loan, and his expectation of receiving a $6 million dividend from the proceeds of Marek's investment.

114Furtado approached Marek in August 2019, to ask if Marek might be interested in making a further investment in the Adelaide LP. Furtado and Marek met in person for about an hour at Furtado’s office on August 27, 2019. Marek invested a further $12 million by a subscription of units on September 26, 2019. Marek and Furtado agreed that those units would carry a target annualized return of 20% plus a further 10% of the profits after other limited partners were paid.

115At some point (precisely when was not agreed upon by the parties), Furtado gave Marek an updated information deck about the Adelaide Project (the Updated Deck). The Updated Deck was clearly wrong in some key respects. It stated that “Go-To Developments and its partners...have collectively invested $19.8 million of the total $27 million equity required”. In that regard, on the same page in a table of “Sources and Uses” of capital, it showed Adelaide Square Developments as having contributed $16.8 million in equity. Both of these statements were incorrect. “Go-To Developments and its partners” had invested no equity. Adelaide Square Developments did not have any equity. Rather, it had the substantial outstanding Demand Loan, which was not disclosed. The Updated Deck materially understated the Adelaide LP’s debt and overstated its equity.

116Marek’s testimony is that he received the Updated Deck in the August 27 meeting. Furtado contests this, on the basis that he believes Marek left the meeting with no documents and only received the Updated Deck later by email. Furtado’s evidence, however, changed over time between his compelled interviews, his affidavit, and his live testimony. We prefer Marek’s evidence on this point and find that he did receive the Updated Deck before his $12 million investment.

117Marek testified that Furtado said nothing in the meeting about the page in the Updated Deck referred to above, that set out the erroneous equity, debt, and sources and uses of capital. His evidence, consistent with Furtado’s in this respect, is that they just flipped through the deck. He was straightforward in saying that Furtado told him nothing about any of the items on that page. After the meeting, he testified that he “quickly reviewed” the document but asked no further questions. He confirmed he asked for no further financial information before making his investment.

118We are therefore faced with a situation where a disclosure document provided to an investor, Marek, prior to his decision to invest, contained material misstatements concerning the capital structure of the investment.

119It is equally clear from the evidence, however, that Marek did not rely on the misstatements before making his $12 million investment. He was focused on the return he would receive on his investment.

120We have explained above that reliance is not a necessary element of a finding of fraud, whether by deceit, falsehood, or other fraudulent means. This alleged fraud demonstrates the importance of this principle.

121Furtado attempted to explain away the misstatements, and to blame them on the third party who had been retained to prepare the Updated Deck. However, as President and CEO of GTDH, he had the power of final approval over all information decks provided to investors, and he provided the Updated Deck to Marek. He bears responsibility for its contents.

5.2.2.d.i Step one – objective element

122Returning to the framework for determining whether securities fraud occurred, we conclude that the first aspect of the objective element is satisfied by Furtado's dishonest act in providing the Updated Deck containing material misstatements to Marek as a potential investor. The second aspect of the objective element, the risk to the pecuniary interests of the investor, flows from the nature of the misstatements, which overstated equity and understated debt.

5.2.2.d.ii Step one – subjective element

123As to the subjective element, Furtado was aware of the true capital structure of the limited partnership, and was therefore aware that what was in the Updated Deck was a misstatement. We find, therefore, that he must have appreciated the pecuniary risk that could flow from that misstatement.

5.2.2.d.iii Step two – remaining elements of s. 126.1(1)(b)

124Finally, the second element of s. 126.1(1)(b), that Furtado’s fraudulent conduct is in relation to securities, is satisfied by the fact that the conduct was in relation to the sale of units in the Adelaide LP. Accordingly, this allegation is established, and we find that Furtado perpetrated a fraud in the solicitation of Marek's $12 million investment in September 2019.

5.2.2.e Fraud on the Adelaide LP itself

125The Commission alleges that Furtado’s acts, undertaken to obtain a personal benefit from the Adelaide LP’s acquisition of the Adelaide Properties, were a fraud on the Adelaide LP itself.

126Of the four frauds we have determined above, only one impacts the Adelaide LP itself. It is the early redemption of Marek’s initial units and its replacement with a Demand Loan.

127From the perspective of the Adelaide LP, the early redemption of Marek’s initial investment, and its replacement with a Demand Loan from Adelaide Square Developments, had the effect of replacing a material amount of its equity with debt. To the extent we have found that this perpetrated a fraud on the investors in the Adelaide LP, we find it also was a fraud on the limited partnership itself.

5.3 Did Furtado and GTDH engage in the business of trading in securities without being registered?

128Registration is one of the cornerstones of the regulatory framework of the Act. It is a key gate-keeping mechanism that protects investors and the capital markets by imposing obligations of proficiency, integrity, and solvency on those who seek to be in the business of trading in securities.¹⁶

129The Act requires those engaged in the “business” of trading to be registered.¹⁷ The conduct must be determined to be trading in securities, and the trading must rise to the level of someone being in the business of trading in securities. This is generally referred to as "the business trigger".

130The Commission alleges that Furtado and GTDH traded in securities of the various GTDH limited partnerships, and that their capital raising conduct activated the business trigger, which required them to be registered to trade. Furtado and GTDH do not take issue with the Commission’s allegation that they were trading in securities, but submit that their trading did not cross the line between permissible capital raising, and the registrable business of trading.¹⁸ We have concluded that Furtado and GTDH did not engage in the business of trading, for the following reasons.

131Between March 2016 and June 2020 (a period of more than four years), Furtado and GTDH raised over $80 million from about 85 investors. The capital was invested in 10 separate limited partnerships. Each partnership held a different property (with one exception, where two partnerships existed for a single property). The Adelaide LP was the last partnership to start raising money and was by far the largest of the 10 partnerships.

132In all cases, the units were sold on a prospectus-exempt basis, relying on the accredited investor or similar exemptions. The Commission has not alleged that any of the sales required a prospectus.

133The Commission cites and relies upon Companion Policy 31-103CP Registration Requirements, Exemptions and Ongoing Registrant Obligations (Companion Policy) as setting out criteria to assist in determining if the business trigger has been met. The criteria include:

a. engaging in activities similar to a registrant;

b. intermediating trades or acting as a market maker;

c. carrying on the activity with repetition, regularity or continuity;

d. being, or expecting to be, remunerated or compensated for the activity; and

e. directly or indirectly soliciting securities transactions.

134The Companion Policy is not law. However, the Tribunal has consistently adopted its criteria as helpful in determining whether a business trigger has been met. Equally, though, the Tribunal has cautioned that “these factors are useful, but ultimately [the Tribunal] must take a holistic view to determine whether [the impugned party] was acting like a [party] in the business of trading securities or was seeking to raise capital for the advancement of an underlying business.”¹⁹

135This quote refers to a concept which has influenced the Tribunal’s determination on the business trigger in several cases. The presence of an underlying business for which capital is being raised is a factor which weighs against a finding of a “business of trading”.²⁰ However, it is not determinative.²¹

136The Companion Policy itself reflects this tension, as it notes that issuers with an active non-securities business (or a bona fide business plan for one), who trade in their own securities, are generally not considered to be in the business of trading if they meet certain criteria. The criteria are the obverse of the ones set out above, which tend to demonstrate that the business trigger is met. Yet those criteria are themselves also noted in the Companion Policy to be subject to exceptions.

137The Companion Policy also refers specifically to issuers in the "start-up stage", who will be considered to have an “active non-securities business” if they are raising capital to start a non-securities business.

138The Commission submits that we should consider all the GTDH projects together in our analysis of the business trigger, as Furtado was the directing mind of them all, and solicited investments for all of them with repetition, regularity and continuity. It encourages us to view all the capital raising for the projects as a single ongoing business, not something in the start-up stage for each project. The Commission submits that the registration requirement should apply to such "serial sponsors and sellers” of securities, when viewed through the investor protection lens of the Act.

139Furtado and GTDH submit, to the contrary, that each of the limited partnerships represented a separate business, financing a different project, and there was no reason to ignore the separate legal personality of the different partnerships. The fundraising efforts of each limited partnership, they submit, should be viewed on their own. Furtado’s activity is explicable as GTDH was the shareholder of each of the general partners of the partnerships, and he was the directing mind of GTDH. When viewed as stand-alone partnerships, they submit, each limited partnership was raising funds primarily in its start-up phase.

140It is common ground that in each case, the purpose of soliciting investments was to provide the relevant partnership with funds to purchase a developable property and then fund pre-construction 'soft costs’ (such as planning and zoning). Each investor received a separate subscription agreement and the relevant limited partnership agreement, and almost all received an informational document about the particular partnership seeking funds.

141Ultimately, in our view, whether one views the GTDH family of projects as a single business, or as separate businesses, does not materially change the analysis. Either way, each capital raising was for a defined underlying business in respect of a particular property development.

142The Commission notes that, among Furtado's responsibilities under his employment agreement with GTDH, he was expected to meet and communicate with potential investors in relation to the purchase of LP units. Furtado did meet with virtually all investors before they invested, to walk through the relevant project and documents. The Commission also notes that GTDH received administration fees from the limited partnerships, including for managing tasks related to unitholders. Further, GTDH also had a VP of Investor Relations and Special Projects whose responsibilities included achieving annual targets for new funding from accredited investors.

143While all this is true, in respect of Furtado there was no evidence to suggest that his activity related to soliciting investments consumed more than a modest fraction of his time, nor that he was compensated based on the quantum raised. Furtado testified, and we accept, that he wore many hats for GTDH, including identifying development opportunities, formulating acquisition and development strategies, securing mortgage financing, managing zoning and planning processes with municipalities, retaining architects, engineers and planners, and sometimes additional responsibilities if a project entered the construction phase.

144While GTDH did receive administration fees from the partnerships, there was no evidence to support an assertion that it was any more, or less, than one would expect for the administration of property development projects. Nor was there any evidence as to whether any component of any fee attributable to investor relations was typical or not.

145With respect to the VP of Investor Relations and Special Projects, we had in evidence only the employment contract for that person and no witnesses spoke to the responsibilities or scope of the role. We note that the contract sets out numerous responsibilities including leading all communications and information technology functions.

146While the Commission’s factual assertions are correct, in context and considered together they are consistent with GTDH and Furtado acting primarily as a real estate developer, rather than being in the business of trading securities. None of the investor witnesses suggested that they viewed Furtado or GTDH as being in the business of trading securities. All of them said, in one way or another, that GTDH was a real estate development business.

147It is useful to contrast two recent decisions of the Tribunal, Paramount and Stinson. In Paramount, the respondents offered units in pooled mortgage investment funds and direct mortgage investments on a continuous basis. The Tribunal cautioned that, just because an issuer carries on a core or other business, it does not preclude a conclusion that the issuer is engaged in the business of trading in securities.²² The Tribunal focused on other factors such as the amount of management time spent on soliciting investors, the regularity and continuity of sales of securities, and the expectation of those engaged in the trading activity to be compensated for it. The Tribunal concluded that the business trigger test had been met.

148In Stinson, on the other hand, the respondents were pursuing a strategy to acquire, renovate, convert and operate a hotel and condominium project. Despite an agreed statement of facts that purported to admit to a breach of the registration section, the Tribunal determined that the Commission had not established that the respondents had met the business trigger test. It found that the respondents did not cross the line from capital raising for a specific underlying business, to engaging in the business of trading in securities.²³

149In our view, the position of Furtado and GTDH is more analogous to that of the respondents in Stinson than those in Paramount. Though GTDH had nine separate projects, each was the subject of a separate capital raising. The focus of Furtado and GTDH was to raise capital for those businesses. We find the respondents were not in the business of trading in securities.

5.4 Did the respondents make false or misleading statements to investors about the use of invested funds?

150Subsection 44(2) of the Act supports the registration requirement by prohibiting false or misleading statements that a reasonable investor would consider relevant to deciding whether to enter or maintain a trading relationship.

151The Commission conceded, consistent with the Tribunal’s decision in Solar Income Fund, that if there were no requirement for the respondents to be registered under s. 25(1), then they could not be liable under s. 44(2).²⁴ We have concluded that the respondents were not required to be registered. Accordingly, we need not consider this allegation.

5.5 Did Furtado mislead the Commission during the investigation?

152The Commission alleges that Furtado made misleading statements to the Commission during its investigation into the respondents’ conduct.

153Subsection 122(1) (a) of the Act makes it an offence to make a statement to a person appointed to make an investigation under the Act that, in a material respect, is misleading or untrue, including by omission.

154The statements relied upon by the Commission were made by Furtado in his three compelled interviews, pursuant to a summons under the Act. The Commission must therefore prove the remaining element, that one or more of these statements were misleading or untrue.

155In deciding whether a misstatement rises to the level in s. 122(1)(a), we must give meaning to the term “in a material respect”. As the Tribunal has found in the past, we should give those words meaning consistent with the remedial nature of the section, but we should also distinguish between, on the one hand, misstatements that are evasive or designed to obfuscate, and on the other hand, inadvertent errors that are the product of confusion or poor recollection.²⁵

156The Commission in its Statement of Allegations alleges that Furtado misled the Commission about:

a. the payments and benefits received by Furtado Holdings, specifically Furtado’s testimony across his three examinations about the $388,087.33 received from Adelaide Square Developments in April 2019 and the $6 million dividend paid by Adelaide Square Developments in October 2019, and

b. his relationship with Adelaide Square Developments and Malanca, specifically that Furtado initially claimed his discussions with Adelaide Square Developments were with its sole registered director, Angelo Pucci, but later saying he dealt with Malanca as his primary contact.

157In the hearing and in its closing submissions, the Commission expanded its allegations to include arguably misleading or incomplete written answers given by Furtado to a summons for documents delivered between his second and third examinations, concerning correspondence with Malanca.

158Furtado objected to this expansion of the allegation, noting that nothing in the Statement of Allegations alleges misleading in respect of responses to summonses for documentary disclosure. This allegation was not referred to in the Commission’s opening statement and was raised for the first time in the cross-examination of Furtado during the hearing.

159The Commission submitted this allegation was captured by the phrase “regarding his relationships and dealings with [Adelaide Square Developments] and [Malanca]”. Yet the only particularized allegation on that matter in the Statement of Allegations is related to the question of whom Furtado said he had discussions with, Pucci or Malanca.

160We allowed the Commission to pursue questioning and introduce documents in relation to what later became this allegation. However, we have determined that in light of the limited assertions in the Statement of Allegations and the absence of any notice of this particular allegation, we will consider only those allegations of misleading statements made in Furtado's examinations.

161We deal first with the second allegation, that Furtado misled the Commission about who Furtado said was his primary contact for Adelaide Square Developments. On the second examination, he said it was Pucci. On the third examination, he said it was Malanca. Furtado attempted to explain this in his affidavit as his understanding that Pucci was the principal of Adelaide Square Developments, but that Malanca was an agent and acted with authority for Adelaide Square Developments. We do not find his explanation persuasive, but in our view this inconsistency is not “misleading in a material respect” in the circumstances, given the documentary record the Commission had in hand. The Commission has not established this second allegation, and we decline to find a breach of s.122(1)(a) by Furtado in this regard.

162We now consider the first allegation that Furtado misled the Commission about the payments and benefits he received from Adelaide Square Developments.

163In his first examination, Furtado was asked about both the approximately $388,000 and the $6 million payments from Adelaide Square Developments. In each case, he was presented with a funds transfer into the Furtado Holdings bank account and asked what it was for. In both cases, he answered that he did not recall offhand.

164In his second and third examinations, these payments were revisited and Furtado gave more expansive answers. In the second examination, he explained that the reason for receiving the $388,000 payment was in compensation for his having assumed the risk of an $800,000 non-refundable deposit on the 355 Adelaide property, pursuant to an oral agreement with Pucci. In his third examination, however, he revised this evidence to say there was a written agreement, signed by Pucci, which by that time had been provided to the Commission. He said the payment was treated as a dividend at his request.

165With respect to the $6 million dividend in October 2019, in his second examination he said the payment was provided as a “thank you” from Adelaide Square Developments in recognition of all his efforts on the Adelaide LP property purchase, in presenting solutions each time the transaction was in jeopardy. In his third examination, he said that the conversation about the dividend happened in the summer of 2019 during a lunch he had in Woodbridge with Malanca and Pucci.

166It is clearly the case that his testimony evolved through the three examinations. It further evolved when he testified in the hearing. In his affidavit for the hearing, Furtado testified that it was Malanca who suggested that Furtado receive shares of Adelaide Square Developments, so the $388,000 payment could be received as a dividend. He also testified at the hearing that it was Malanca who told him that he was going to receive the $6 million dividend, at a luncheon in Toronto in late September 2019, where Pucci was not present. This testimony differs from what he said in the examinations.

167Although there were differences in details, the basic assertions about why Furtado was receiving the dividend payments were the same in the second and third examinations: that the $388,000 was to compensate Furtado for having borne the risk of a non-refundable deposit, and that the $6 million dividend was an unexpected “thank you” for Furtado based on his efforts to close the deal when it was in jeopardy.

168In the Statement of Allegations, the Commission asserts that this testimony in his examinations was false and misleading. It asserts this is because in fact, Furtado expected, intended and planned to receive a personal benefit as a result of the acquisition by the Adelaide LP of the Adelaide Properties. The Commission submits that he expected to receive the $388,000 and the $6 million, which ultimately took the form of dividends from Adelaide Square Developments on shares issued to Furtado shortly after the closing of the purchase of the Adelaide Properties.

169As noted, we must determine if the inconsistencies were "misleading or untrue” “in a material respect”, and, if so, whether they were evasive or designed to obfuscate, or rather inadvertent errors that were the product of confusion or poor recollection.

170We note that on the key elements of this testimony we have rejected Furtado’s evidence that the payments were unexpected, in our determination that he did expect, intend and plan to receive personal benefits as a result of the purchase of the Adelaide Properties.

171This is precisely the testimony alleged in the Statement of Allegations to have been false and misleading, for precisely the reason alleged. It is not an attempt, after the fact, to find a breach of s.122(1)(a) based on a simple rejection by the Tribunal of a respondent’s testimony at the hearing.

172The reasons that Furtado received shares, and then substantial dividends, from Adelaide Square Developments, were material issues in this proceeding from the outset. We find that his testimony on this subject in his examinations was misleading or untrue, and was so in a material respect in relation to the issues joined in this proceeding. Were they, however, evasive or designed to obfuscate, or were they inadvertent errors that were the product of confusion or poor recollection?

173As an explanation for these inconsistencies, Furtado gave testimony, both in his affidavit and in his oral evidence, as to his health and mental state at the time of his examinations. In particular:

a. he had anxiety associated with testifying unmasked with his counsel beside him during the COVID-19 pandemic as he is immuno-compromised;

b. at that time he was seeing doctors for undiagnosed constant pain in his head; and

c. he has mental health challenges with memory, anxiety, sleep problems, and concentration issues which caused him to need to review documents multiple times to retain information.

174We note that this evidence was direct evidence in his affidavit and oral testimony, and we had the benefit of observing him in person throughout the hearing. In light of our ruling above concerning the admissibility of Furtado’s affidavit, we note that we have disregarded expert testimony about his health that was proffered on adjournment motions.

175As we have found above, Furtado’s examination testimony on these topics was misleading or untrue in a material respect. While there is no doubt Furtado suffered health challenges throughout the examinations and the merits hearing, those challenges cannot excuse the specific and repeated explanations he gave for the receipt of the payments, which we have found are not sustainable. We find they were evasive or designed to obfuscate.

176We accordingly find that the Commission has established its allegation that Furtado breached s.122(1)(a) by making statements to the Commission as to the reasons he received dividends from Adelaide Square Developments, that were misleading or untrue in a material respect.

5.6 Did Furtado authorize, permit or acquiesce in the Corporate Respondents’ non-compliance with Ontario securities law?

177The Commission alleges that Furtado, as the directing mind of the Corporate Respondents, is liable for their non-compliance with the Act. Pursuant to s. 129.2 of the Act, a director or officer is deemed to be liable for a breach of securities law by a company where the director or officer authorized, permitted or acquiesced in the company’s non-compliance with the Act.

178Recent Tribunal decisions have concluded that where an individual has been found directly liable for a breach of the Act, it is not necessary to consider whether the individual should also be deemed liable under s. 129.2. The Hogg case contains a recent summary of the reasons for this conclusion.²⁶

179Furtado controls all the Corporate Respondents and is their sole directing mind. We have found him directly liable for breaches of the Act. As a result, we decline to deem him to be also liable under s. 129.2 for the same breaches by the Corporate Respondents.

5.7 Did the respondents engage in conduct contrary to the public interest?

180The Commission alleges that the respondents engaged in activity contrary to the public interest by engaging in the misconduct outlined above.

181The Commission did not provide any particulars in its written or oral submissions to support this allegation, and it was not advanced in the Statement of Allegations. The Tribunal has previously determined that where it has found a respondent’s conduct to have breached Ontario securities law, it will not also conclude that the conduct was contrary to the public interest without there being additional facts and submissions to support that allegation.²⁷ We therefore decline to make a finding that the respondents engaged in conduct contrary to the public interest.

6. conclusion

182For the reasons above, we find that the Commission has established that the respondents perpetrated fraud in the five ways we have described above. We also find that the Commission has established that Furtado breached s.122(1)(a) by giving misleading statements. However, we find that the remaining allegations have not been established and we dismiss them.

183We therefore require that the parties contact the Registrar by 4:30 p.m. on May 26, 2025, to arrange an attendance, to schedule a hearing regarding sanctions and costs, and the delivery of materials in advance of that hearing. The attendance is to take place on a mutually convenient date that is fixed by the Governance & Tribunal Secretariat, and that is no later than June 16, 2025.

184If the parties are unable to present a mutually convenient date to the Registrar, each party may submit to the Registrar, for consideration by a panel of the Tribunal, a one-page written submission regarding a date for the attendance. Any such submission shall be submitted by 4:30 p.m. on May 26, 2025.

Footnotes

1. 1RSO 1990, c S.5 (the Act)
2. 2Conrad M Black et al, 2015 ONSEC 4 at para 5; see also Juniper Fund Management Corporation et al, 2013 ONSC 17 at paras 2, 13-17
3. 3Feng (Re), 2023 ONCMT 12 (Feng) at para 22, citing Springer v Aird & Berlis LLP, 2009 CanLII 15661 (ON SC) at para 14
4. 4Meharchand (Re), 2018 ONSEC 51 (Meharchand) at para 52; Feng at para 23
5. 5First Global Data Ltd (Re), 2022 ONCMT 25 at para 346; Quadrexx et al (Re), 2017 ONSEC 3 at para 19; Bridging Finance Inc (Re), 2024 ONCMT 23 at para 33 (Bridging Merits)
6. 61993 CanLII 134 (SCC), [1993] 2 SCR 5 (Théroux)
7. 72024 SCC 31 (Aquino)
8. 81985 CanLII 32 (Canadian Dredge)
9. 92024 ONCJ 151 (Katmarian)
10. 102015 SCC 65 (Riesberry)
11. 11Riesberry at para 22
12. 12Riesberry at para 26
13. 132015 SCC 65 (Drabinsky)
14. 14Drabinsky at paras 81-82
15. 15Bradon Technologies Ltd (Re), 2015 ONSEC 26 at para 159; R v Émond, 1997 CarswellQue 4688 (English translation) at paras 29-30, 34-37
16. 16Hogg at para 187; Limelight Entertainment Inc et al, 2008 ONSEC 4 at paras 135-136; Meharchand at para 107
17. 17Act, s 25(1)
18. 18Money Gate Mortgage Investment Corporation (Re), 2019 ONSEC 40 (Money Gate) at para 143, citing Blue Gold Holdings Ltd et al, 2016 ONSEC 24 at para 20
19. 19Threegold Resources Inc (Re), 2021 ONSEC 30 (Threegold) at para 40
20. 20Threegold at paras 41-58; Stinson (Re), 2023 ONCMT 26 (Stinson) at para 53
21. 21Paramount Equity Financial Corporation (Re), 2022 ONSEC 7 (Paramount) at para 46; Money Gate at para 143
22. 22Paramount at para 46
23. 23Stinson at para 52
24. 24Solar Income Fund Inc (Re), 2022 ONSEC 2 at para 66
25. 25Rosborough (Re), 2022 ONCMT 11 at para 91
26. 26Hogg (Re), 2024 ONCMT 15 at paras 215-230
27. 27Valentine (Re), 2024 ONCMT 11 at paras 119-121; Kraft (Re), 2023 ONCMT 36 at para 336; Kitmitto (Re), 2022 ONCMT 12 at paras 174-179