VANCOUVER - Two British Columbia companies have admitted to fraud for operating a Ponzi scheme that took about $570,000 from almost 200 investors.

The B.C. Securities Commission said Thursday Wellspring Capital Group Ltd. and Springpay Systems admitted to the fraud and agreed $440,000 frozen by the commission was the proceeds of unlawful activity.

Wellspring representatives told investors the program would generate high returns through sophisticated investments, when in fact the company was using new investment money to pay previous investors, said the a B.C. Securities Commission in a news release.

In addition to the fraud admission, the two companies admitted to trading and distributing securities without being registered.

Both companies are ordered to cease trading in securities and have been banned from purchasing securities in the province.

The Ponzi scam is named after Charles Ponzi, a clerk in Boston who first orchestrated such a scheme in 1919.

The commission said that for seven months in 2003, Wellspring offered investment programs to residents in B.C. and elsewhere in Canada that promised returns on people's investments through legitimate business transactions.

The programs offered involved financing for new vehicles, payroll deductions and a business expense reduction program.

In its decision, the commission said Blake Prater was a director of Wellspring and Springpay and that both companies were dissolved in 2006 for failing to file records with the Finance Ministry.

One program the companies offered was called CarDeal. After a person got independent financing for a new vehicle, CarDeal investors were required to invest the equivalent of four times their monthly vehicle payment with Wellspring, the commission said.

The CarDeal investment said it would then pay the investor a monthly payment equal to the monthly car payment for the term of the investor's independent financing agreement.

Prater pleaded guilty in U.S. District Court in Connecticut to one count of securities fraud and one count of conspiracy in connection with a separate investigation.

He was sentenced a year ago to 10 years in prison. He had previous criminal convictions in the U.S. that were for activities similar to ones carried out by Wellspring and Springpay, the commission said.

In late 2003, the commission froze the investors' funds in two bank accounts and gave custody of the money to the Civil Forfeiture Office which is engaged in making restitution to investors.