A B.C. mortgage broker accused of losing hundreds of thousands of dollars of his clients' money after convincing them to invest in a U.S. Ponzi and pyramid scheme is now the subject of an investigation by the province's financial watchdog.
The British Columbia Securities Commission says Don Maxwell, who works for The Mortgage Group in Vancouver, was a finder who received financial compensation to refer investors to Gold-Quest International – despite never being registered to trade in securities.
The Las Vegas-based foreign exchange company was eventually shut down in March 2008 after American regulators ruled that it illegally took as much as US$29 million from investors in the U.S. and Canada.
The board says Maxwell convinced one of his female mortgage clients to invest $343,000 in the company – even after he knew it was in trouble with securities regulators.
The BCSC says Maxwell helped the woman to remortgage her home to make her first $100,000 investment. The next $123,000 is alleged to have come from a line of credit against one of her properties he helped set up.
A hearing notice into his actions states Maxwell made the final investment of $120,000 after assuring his client that a negative news article and an internal warning bulletin about the company "was an attempt to discredit Gold-Quest" and that "he remained confident that Gold-Quest was still a good investment opportunity."
Malcolm Collett of The Mortgage Group told ctvbc.ca the elderly client lost her home and her life savings because of the bad investments.
Collett himself invested $20,000 in early 2008 and says three or four others in his office trusted Maxwell with their savings.
Collett said there were numerous red flags around Maxwell's Gold-Quest promises, including a seemingly impossible 87.5-per-cent annual return rate. But he trusted his longtime colleague.
"[He] worked with us in the mortgage business and he kind of pressured us. I didn't want to and then another colleague of mine went in and invested a bit of money, so I did too," he said.
By the time he tried to get his initial investment out, Collett says the company had already been shut down by the authorities.
"I just feel awful – it's a lot of money. It was some of my savings," he said.
Collett said he's talked to Maxwell about his losses and his coworker maintains his innocence.
"At the beginning I think he believed in it but near the end I think he understood how much he'd hurt us."
The allegations have not been proven by the securities commission. Maxwell has been ordered to appear at a BCSC hearing in Vancouver on Jan. 26.
He could not be reached by CTV News on Wednesday.
