Investors in a scheme that seems too good to be true should be
aware that they may be liable to return the funds under principles
of unjust enrichment or bankruptcy preference laws.
The claims in Golden Oaks Enterprises Inc. v. Scott,
2022 ONCA
509 (CanLII), arose from a Ponzi scheme in Ottawa that was
advertised as a “rent-to-own” business (Golden Oaks) but
was promoted by its principal owner (Lacasse) to certain
individuals as a way to turn a quick profit by advancing funds for
short time periods in exchange for high-interest promissory
notes.
Over five hundred promissory notes were issued by Golden Oaks to
investors from 2009-2013, with early investors earning commissions
for persuading new investors to make loans. The interest on the
issues increased to the point where it exceeded the criminal rate
of 60%, and money from new investors was being used to pay existing
investors.
The court later described the scheme as
follows:
Its core business was persuading investors to lend the company
money with the lure of unrealistically high returns, to the profit
of Lacasse and early investors. These returns were not being funded
by the Rent2Own operations. These operations were not viable and
generated almost no income. The interest and commissions paid to
early investors in Golden Oaks were funded by money from later
investors. Early investors and insiders did very well, assuming
they withdrew their funds before the whole scheme collapsed in…
