Sandy Sussman Accused of Mortgage Ponzi Scheme

Canada’s Cottage Country, a favorite vacation spot for the country’s upper-crust, is the epicenter of a new Ponzi scheme.

Toronto businessman Sandford “Sandy” Sussman has been accused of fraud after his longtime business of selling private mortgages tied to lake homes in the popular destination went kaput, Bloomberg reported.

Sussman reportedly stopped making interest and principal payments on syndicated mortgages to the tune of more than C$100 million ($72 million), leading Ontario’s Financial Services Regulatory Authority to place his firm into receivership. An investigation by the court-appointed receiver suggests that much of the money raised was never lent out, and investor payments he’d been making were likely funded by other investors’ money coming in.

In one lawsuit, investors reportedly presented a document Sussman signed earlier this year that seemingly admits to misappropriating loan proceeds. Another lawsuit from another group of investors also accused Sussman of fraud. A judge granted a freeze of Sussman’s assets in May.

The scheme, reminiscent of Bernie Madoff’s infamous dealings, comes as Canada’s real estate market languishes in stagnation for a third straight year. Sussman’s business only fell apart after the market dropped. The receiver now estimates that more than 60 percent of investors’ money may be gone.

Sussman explained in a May deposition for one of the lawsuits that he felt pressure to try to find money to keep payments flowing. “I was signing anything to keep everyone afloat,” he said, per Bloomberg. Many investors allegedly trusted Sussman to invest their money without proper documentation or the involvement of a lawyer. Commercial real estate lawyers, heads of small private equity firms and even some of Sussman’s friends from school are among those who are after Sussman for money.

His family firm had a decades-long reputation for reliable mortgage returns before Sussman pivoted to funding housing developments in Barrie and Muskoka, a lake-dotted region dubbed the “Hamptons of the North.” Unlike single-borrower loans, however, those projects produced no steady income stream to cover the 10 percent returns he promised investors. Sussman allegedly sought new investors to fill the gap, according to Bloomberg.

Investors are now tasked with finding value in the various real estate assets left in Sussman’s business and distributing them amongst each other. Unless Canada’s real estate market jumps back to life, they’re likely to face steep losses.

“If economic conditions support further development there may be significant additional realizations for investors,” the receiver said in legal documents.

— Chris Malone Méndez