Mortgage fraudster gets permanent ban

A convicted fraudster has now also been permanently banned by Ontario’s Capital Markets Tribunal.

The Ontario Securities Commission (OSC) sought an order sanctioning Derek Scheinman, who was convicted of fraud in the Ontario Court of Justice in 2021 after he pleaded guilty to defrauding investors of about $10 million in a syndicated mortgage investment and another $13 million in a real estate limited partnership he controlled.

“In the agreed statement of facts, filed in connection with the criminal proceeding, Scheinman admitted that he created fictitious mortgages and diverted $13 million” from the partnership, the tribunal said in its ruling.

Some of the funds were paid to investors in the syndicated mortgage investment scheme, who also ended up being defrauded. “However, most of the funds were diverted for personal expenses and funding Scheinman’s lavish lifestyle,” the panel noted.

In 2021, Scheinman was sentenced to four years, less four months, in prison.

The tribunal has now also ordered that Scheinman, who was previously registered as a mutual fund rep and limited market dealer rep, be permanently banned from the capital markets in Ontario after finding that his conviction involved securities, and that it is in the public interest to ban him from the markets.

“As a former registrant, he knew or ought to have known that his conduct was in breach of the [Securities] Act,” the panel said.

“His conduct demonstrates that he cannot be trusted. A permanent ban from the capital markets is required to protect investors by restraining future conduct by Scheinman that would be detrimental to the integrity of the capital markets,” it said, adding that a permanent ban is also a deterrent to others.

James Langton

James is a senior reporter for Advisor.ca and its sister publication, Investment Executive. He has been reporting on regulation, securities law, industry news and more since 1994.