According to court filings, since 2015, the venture raised at least $13 million from investors, which was to be used to invest in the purchase and redevelopment of residential real estate.
The OSC began its investigation in 2023 based on a complaint from Cacoeli’s former CFO.
In February, the court appointed Grant Thornton to monitor the firms’ assets. Now, following a hearing, it has appointed the firm as receiver over the various firms and LPs.
The regulator hasn’t made any enforcement allegations against the firms, and nothing has been proven.
In the receivership application, the OSC said that it only has to show that there are “serious concerns” about a possible breach of securities law — it doesn’t have to prove that any wrongdoing took place.
The basic concern set out in its court filings is that investor money that was raised for a particular project was instead diverted to other projects.
The respondents in the case argued that investor equity was used in different projects, not investor funds, and that this was all disclosed to investors, who received interests in the other projects as a result.
However, the court concluded that this was likely not allowed.
“Reading the limited partnership agreement as a whole and taking into account what was communicated to investors when they made the investment, I am of the view that the diversion of funds from one limited partnership to another limited partnership was not permitted,” it said.
The alleged diversion of funds to other investments “was contrary to what the limited partnership agreement provided, and contrary to what a reasonable person would have understood based on the marketing materials,” the court said.
And, as a result, it concluded that “there are serious concerns such that an order under section 129 of the Securities Act is appropriate,” the court said in granting the receivership order.