Ontario dentist Dr. Peter Sbaraglia settles with regulator on $21M ponzi scheme to steal

The Ontario Securities Commission conducted an investigation into the conduct of a dentist, Dr. Peter Sbaraglia, and determined the following:

Report re Dr. Peter Sbaraglia

BACKGROUND AND PARTICULARS TO CONDUCT

A. Conduct Contrary to section 126.1(b)

(i) CO's Supposed Business Model

10. CO's purported business model was as follows:

(a) CO would solicit investors to loan money to it;

(b) The funds were to be loaned to CO for a fixed term (generally one to three years) at a fixed, high rate of interest ranging from 20% to 30%;

(c) CO would issue a loan agreement to each investor and, from 2007 onward, would issue a corresponding promissory note for the amount loaned together with the interest payable;

(d) The funds from CO were to be transferred to Mander personally or through EMB to other Mander controlled companies for investment purposes; and

(e) The profits generated from the investments above the fixed interest rate promised to investors were to be split equally between CO and Mander/EMB.

11. At the time that Peter Sbaraglia began soliciting investors (including his mother and other close family members), he had not been provided with any evidence regarding the actual performance of Mander's supposed invements on his behalf other than Mander's representations to him.

(ii) CO's Actual Business

12. In practice, and as further described below, CO's actual business varied from the above model in a number of ways. First, CO did not transfer all of the funds of CO Investors to Mander/EMB. Approximately one third of the funds raised by CO (approximately $6-7 million) were not transferred to Mander/EMB.

Those funds were used in one of a number of ways by Peter Sbaraglia acting on behalf of CO, including: (i) making payments to CO Investors with newly received funds from other CO Investors; (ii) making investments in securities, either directly in trading accounts of CO or indirectly in trading accounts in the names of other companies, that resulted in significant losses; and (iii) making payments for personal expenses of the Sbaraglias.

13. Of the $21.2 million raised by CO from its investors, $15.4 million was transferred to Mander/EMB, the balance of which (between $6-7 million) can be accounted for as follows:

(a) $2.1 million was received personally by Peter Sbaraglia at the direction of Mander, notionally for profits and dividends earned by the Sbaraglias from the actions of Mander;

(b) approximately $2.4 million was lost through trading accounts;

(c) approximately $985,000 in general expenses of CO were paid from the CO bank accounts;

(d) approximately $585,000 was used by CO to purchase open venture securities, which securities have almost no current value;

(e) approximately $213,000 in rent payments in respect of a property located at 239 Church Street were made by CO to 91 Days Hygiene ("91 Days"), a company wholly owned by Peter Sbaraglia's spouse;

(f) approximately $383,000 in charges were incurred on a corporate Visa in the name of CO, some of which were not for the benefit of CO Investors but, rather, were for the personal benefit of the Sbaraglias, including payments for restaurants, renovations of a building owned by 91 Days and other personal expenses.

14. In addition, at certain points during the Relevant Period, CO used funds raised from some investors to pay amounts owing to other investors. The payments to investors were made from the CO bank accounts over which Peter Sbaraglia had control and were made by cheques signed by him.

15. As a consequence of the foregoing conduct, Sbaraglia engaged or participated in acts, practices or courses of conduct relating to the securities of CO that he ought reasonably to have known perpetrated a fraud on persons, contrary to section 126.1(b) of the Act.

Dr. Sbaraglia was given a reprimand and a lifetime ban from dealing in securities. He died in 2021 at age 57.

Content retrieved from https://financialpost.com/tag/peter-sbaraglia/

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