Financial fraud persists two decades following the Norbourg scandal
In the world of finance, the past two decades have seen their fair share of scandals and fraudulent activities. Two notable cases that have left a lasting impact are the Norbourg affair in Canada and the Celsius Network cryptocurrency platform collapse in the United States.
The Autorité des marchés financiers (AMF), Canada's financial market regulator, was formed in February 2004 through a merger of five organizations. Just a little over a year later, the Norbourg affair unfolded, marking a significant event in the AMF's history. The AMF has since tripled its resources for inspections and investigations, growing from 47 people to 206, in an effort to prevent such incidents from recurring.
Financial planner Fabien Major, who was the director of investment products at Capital Teraxis when Norbourg acquired it at the beginning of 2004, remembers the affair vividly. Following the scandal, Major resigned from his post and withdrew his clients' money to prevent them from losing any.
The Norbourg affair resulted in significant losses and shook investor confidence across the industry. Mr. Major reports that the following years were difficult for the industry as a whole due to the shaken investor confidence.
In an attempt to combat financial crime, Claude Mathieu, responsible for the program against financial crime at the Faculty of Management of the University of Sherbrooke, states that fraudsters use social networks and cryptocurrencies to perpetrate investment scams. This trend was further highlighted by the collapse of the Celsius Network cryptocurrency platform in 2022.
Alex Mashinsky, the founder of Celsius Network, was sentenced to 12 years in prison by American justice in connection with fraud charges. Mashinsky was accused of illegally manipulating the price of the cryptographic token that Celsius owned, then secretly selling its holdings at inflated prices, just before the company went bankrupt. The Caisse de dépôt et placement du Québec had invested money in the Celsius Network cryptocurrency platform.
Last year, investment fraud generated losses of $310 million in Canada, according to the Canadian Anti-Fraud Centre. The vast majority of fraud cases (between 90% and 95%) are not reported, according to authorities.
In response to the Norbourg fraud incident, Jean-Paul Bureaud, general director of FAIR Canada, states that authorities have tightened rules, strengthened sanctions, and filled several gaps. The AMF's refusal to discuss the Norbourg affair from 20 years ago is a testament to its focus on maintaining the integrity of the financial market and preventing similar incidents from recurring.
More recently, Sam Bankman-Fried, founder of the cryptocurrency platform FTX, was sentenced to 25 years in prison in the United States for diverting his clients' money, amounting to nearly $8 billion US. The American prosecutor in charge of the case qualified the FTX affair as "one of the largest financial frauds in history."
In the wake of these incidents, the AMF collaborates more effectively with police forces to combat financial crime and protect investors. Manon Roy, a chartered professional accountant and expert in juricomputability, compares her work of detecting fraud to that of a medical examiner in a trial. Her work is within an accounting and financial perimeter to provide independent expert testimony in courts, in the context of disputes or financial investigations related to money laundering, corruption, or fraud.
Last June, the scope of the Fonds d'indemnisation des services financiers was expanded to cover victims of fraud committed by companies or representatives in securities. The AMF's efforts to strengthen its resources and collaborations demonstrate a commitment to maintaining the integrity of the financial market and protecting investors in an increasingly complex and evolving landscape.
