David Michael Michaels guilty of $65M investment fraud

The B.C. Securities Commission has convicted Victoria-area financial adviser David Michael Michaels of perpetrating a massive fraud that cost hundreds of investors a total of $65 million.

With a weekly CFAX radio show to trumpet his claims, Michaels drew elderly investors like lambs to the slaughter.

"We are generating over $67,000 in monthly income for our clients," he boasted on his show. "For me and my clients, give me the most rate of return for the least amount of risk."

But B.C. Securities Commission head Teresa Mitchell-Banks said Michaels's "entire business was a fraud."

The commission found that between 2007 and 2010 the Cowichan Bay, B.C., resident acted as an investment adviser without being registered as one.

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The securities commission said Michaels used a weekly radio infomercial on CFAX in Victoria to promote his business, telling potential investors he gave up his registration as a stockbroker because he had lost faith in the market and resigned when he foresaw the impending market crash.

According to the securities commission this was a fraudulent claim, because the former mutual fund salesman actually lost his licence in 2006 when he was under investigation by the Investment Dealers Association of Canada for "a number of off-book transactions with clients."

It found Michaels guilty of improperly advising 484 clients to buy $65 million worth of market-exempt securities without being registered.

Michaels earned $5.8M in commissions

It also found Michaels pocketed $5.8 million in commissions for himself by talking seniors into buying the securities by taking out loans on their homes. The average age of his victims was 72.

"They had a relationship of trust with him when he was registered and he used that relationship of trust to keep selling these high-risk exempt market securities."

In addition, the BCSC said that "virtually all of the roughly $65 million invested by Michaels's clients is now worthless, leaving many of them financially destitute while their home equity loans remain."

Helen Dubas was one of the hundreds of investors who trusted Michaels and took out a line of credit against her house to invest with him.

"David advised that it would be a really good deal. I took a line of credit against my house for that $100,000 … and that's $100,000 that I'm not going to be able to pay off in my lifetime."

"He gave me brochures that said guaranteed. That even if the thing went down I'd be guaranteed my money back, which of course wasn't true at all," she said.

The Vancouver Island senior said she and her husband had a long relationship with Michaels.

"My husband had real faith in David, because he really sold us on that we were getting a good deal with him, right. He would be so disappointed with … he's passed away, but he would have been so disappointed in David," said Dubas.

Other investors told CBC News that Michaels was personable and knowledgeable and promised them their money was being put into low-risk funds including an oil company and a private seniors' care centre.

The securities commission's Mitchell-Banks said penalties could include a lifetime market ban and millions in fines,

No criminal charges have been laid against Michaels in relation to the investigation.