The British Columbia Securities Commission settled the case of a Canadian owned and operated Ponzi scheme which may have stolen up to $600,000 from investors in the traditional pay-off-investors-with-new-investors style of running the float.

The Commission alleges Wellspring Capital and Springpay Systems admitted to fraudulent behavior and agreed to have their funds frozen as proceeds of illegal activity. Neither company was a registered securities trader and both have been ordered to cease operations immediately.

Both companies and their heads are banned from trading in B.C. securities indefinitely at this point.

The fraud which has been uncovered seemingly took place in 2003 for a period of several months and affected a reported 38 British Columbians and 153 Canadians from outside the province for a total of just under $600,000 Canadian.

Roughly $440,000 remains in the accounts frozen and will, as available, likely be returned to the investors.

“Wellspring representatives told investors that the programs would generate investment returns through sophisticated investments, including overnight transactions with high interest rates. This was untrue. In fact, the companies made scheduled payments to the investors with subsequent investor funds, operating the programs as Ponzi schemes,” said the BCSC report.

The Canadian Securities Administrators also reported this week they would be unveiling a set of new tools for Canadians to identify and avoid fraud.

“The recent economic downturn has created an opportunity for fraud artists to capitalize on investor anxiety. The investor tools available on our updated CSA website are designed to help Canadians be vigilant against fraud artists,” says Jean St-Gelais, Chair of the CSA.

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