A third mortgage brokerage firm affiliated with troubled Fortress Real Developments Inc. has gone out of business, shutting down the last of the network that helped Fortress raise $920-million in syndicated mortgage financing from regular investors.
FFM Capital Inc., based in Vaughan, Ont., north of Toronto, filed for bankruptcy on Dec. 4, according to federal bankruptcy records. The company said it had liabilities of $910,935 and no assets at the time of the filing. A first meeting of creditors is set for Friday, according to the filing.
Krish Kochhar and Tony Mazzoli – both registered mortgage brokers at FFM and the company’s two shareholders, according to incorporation documents – did not respond Wednesday to an e-mailed request for comment. Calls to FFM’s phone number go to a voice mail box, which is full and not accepting new messages. The company has also shut down its website.
Investigation: Inside the fall of Fortress
FFM was one of three affiliated mortgage brokerage firms that raised funds from the public to finance new real estate development projects co-ordinated by Fortress, a consultant and real estate developer based in Richmond Hill, Ont.
Between 2008 and 2017, Fortress raised about $920-million from 14,000 regular investors to fund projects, with most of that money coming in through three affiliated mortgage brokerages: FFM, FDS Broker Services Inc. and FMP Mortgage Investments Inc.
The three firms, all located in the Toronto area, dealt directly with the public, helping promote syndicated mortgages for Fortress projects. (Syndicated mortgages are private mortgage loans raised from a group of investors, typically to finance new development projects.)
FDS and FMP went out of business earlier this year. In an April letter to clients, FMP blamed its financial problems on developments that had “negatively impacted our business,” including an RCMP search that targeted Fortress’s offices as well as those of the three affiliated firms. The RCMP have said they are investigating syndicated mortgage fraud, but have laid no charges to date.
Many investors in Fortress projects have complained they were encouraged by mortgage brokers to invest in syndicated mortgages even though they were far too risky for their means. Some have seen their interest payments suspended and have received no repayment of their principal after their projects were halted or fell far behind schedule. Senior lenders on many projects, whose claims rank ahead of the syndicated lenders', have moved to seize projects or push them into receivership.
FFM, FMP and FDS reached settlement agreements this past February with Ontario’s mortgage regulator, the Financial Services Commission of Ontario (FSCO), which required them to pay a penalty of $235,000 each to FSCO. The firms’ principal brokers also lost their mortgage brokerage licences under the settlement deals, but all three firms were allowed to name new principal brokers and continue to operate, at least initially before later closing their doors.
FFM was founded in 2012, originally as Fortress Financial Management Inc., but it changed its name to FFM in 2013. According to its 2016 annual information return filed with FSCO, FFM raised $33.2-million from investors in 2016 for 39 syndicated mortgage projects.
Mr. Mazzoli, one of FFM’s founders, previously worked at Building & Development Mortgages Canada Inc. (BDMC), which was Fortress’s in-house mortgage brokerage firm, before moving over to FFM. BDMC, which was located in the same building as Fortress in Richmond Hill, helped developers arrange financing through the three affiliated brokerage firms.
BDMC’s owner, Ildina Galati, helped form the three affiliated firms, which were set up under her direction, FSCO said in a court filing. Several former BDMC or Fortress employees became owners or principal brokers at the three firms when they were created.