Canada has also had its share of frauds and financial failures, including the high-profile collapse of Portus Alternative Asset Management Inc., a Toronto-based hedge fund founded by Boaz Manor and Michael Mendelson. Portus operated from 2003 to 2005, managing over US$800 million in assets for approximately 26,000 mostly retail investors in Ontario and across Canada. The fund promised low-risk returns through investments in principal-protected notes (PPNs) issued mainly by European banks such as Société Générale and by Manulife in Canada. Manor, an Israeli–Canadian entrepreneur aged in his late twenties at the time, co-founded Portus in 2003 after working in finance and real estate. The fund attracted investors through aggressive marketing, guaranteeing 8–15% annual returns with no principal risk.
In 2005, the Ontario Securities Commission (OSC) uncovered serious violations, including self-dealing, improper asset allocation, and failure to maintain proper records. The OSC immediately froze Portus’s assets, halted redemptions, and placed the firm into receivership. The Royal Canadian Mounted Police launched a criminal investigation.
The fund marketed its PPNs to investors as low-risk investments, offering guaranteed principal repayment with returns tied to underlying investments such as hedge fund portfolios or fixed-income products. However, the OSC investigation revealed that the structure of these notes was misrepresented. Only around 5% of the principal was actually in a principal-protected debt instrument. Approximately 95% of Portus’s assets were funneled into high-risk, unregulated investments, including loans to related parties, not the conservative fixed-income products the fund had described—in breach of its fiduciary duties and Ontario’s securities laws.
In the lead-up to the collapse, Manor diverted approximately US$17.6 million in investor funds to offshore entities. A significant portion, around US$8.8 million, was used to purchase loose diamonds in Hong Kong, including a 22-carat stone valued at US$4.5 million. These gems were collected by Manor’s then-sister-in-law and shipped to Israel. Manor claimed he never physically received them and accused an Israeli intermediary, Yitzhak Toib, of withholding them. The diamonds were never recovered by court-appointed receivers (KPMG). The OSC later ordered Manor to disgorge this exact amount as restitution.
Manor fled to Tel Aviv shortly after the OSC’s 2005 intervention, using his dual citizenship to evade immediate arrest. Israeli courts initially resisted extradition requests from Canada, citing jurisdictional issues, but ordered him in late 2005 to surrender US$11.6 million in diamonds and cash. Manor returned to Canada voluntarily in 2007 after negotiations, avoiding a prolonged extradition battle.
In 2011, Manor pleaded guilty in Ontario Superior Court to one count of breach of trust and one count of disobeying a court order (related to asset transfers). He was sentenced to four years in prison (serving about two years before parole). Co-founder Mendelson also pleaded guilty to fraud and was banned from the industry. In 2012, the OSC imposed a lifetime ban on Manor from trading securities (except in his retirement savings plan), acting as a director/officer of public companies, or advising on investments. He was ordered to pay US$8.8 million in disgorgement for the missing diamonds, but he declared bankruptcy and didn’t comply.
Despite the scandal, investors recovered about 97% of their principal (over US$780 million) through guarantees from French bank Société Générale and Manulife, which had backed many of Portus’s products. The unrecovered US$20+ million included the diamonds and other misappropriated funds.
Sources:
No author listed (2005), “$246M of Investors’ Money in Portus Went Offshore: Report,” CBC News, March 19: https://www.cbc.ca/news/business/246m-of-investors-money-in-portus-went…
No author listed (2005), “Ex-Israeli Flees Canada Home as Hedge Fund Collapses,” Haaretz, April 11: https://www.haaretz.com/2005-04-11/ty-article/ex-israeli-flees-canada-h…
No author listed (2005), “Portus Co-Founder’s Hand in ‘Cookie Jar’,” The Globe and Mail, June 24: https://www.theglobeandmail.com/report-on-business/portus-co-founders-h…
No author listed (2005), “Portus Funds Spent on Gems, Court Told,” The Globe and Mail, October 11: https://www.theglobeandmail.com/report-on-business/portus-funds-spent-on-gems-court-told/article20424664/