A Superior Court judge has granted an order to freeze and trace the assets and accounts of iPro Realty‘s co-founders and their related companies.
In a virtual court hearing on Monday afternoon, Justice William Black told the Real Estate Council of Ontario (RECO), which sought the emergency injunction, that he’ll endorse the order “within the next 24 hours.”
Litigator Andrew Max, representing iPro Realty co-founders Rui Alves and Fedele Colucci at the hearing, unsuccessfully argued that RECO’s application for an order to freeze and trace millions of dollars in missing funds breached an undertaking its registrar had signed with his clients on Aug. 8 to “not take any further administrative action” against them after they diverted $10.5 million from their brokerage’s trust accounts.
Justice Black allowed Alves and Colucci up to 24 hours to specify the amount of funds they need set aside to cover living expenses and legal fees.
The order will show where homebuyers’ deposits, agent commissions and trust funds actually went and make sure money isn’t hidden, depleted or moved out of jurisdiction.
The order states that anyone acting on behalf of, or with Alves, Colucci and their companies, are “restrained from directly or indirectly” selling, removing or transferring assets, whether or not they are solely or jointly owned.
The regulator’s lawyer, Arthur Hamilton of Dentons Canada, described as Colucci and Alves’ companies as their “alter egos.”
The companies listed as respondents in the court application include: iPro Realty Ltd. (the registered brokerage, which was shuttered by RECO on Aug. 19), iPro Realty Inc., IP Holding Realty Ltd., Hippo Holdings Corp., Sutton Group Professional Real Estate Services Inc., Alco Motors Ltd., and Alco Rent-A-Car Ltd.
Alves and/or Colucci are listed on provincial business registration records as directors for all of these companies.
When RECO first initiated its court action, the regulator issued a statement that said Alves, Colucci and their companies “orchestrated and executed a trust scheme involving the systematic diversion, removal and misuse of consumer deposit and agent commissions held in trust on their behalf.”
Justice Black’s order compels TD Canada Trust, Bank of Montreal, and National Bank to disclose records of all accounts, transactions and assets held by Alves, Colucci and their companies from January 2021 up to the date of the court order.
The undertaking RECO entered into with Alves and Colucci shows the men promised to give up their real estate registrations and sell their business for $3 million to a new company called iCloud before July 31. Money from that sale was to be returned to the brokerage’s trust accounts to offset the shortfall. In return, RECO would not charge the cofounders under its authority or “take any further administrative action against Colucci and Alves,” the undertaking said.
Max argued RECO knew of the financial shortfall for months prior to seeking the emergency injunction in September and agreed to not pursue further action. The injunction, he said, violates the terms of the undertaking.
After mounting public pressure and backlash in RECO’s handling of the scandal, the regulator sought an emergency injunction on Sept. 11.
Hamilton countered that the extent of the financial mismanagement and “trust scheme” was only revealed once RECO hired Dentons in late August to conduct the forensic audit.
It remains unclear why RECO allowed iPro to conduct more than $700 million in real-estate transactions for three months before notifying the public and shuttering the brokerage, which employed 2,400 agents across Greater Toronto.
Neither Alves nor Colucci have responded to requests for comment.
In late August, Ontario Provincial Police began investigating the matter, they confirmed to the Star.
A group of investors who say they are owed more than $4 million in high-interest loans from iPro’s co-founders have filed a separate court action seeking to freeze and trace assets and accounts of Alves, Colucci, their family members and companies. The group’s statement of claim, filed in Ontario’s Superior Court of Justice alleges some of the misappropriated trust funds paid for renovations to a waterfront property Alves’ wife Joselle owns in Simcoe County.
The allegations have not been proven in court.
Greg Weedon, a real estate litigation lawyer based in Toronto speaking generally about the case, said that even if the undertaking stated RECO would not discipline or charge Alves or Colucci, it does not prevent the regulator from pursuing “civil remedies” in the Superior Court to preserve trust funds.
Weedon represents a number of homeowners and agents affected by iPro Realty’s downfall.
“This hearing is a reminder that when trust accounts are misused, the law has powerful tools to protect consumers and restore confidence in the market.”
Weedon said the stakes are significant.
“We are not talking about a minor technical breach,” he said. “This involves millions of dollars in consumer deposits, registrants’ commissions, and trust funds. Those are the lifeblood of real estate transactions, and if they are not preserved, the fallout for consumers and the profession could be severe and permanent.”
