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An Ontario court dismissed an appeal of the Ontario Securities Commission’s (OSC’s) enforcement case against executives at failed hedge fund firm Quadrexx Hedge Capital Management Ltd. The case had resulted in over $5 million in sanctions after finding that the executives defrauded investors.

The Ontario Superior Court of Justice dismissed an appeal of the OSC’s ruling in 2017, which found that Quadrexx executives Miklos Nagy and Tony Sanfelice breached securities law, and the 2018 decision imposing sanctions against them.

“After an investigation and a hearing, the OSC found that Mr. Nagy and Mr. Sanfelice had perpetrated fraud in three separate transactions,” the Court said.

As a result, they were permanently banned, ordered to pay over $3 million in disgorgement, $1.2 million in penalties, and $550,000 in costs.

On appeal, Nagy and Sanfelice argued that the commission “erred in law and also denied them procedural fairness” the Court said. They also argued that the commission’s reasons in the case were inadequate.

However, the court sided with the OSC on the appeal.

“The commission did not ignore or misapprehend Mr. Nagy’s and Mr. Sanfelice’s version of the facts,” the Court said in the decision. “It rejected their evidence on key points and explained why it did so.”

The Court concluded that the OSC “carefully and thoroughly reviewed the evidence and made credibility and factual findings available on the record.”

“We see no palpable and overriding errors of fact,” the decision said.

The Court also ruled that the commission didn’t make errors of law, nor were the executives denied procedural fairness.

Finally, the court also found that the OSC’s reasons in the case were not inadequate.

“It is somewhat ironic and undermines their submission that the commission’s decisions were inadequate that Mr. Nagy and Mr. Sanfelice posit twenty-three errors that can meaningfully be reviewed before this court,” the Court said in its ruling.

“Apart from the irony, there is no merit to the argument that the commission’s reasons for decision were inadequate,” it said. “Mr. Nagy and Mr. Sanfelice know precisely how and why they found to have contravened the Securities Act.”

On the issue of sanctions, the Court said that Nagy and Sanfelice argued that the OSC’s decision should be set aside for alleged errors in its ruling on sanctions.

However, the Court again sided with the regulator.

“The sanctions decision is consistent with applicable principles on the basis of the facts as found in the merits decision,” the Court wrote in dismissing the appeal. “We see no reversible error.”