Music-funding provider FACTOR’s quest to recover nearly $10-million it says was stolen from its Bank of Nova Scotia account can proceed with an expedited court process without a formal trial, a judge said.
The Foundation Assisting Canadian Talent on Recordings filed an application in July against Scotiabank and the cryptocurrency platform VirgoCX seeking to recover $9.8-million that allegedly disappeared from its account in June. It later added one of the bank’s clients, whose account allegedly briefly received the missing funds before transferring them to VirgoCX, to the application.
Much of the English-Canadian music industry depends on FACTOR to cover costs – not just musicians seeking financial help to record, market and tour their music, but also artist managers, music publishers, record labels, music distributors and event organizers.
The case will ultimately determine which organization is responsible for the security breach that led to the alleged theft, and whether FACTOR should be reimbursed by the bank for the money, which court filings say has since been shifted among numerous crypto wallets. But the parties have been mired in procedural delays since the summer, arguing about producing documents for the court and whether the case should take the form of a quicker, documentation-oriented “application” process or a longer, more traditional trial.
FACTOR, a non-profit with limited means, has been pushing for the quicker application process, and for both Scotiabank and its client whose account initially received the money to produce more documents. Justice William Black, of the Ontario Superior Court of Justice Commercial List, granted its wish in a decision issued this week, but warned that it could be a “Pyrrhic victory.”
Once that documentation arrives, Justice Black clarified, if there are “significant factual matters in dispute,” he may need to revisit the question of converting the application to a full legal action requiring a trial. He set a Jan. 10 deadline for Scotiabank and its client to produce all relevant documentation, and a Jan. 31 deadline for any cross-examinations.
Meg Symsyk, FACTOR’s president and chief executive, said in an e-mail Tuesday that she welcomed the decision, calling it “an important step in resolving this matter.” She added: “We will continue to vigorously pursue the return of the money that was stolen from our Scotiabank account, and ensuring it goes to the deserving Canadian artists for whom it is intended.”
The counsel for both Scotiabank and for James Campagna – the sole shareholder of a numbered company that, filings say, owns the bank account to which FACTOR’s money was first transferred – said in court last month that they hoped to file cross-claims against other parties. Justice Black said in his decision that “the assertion of cross-claims, depending on their content, may ultimately be another factor favouring conversion” to a full trial process.
Though Justice Black said VirgoCX produced documentation for the case “swiftly and comprehensively,” he asked Scotiabank to provide information about its internal alert system, which FACTOR has chastised, to the granting organization “in a way that ensures the confidentiality of the information.”
The judge also found that Mr. Campagna and his company’s “response to the imperative to produce relevant materials is woefully and deliberately inadequate.”
Scotiabank vice-president of communications Heather Armstrong did not comment directly when asked about the judge’s decision this week. In an e-mail, she said that “if clients suffer direct financial losses and Scotiabank is accountable under the terms of our client agreements, we will reimburse for those losses. In determining who is responsible for the loss, we require client co-operation.”
Lawyers for Mr. Campagna and his company did not immediately respond to comment requests Tuesday. While FACTOR is not seeking financial relief from VirgoCX, its lawyer, Andrew Jia, said the company “will continue to co-operate with the court process to ensure justice is served.”
FACTOR receives its funding from both the Department of Canadian Heritage’s Canada Music Fund and from private radio broadcasters. In its most recent annual report, from 2022-23, it said it distributed more than $51-million to the music industry.
Court filings show that a major chunk of 2024-25 FACTOR funding was allegedly taken on June 12, about a week after Heritage deposited $14.3-million into its Scotiabank account. The non-profit moved $5-million to a short-term investment account, but said a “cyberthief” gained access to the account and transferred $9.8-million to a different account with the same bank belonging to Mr. Campagna’s numbered company.
The saga began when a new user was added to FACTOR’s digital banking account in January, 2024, the filings show. The user registered with a third-party e-mail address bearing the name Sara Stasiuk, the grant provider’s former part-time chief financial officer. FACTOR’s filing alleges that Scotiabank did not make the non-profit aware of the new user. Until then, FACTOR accountant Marina Anianova was the only person who officially had access to the Scotiabank digital login credentials.
Just minutes after the transfer to Mr. Campagna’s company’s Scotiabank account, he transferred $9.4-million to an ATB Financial account belonging to VirgoCX, the filings add. The funds were then converted into the USDC cryptocurrency and shifted between various wallets.
Scotiabank said it recovered the remaining $379,000 that was left in Mr. Campagna’s account and returned it to FACTOR; Mr. Campagna’s filings said that the transaction was for the sale of 2,800 bitcoin-mining machines, and that the remaining money was his sales margin.