Janet Campbell's dream of homeownership turned into a nightmare when she discovered the $25,000 deposit she'd paid for a pre-construction home in the GTA was gone along with her trust in the system designed to protect her.
"This hurt me a lot because I believed him, and I trusted him to have a home, and it didn't happen," Campbell told CBC after learning she was one of dozens of victims in an alleged pre-construction deposit fraud that has cost would-be homeowners nearly $570,000.
Campbell's story isn't isolated. It's part of a troubling pattern that reached its crescendo with the iPRO Real Estate brokerage collapse - the largest real estate fraud in recent Canadian history. When RECO shut down all 17 iPRO locations in August 2025 due to an $8-10 million trust account shortfall, it exposed not just one bad actor, but fundamental flaws in a system where consumers like Campbell bear the ultimate risk while their life savings sit vulnerable in brokerage trust accounts with inadequate oversight.
The Real Estate Deposit Journey: Where Your Money Really Goes
To understand how consumers become victims, we need to follow the money. When you write that deposit cheque towards purchasing real estate, often tens of thousands of dollars representing months or years of savings, it doesn't go into a secure, monitored vault. Instead, it flows into a system that would make most people uncomfortable if they truly understood how it works.
In Ontario's competitive Real Estate market, buyers typically provide their deposit "herewith" with the offer itself, meaning you need to have the funds ready before you even know if your bid is accepted. That certified cheque then travels to the listing brokerage's Real Estate Trust Account - a bank account managed by the same company trying to close the deal and earn their commission.
Your deposit joins a pool of other buyers' money, overseen by just five RECO inspectors covering over 3,876 brokerages across the province, meaning 27% of brokerages have never received a full on-site inspection, and 35% haven't been inspected for over five years. This isn't necessarily a failure of will, but a reflection of resource constraints facing regulators in an increasingly fragmented and complex real estate landscape. When violations are found, enforcement options are limited by existing frameworks: average fines of $8,273 often reflect regulatory guidelines rather than deterrent effectiveness.
For new construction property deposits, the vulnerability multiplies. Unlike resale transactions that close within weeks, pre-construction deposits can sit in trust accounts for years while the building is constructed. In the Moiz Kunwar case, alleged victims paid deposits for homes in developments they were shown but never owned, with some buyers signing agreements as recently as 2024 despite years of red flags. The fraudster allegedly used a company name nearly identical to a legitimate developer, taking buyers to actual construction sites to view "their" future homes. Homes that belonged to other buyers who'd purchased through the real developer.
The Human Cost of System Failures
The iPRO case revealed how quickly consumer confidence can evaporate. Despite consumer deposit insurance providing up to $200,000 per claim, the 2,400 agents affected had to scramble to new brokerages while their clients faced uncertainty about their deposits and pending transactions. The psychological impact extends far beyond financial loss, and a big black mark was left across the real estate industry as headlines and social media posts quickly spread.
"I do want a home, but I'm scared, because now I don't know if it's going to be the same thing again. How do I believe somebody or trust somebody now?" Campbell's words capture the erosion of trust that fraud creates—not just in individual bad actors, but in the entire system. This trust deficit has real economic consequences, as potential buyers delay purchases or demand additional protections that slow transactions and increase costs.
The statistics paint a grim picture. Over the last decade, Ontario has seen fraud reports skyrocket from 31,407 cases in 2010 to 51,429 in 2021 - a 63% increase while only 13% of reported fraud cases were cleared by police in 2021. According to CPA Canada's 2020 Fraud Survey, nearly 450,000 Canadians fell victim to fraud in 2019, with real estate representing a growing portion of these losses.
The new construction sector faces particular challenges. Moiz Kunwar allegedly continued taking deposits as recently as last year, with over 40-50 additional alleged victims coming forward after initial reporting, demonstrating how pre-construction fraud can persist for years before discovery. Unlike resale transactions where ownership transfers quickly, new construction deposits create extended vulnerability periods where fraudsters can operate sophisticated schemes involving fake companies, forged documents, and convincing presentations at actual development sites.
Can Real Estate Deposits be Held By Lawyers? Why Lawyers Aren't the Silver Bullet
The obvious response that has been mentioned across social media has been: "Move deposits to lawyers they're more trustworthy and better regulated." But recent data suggests this solution isn't as simple as it appears. A sobering reality check comes from a 2017 CBC investigation that found concerning patterns in legal profession oversight.
Between 2010 and 2015, more than 200 Canadian lawyers misappropriated approximately $160 million from client trust funds, yet fewer than 10% faced criminal charges. The investigation revealed systemic challenges: law societies, like other professional regulators, face resource constraints in monitoring thousands of practitioners, disciplinary processes require extensive due process that can take years, and coordination with criminal authorities involves complex jurisdictional considerations.
The Real Estate fraud problem persists despite ongoing efforts. In 2024, the Cartel & Bui case highlighted these challenges when Toronto lawyers Singa Bui and Nicholas Cartel were charged with embezzling over $7 million from their real estate clients' trust accounts. Bui admitted to using client funds to pay for "luxurious vacations," fine dining, and "elegant furnishings and expensive art" starting as early as 2014. Court documents revealed the couple treated their firm's trust account as a "personal/business line-of-credit," leaving at least 26 homebuyers and sellers without their money.
In Ontario specifically, law societies face the same resource and complexity challenges affecting other professional regulators. The complaint-driven model that most regulatory bodies rely on - waiting for issues to be reported before investigating inevitably creates detection delays. With thousands of practitioners handling millions of transactions, proactive monitoring of every trust account would require resources that current regulatory frameworks don't provide.
Recent regulatory changes have attempted to address these structural challenges. British Columbia implemented Rule 3-58.1 in 2019, creating clearer boundaries around what funds can enter lawyer trust accounts, while other provinces have strengthened reporting requirements. However, these remain reactive measures within existing oversight models rather than fundamental system redesigns.
The legal profession's own challenges with trust account management and enforcement demonstrate that simply shifting deposits from real estate brokerages to lawyers doesn't eliminate systemic risk it transfers oversight responsibilities to a different regulator facing similar resource constraints and structural limitations in a fragmented professional landscape.
Australia's PEXA Model: A Proven Alternative?
While Canada grapples with trust account vulnerabilities across multiple professions, Australia has demonstrated that a fundamentally different approach can virtually eliminate deposit fraud while improving efficiency. Australia's PEXA system processes 89% of all property transactions with over $3.5 billion in daily volume, achieving zero claims paid for electronic lodgement fraud since 2013—compared to $9.4 million in fraud losses from paper-based systems during the same period.
PEXA's success stems from removing human intermediaries from deposit handling through comprehensive digital infrastructure. The platform provides $2 million guarantee protection for secure communications and residential seller protections, while technical safeguards block over 1.4 million malicious intrusion attempts annually. Multi-factor authentication, digital certificates, real-time monitoring, and integration with central banking systems create multiple layers of security that individual trust accounts cannot match.
The efficiency gains are equally impressive: same-day settlement capability has replaced weeks-long traditional processes, while integrated AML compliance tools and automated reporting significantly reduce regulatory burden. PEXA's expansion to the UK market demonstrates the platform's adaptability to different legal systems, with over 85% of code reusable for other Torrens Title jurisdictions.
For Canadian consumers like Janet Campbell, PEXA's model offers something transformative: the removal of deposit vulnerability periods. Instead of deposits sitting in individual brokerage or lawyer trust accounts for weeks, months, or years, funds would be held in a centralized, regulated, monitored system with multiple safeguards and institutional backing.
The Anti Money Laundering (AML) Imperative: A Regulatory Push for Change
Beyond consumer protection, mounting anti-money laundering (AML) pressures create additional momentum for centralized platforms. Despite FINTRAC requirements for client identification and suspicious transaction reporting, the real estate sector filed only 127 suspicious transaction reports over a 10-year period covering over $9 trillion in mortgage credits—a reporting rate suggesting massive underdetection of suspicious activity.
Key vulnerabilities include the lawyer exemption gap, where legal practitioners remain exempt from PCMLTFA reporting requirements due to solicitor-client privilege, and beneficial ownership opacity, where properties can be owned through numbered companies and trusts without public disclosure. Only British Columbia has implemented a public beneficial ownership registry, while federal promises continue to face delays.
However, FINTRAC has dramatically increased enforcement, issuing $26.1 million in violations for 2023-24 with proposed 40-fold penalty increases. Recent regulatory amendments have expanded AML coverage and strengthened beneficial ownership requirements, while Canada prepares for its 2025-2026 FATF mutual evaluation with real estate sector oversight as a key focus area.
A centralized settlement platform could address multiple AML challenges simultaneously: automated compliance monitoring would detect suspicious patterns across the entire market rather than relying on individual practitioners, integrated reporting would eliminate gaps between different regulatory regimes, and real-time transaction tracking would provide unprecedented visibility into fund flows.
Canada needs a Centralized Trust Infrastructure
The convergence of consumer protection challenges, professional oversight constraints, and regulatory modernization efforts creates a unique opportunity to reimagine Canadian real estate settlement infrastructure. Rather than asking different regulatory bodies to do more with existing resources hoping each can better monitor thousands of individual trust accounts across fragmented professional landscapes, Canada could implement a centralized platform that fundamentally changes the oversight equation.
Such a system would operate as a regulated utility, similar to payment processing networks or securities clearing systems. Deposits would flow directly from buyers to the centralized platform, where they'd be held in segregated accounts with institutional-grade security, real-time monitoring, and comprehensive insurance coverage. Smart contracts could automate release conditions, eliminating the discretionary control that enables fraud while ensuring funds move only when legitimate closing conditions are met.
For consumers, this means deposits would be protected by multiple layers of institutional safeguards rather than relying on individual practitioners' honesty and competence. For regulators, it provides unprecedented visibility into market activity and automated compliance monitoring transforming oversight from a resource-intensive, reactive audit model to a proactive, technology-enabled supervision framework. For the industry, it reduces liability exposure while streamlining operations.
The technology exists PEXA has proven the model works at scale. The regulatory environment is increasingly favorable, with AML enforcement creating pressure for systemic reform. The question isn't whether such a system is possible, but whether Canadian policymakers will act before the next major fraud case emerges.
A Trust Revolution Waiting to Happen
Janet Campbell's story and the stories of thousands of other fraud victims illustrate what happens when deposit protection systems fail. The iPRO collapse, lawyer trust account violations, and ongoing new construction fraud cases all point to the same fundamental problem: individual trust accounts, regardless of who manages them, create unnecessary vulnerability in an era when technology can provide better alternatives.
As insurance investigator Brian King notes, total title fraud represents "one of the frauds with the lowest risks and the highest rewards" for criminals, partly because the current system creates multiple attack vectors and limited oversight. A centralized platform would eliminate most of these vulnerabilities while providing better service for legitimate participants.
The choice facing Canada isn't between incremental reforms to existing oversight systems versus radical change. It's between continuing to ask under-resourced regulators to monitor an increasingly complex and fragmented landscape through traditional audit-and-response models, or implementing proven technology that transforms the entire oversight paradigm from reactive to proactive.
For consumers like Campbell who've lost faith in the system, a centralized trusted platform offers something invaluable: the restoration of confidence that their deposits are truly safe. In a market where buyer trust drives transaction volume and economic activity, that confidence has real value for everyone involved.
The technology is ready. Regulatory modernization momentum exists across multiple sectors. The only question is whether Canada will lead in building the next generation of real estate settlement infrastructure that empowers regulators with better tools while putting consumer protection first.
The time for trust account roulette is over. The time for trusted platforms has begun.
Protecting Yourself in the Current System
While Canada works toward systemic reform, consumers and real estate professionals must navigate existing vulnerabilities with heightened vigilance.
For homebuyers: Verify brokerage registration through RECO's public database, confirm deposit insurance coverage limits, demand written receipts for all deposit payments, and consider purchasing title insurance which typically costs $800-1,200 for lifetime protection.
For new construction purchases: Independently verify the developer's legitimacy through provincial corporate registries, visit official sales centers rather than relying on third-party representatives, and never pay deposits to companies with similar but not identical names to known developers.
For real estate professionals: implement enhanced due diligence on new clients, verify identities through multiple government-issued documents, maintain detailed trust account records with regular reconciliation, and report suspicious activity promptly to both your regulator and FINTRAC. Most importantly, if a deal seems too good to be true or involves unusual payment arrangements, step back and seek guidance from your regulatory body - protecting client funds is worth more than any commission.
Unlock Your Seamless Closing Experience
Your Journey to a Worry-Free Closing Starts Here!
