Music grant body alleges ‘cyberthief’ stole $9.8-million in federal money from Scotiabank account | Canada Voices

Arts-grant provider FACTOR says nearly $10-million in federal money destined for the music industry was stolen from its Bank of Nova Scotia BNS-T account last spring – and is asking an Ontario court to direct the bank and a customer involved with the transaction to work to recover the funds.

A massive chunk of 2024 funding was allegedly taken on June 12, about a week after the Department of Canadian Heritage deposited $14.3-million into the Scotiabank account of the Foundation Assisting Canadian Talent on Recordings, according to documents filed with the Ontario Superior Court of Justice. FACTOR moved $5-million to a short-term investment account but said a “cyberthief” gained access to its Scotiabank account and transferred $9.8-million to a different account with the same bank belonging to a numbered company.

FACTOR distributes funding from Ottawa and private radio broadcasters to the English side of the music industry. Last year, it handed out more than $51-million in grants and emergency supports.

“This isn’t just about numbers in a bank account – this is about real people, musicians, producers, managers, record labels, crew who work at venues,” said FACTOR board member Tegan Quin, one-half of the Juno Award-winning duo Tegan and Sara, who benefited from its grants early in their career. “The idea that this could affect the ability to fund future projects is deeply unsettling.”

The filings allege that the sole shareholder of the numbered company was a Quebec man named James Campagna, and that just minutes after the transfer to his Scotiabank account, he transferred $9.4-million to an ATB Financial account belonging to the cryptocurrency platform VirgoCX Direct. The funds were then converted into the USDC cryptocurrency and shifted between various wallets.

The Toronto Police Service said that it is investigating the case, but FACTOR said that, as of late Friday, it had not been assigned an investigator.

The organization said it had never before conducted a transfer worth more than $1-million.

Mr. Campagna said in a filing that he and his company “vehemently” deny being behind the alleged theft. They wrote that an unknown user using FACTOR’s account contacted a company affiliate in the days preceding the alleged theft with an order to buy 2,800 bitcoin mining machines and processed a transaction. He and the company, the filing says, “are not in the business of, or required to, look into the type of company investing in the machines.”

The bank was able to recover the $379,000 that the filings allege remained in Mr. Campagna’s account. He wrote in his court filing that this was supposed to be his sales margin for the bitcoin-mining machine transaction.

The court documents illustrate a messy back-and-forth over who, exactly, should be held responsible for someone being able to access FACTOR’s bank account and allegedly make nearly $10-million in taxpayer funds disappear.

The saga began, the filing says, when a new user was added to FACTOR’s digital banking account in January, 2024. 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. The filing alleges that Scotiabank did not make FACTOR aware of the new user. Until then, FACTOR’s accountant Marina Anianova was the only person who officially had access to Scotiabank digital login credentials.

FACTOR says that four independent investigations found “no evidence” that the alleged theft was caused by a vulnerability, action or failure on its end.

Scotiabank’s lawyers referred to their own legal filing when asked about the case. In it, they say the bank agrees with a Deloitte digital forensics expert that “the most likely explanation as to how the fraudster gained access to Ms. Anianova’s credentials is that Ms. Anianova was either involved in the fraud or unwittingly gave up her credentials as part of a phishing, social engineering, or malware attack.”

FACTOR’s chief executive Meg Symsyk responded to these allegations in an October affidavit. She called them “pure speculation” and said they “do not account for how the fraudster could have accessed the account without a digital token, the whole purpose of which was to protect the account from unauthorized access.”

Ms. Symsyk said in a subsequent interview that the allegedly stolen money was destined for a wide range of programs, including supports for live performances, music videos and entrepreneurship. She added that the Department of Canadian Heritage is not backstopping the lost funds.

Her organization’s legal application cites a guarantee on the bank’s website, which says that in cases of direct financial losses due to unauthorized activity, the bank would “fully reimburse you, provided you’ve met all of your security responsibilities as outlined in the terms of our customer agreements.”

The bank disagrees in its filing that the guarantee applies in this situation, and says more evidence is needed – particularly from FACTOR – for experts or a court to figure out how the account was compromised.

This has led to a subsequent dispute about how to proceed with the case.

FACTOR is asking for a primarily document-based process that it hopes would be less costly and time-consuming than a trial and is insisting that Scotiabank is not providing enough documentation to move forward.

Scotiabank says in its own filing that it “has responded to almost every request FACTOR has made to date.” Both the bank and Mr. Campagna are pushing for a full trial, which would include a formal discovery process to disclose all relevant communications. A judge is scheduled to hear arguments about how to proceed on Friday.

FACTOR also included VirgoCX, the cryptocurrency platform, in its application, as it seeks documentation about the alleged theft and to determine what steps the platform has taken to recover its funds. VirgoCX’s lawyer said in an e-mail that it “remains dedicated to transparency and compliance. We intend to cooperate with investigations so that the perpetrators of this fraud may be brought to justice.”