How former child TV star Robby Clark’s crumbling real estate empire has left hundreds of private lenders on the hook

In late February, mortgage broker Claire Drage, founder and CEO of Hamilton-based Windrose Group, sent a frantic e-mail to hundreds of Canadians who had invested with her company. Their money had been lent to a small collection of businesses that bought and renovated homes and, in total, Ms. Drage’s company had funnelled more than $135-million in mortgages and other loans to this coterie of house flippers. Now, she was letting everyone know that those loans and that business had gone badly wrong.

Her investors, it turned out, were caught in what would become one of the largest real estate lending insolvencies in Canadian history.

Ms. Drage’s missive came less than a month after her largest borrower, a syndicate of companies, had declared itself insolvent and sought court protection to reorganize. The syndicate was run by a former actor named Robby Clark – best known for a 2000 YTV kid’s show – who has recently confirmed he was 50-per-cent owner of all 11 companies named in the insolvency. The firms carried fanciful sobriquets that referenced movies and pop culture such as Balboa Inc., Happy Gilmore Inc., The Pink Flamingo Inc., and Horses In The Back Inc. But given that these firms were like Russian nesting dolls and operated as one entity, the syndicate was shortened in court filings to simply “Balboa et al.”

Ms. Drage now says she didn’t know how central Mr. Clark’s role was in running all the companies, and that she never loaned any money directly to him. Nevertheless, her financing allowed Mr. Clark to risk almost none of his own money as he went on a reckless buying spree that amassed more than 600 properties across Ontario.

As she prepared to send the e-mail to investors, Balboa’s collapse was threatening to spread financial ruin to the hundreds of small lenders across the province who had invested with Ms. Drage.

Her e-mails to lenders were normally chipper, but the February message was different. Ms. Drage was asking for patience – and for investors to keep quiet. “There will be a time, once your investment, and those of your friends, family and referrals, are returned, that we can all scream, shout and rant,” she wrote. She then warned: “We can’t let it get out of control.”

In retrospect, it was already out of control. Ms. Drage had exposed her company and her clients to a mountain of bad debt. While the insolvency of Mr. Clark’s companies came first, Ms. Drage claimed several other borrowers soon stopped making loan payments to her clients as well. And the overall impact has been devastating. Court filings related to the insolvency hearings contain sample loan agreements suggesting individuals loaned between $50,000 and $1.6-million to Mr. Clark’s companies. In one case, an extended family put up roughly $1.535-million, spread across 11 promissory notes of between $35,000 and $450,000.

“With depleted savings and no foreseeable income, we face the looming threat of losing our home,” wrote one unnamed lender in a March 29 affidavit released by the secured lender’s representative legal counsel, George Benchetrit of Chaitons LLP.

Many times, Ms. Drage was just an intermediary who collected a fee for connecting an individual lender who agreed to a mortgage directly with one of Mr. Clark’s companies. In other instances, a company controlled by Ms. Drage borrowed money from individuals and then lent it to Balboa.

After she hit send on the e-mail, lawsuits flooded in and her employees fled or were fired. She closed her business and abandoned her mortgage licence in March; she declared bankruptcy in April. Investigations by provincial regulators are ongoing but no criminal charges have been filed. None of the allegations of wrongdoing made in court filings have been proven in court.

Through it all, Ms. Drage has declined to respond to questions from The Globe and Mail about her conduct. Mr. Clark has been more forthcoming. In his first media interview since his business unravelled, he described some of what went wrong and how he ended up owing far more money than the properties appear to be worth, chalking up the entire affair as a “learning experience.”

He also claims that he still intends to pay back all the lenders. However, a combination of published reports, social-media posts and interviews with former colleagues offer a window into how Ms. Drage put the financial futures of more than 1,000 lenders into the hands of a company that didn’t keep business ledgers, blew money on lavish personal expenses and continued to renew loans on homes that been sold, set on fire or literally demolished.

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Originally from the United Kingdom, Ms. Drage, 57, in court documents has called herself “street smart” and said she sold time-share vacation properties in the Canary Islands before moving to Calgary in 1998. There, official records suggest she was registered as a mortgage associate in Alberta from 2001 to 2006. But Ms. Drage’s career took a big leap when she was hired in 2005 to work with the Canadian arm of the U.S. lender General Motors Acceptance Corporation, better known as GMAC.

“I was looking for people that knew how to develop relationships, take brokers and turn them into advocates for GMAC,” said Chris Alexander, then the vice-president of business development.

GMAC would fete mortgage agents with such pricey incentive trips as 10 days at the Hôtel de Paris and Casino de Monaco in Monte Carlo, or private jet trips to The Masters in Augusta, Ga.

GMAC promoted itself as an alternative to traditional lenders in both the Canadian and U.S. markets, and it pioneered some types of high-risk sub-prime residential mortgages in Canada.

”They were basically approving everything that was breathing,” said Martin Villeneuve, a former compliance officer at GMAC Canada who called the company the Wild West of mortgages.

When the mortgage market began to crash in 2007, GMAC’s sub-prime loans or “toxic assets” were one of the key causes of the global financial crisis of 2008. GMAC recorded US$2.8-billion in losses in 2007 and ultimately received a US$5-billion bailout from the U.S. Treasury Department to avoid collapse.

In Canada, Ms. Drage moved to Ontario and took over as interim vice-president of business development after Mr. Alexander said he was “packaged out” in 2006. GMAC Canada was slowly dismantled, and effectively shuttered by 2011.

As GMAC was dying, Ms. Drage jumped ship and became an independent mortgage agent working out of the basement of her Guelph, Ont.-area home for mortgage broker brand Dominion Lending Centre (DLC). Former colleagues recall that her son Sam would help out with the home office’s IT support.

Things may have looked dark for a new mortgage agent in the aftermath of a global financial crisis, but a 15-year bull market was about to begin in Canadian real estate. The total outstanding value of the Canadian residential mortgage market was about $518-billion in 2004 according to the CMHC; by 2023, it was approaching $2-trillion.

Mortgage brokers exist to help borrowers find the best deals between different lenders: big banks, smaller credit unions, specialty mortgage investment companies and even private individuals. Even though 90 per cent of the market still belongs to the big banks and credit unions, that leaves tens of billions of dollars available to other types of lending.

In the post-2008 world virtually no sub-prime loans were being offered by financial institutions, but one method for high-risk borrowers to obtain credit was through a private mortgage with an individual investor charging higher interest. Trevor Daly, a long-time mortgage broker and administrator under the DLC banner and Ms. Drage’s former boss, doesn’t recall her doing a lot of private mortgages, in part because at the time he discouraged the practice. “Our philosophy was people need private financing from time to time but it’s a Band-Aid solution,” he said.

Private mortgage lending with property speculators is risky by its nature: Most of the borrowers have too much debt and not enough income to qualify for loans from banks, which nowadays must abide by federally mandated lending stress tests. A 2020 CMHC study about Ontario’s alternative and private lenders – which can ignore stress tests – found their market share had risen to 15 per cent of the market and that 28 per cent of their borrowers default. Compare that to the typical bank mortgage default rate of less than 0.40 per cent. Of all the foreclosure or power of sales in Ontario, 80 per cent of them were filed by alternative lenders.

By 2013 Ms. Drage left DLC and started her own mortgage team under brokerage brand Mortgage Alliance. She later rebranded her organization as the Windrose Group.

Ms. Drage had also made a name for herself speaking at panels about real estate investing and providing online seminars on private mortgage financing. It was one of these networking events that forged the link to Robby Clark.

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Born in Chicago and raised in Oakville, Ont., Mr. Clark’s first success had been starring in the 2000-02 Canadian children’s TV show The Zack Files, a YTV-created spoof of the Fox hit The X-Files.

“So I’d done very well for a Canadian actor – you’re not quite as well paid as on the U.S. side – but I had no financial education. I just basically wound up spending all my money by the time I was 21 years old,” he said in an interview with The Globe. “And then from there, I was really kind of lost, not sure what I wanted to do. I started serving tables at restaurants.”

Mr. Clark said he began reading and listening to a lot of personal finance audio books and was particularly drawn to Robert Kiyosaki, author of the Rich Dad, Poor Dad series. Using those books as a guide, Mr. Clark said he acquired his first property in 2013 – a duplex in St. Catharines, Ont. – that he renovated and sold for a profit.

He was performing a form of small-scale real estate investing called “BRRRR”: buy, renovate, rent, refinance and repeat. When rates were low and real estate prices were rising rapidly it was easy to get mortgages if you wanted to do BRRRR investing. One chokepoint is the down payment: you needed tens or hundreds of thousands of dollars in liquid cash – and that cash might be stuck in the property until you’re ready to refinance or sell it.

According to Mr. Clark, it was Ms. Drage – through a company she owned called Lion’s Share Group Inc. – that offered a way to break the down-payment bottleneck. The two were introduced in 2018 by Dylan Suitor, a realtor who Ms. Drage had known since 2017 from her speaking events. Her solution: What if you didn’t have to use any of your own cash? What if you used 100-per-cent debt?

“It was brought to us as a solution – especially for people who buy, renovate and create value – as something that can help scale the portfolio,” said Mr. Clark.

Mortgage lenders – private or not – are typically uncomfortable lending 100 per cent of the cost of a home to a buyer. What Ms. Drage and Lion’s Share allowed for was to borrow the difference between what a private mortgage lender would be willing to offer, and what Mr. Clark needed to buy the next home, through what’s known as a promissory note.

“Prom notes” are a common tool among BRRRR investors. They are regulated securities – like a stock or a bond – and several features of Canadian law cause them to exist in a grey area of lax oversight and permissive regulations. “These are high risk or speculative investments,” said Harold Geller, a lawyer who focuses on litigation around investment losses.

Ms. Drage said in a deposition that she extended her first prom-note loan with her own funds in 2016, and according to lenders she would refer to them as a “legal IOU” and structured the contracts similar to a mortgage loan. But unlike a bank or private mortgage, a prom note is not automatically registered against a property by a land registry or title office, meaning that if Mr. Suitor borrowed a prom note to buy a particular house there was no legal guarantee that if they defaulted, the lender could attach a lien to any asset and get their money back as a proceed of its sale.

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Mr. Geller has decades of experience with lenders losing money via prom-note schemes, because without collateral or a property asset to back them up the notes are literally just a promise to pay. “In effect it’s a guarantee of nothing, of air. That is akin to a pyramid scheme: it all works until it doesn’t,” he said.

In an interview, Mr. Clark offered a scenario for how a deal would be structured. If a property cost $100,000, he’d obtain an $80,000 mortgage from a private investor. Then, they would find another investor to loan the remaining amount, plus closing costs, through a promissory note. “So maybe it was $25,000, on top that $80,000 for the $100,000 property,” he says.

Using this method of financing arranged by Ms. Drage, Mr. Clark said the companies bought approximately 40 houses in 2019, and another 70 to 90 in 2020. Mr. Clark described in a deposition that in “busy times” they might make more than 20 home purchase offers a week. All told, between 2019 and 2023, the partners bought more than 600 houses in parts of Southwestern Ontario and in several of the province’s northern cities, such as Timmins, Sudbury and Sault Ste. Marie.

Currently, the companies hold 407 properties and more than 390 mortgages worth $80-million held by hundreds of private lenders. According to court filings from Bennett Jones LLP, the legal counsel to the insolvent companies, as much as approximately $16.8-million in promissory notes were used for a combination of top-up payments and closing costs.

The largest recipient of prom notes was Mr. Suitor’s Interlude Inc. home-buying company, which holds 364 notes worth $29-million. Through a spokesperson, Mr. Suitor and Mr. Clark have disputed some of the notes attributed to them.

In addition to private mortgages with interest rates between 9 and 15 per cent, those prom notes came with even higher interest rates: as much as 20 per cent. As Mr. Daly, Ms. Drage’s old boss, said, private loans should be a short-term Band-Aid, and borrowers need a rapid exit strategy to get out from under the staggering carrying costs.

So while Mr. Clark’s scaled-up BRRRR business managed to slip past its first chokepoint thanks to Ms. Drage’s financing solution, it ultimately suffocated on the third “R”: refinance.

A real estate investor with a high-interest private mortgage (and high-interest promissory note) can try – after renovation or the addition of rental units – to obtain a higher appraisal value that can be used to get a lower-interest bank loan or mortgage to repay the initial investor and lower the monthly carrying costs of the home. Refinance or sale of the renewed property are the typical exit strategies for most BRRRR investors.

But the speed and scale at which Mr. Clark and company were buying homes made the traditional exit impossible. “It became clear you can’t just, you know, throw 100 or 200 residential properties at a bank. It got more difficult,” he said.

As Balboa bought more homes, the company found itself running low on cash as early as 2021, according to Mr. Clark. The houses it was buying and renovating ended up going over budget and requiring more borrowing to get them completed. More prom notes were taken out, and sometimes the money from a new prom note was used to pay the interest on an old prom note or mortgage.

As part of the insolvency, court-appointed monitor KSV Consulting Inc. released a damning report into the business practices of Mr. Clark and Mr. Suitor, along with the other partners, including Aruba Butt, Mr. Clark’s wife, high-school friend Ryan Maloney, and Ms. Drage’s son Sam and daughter-in-law Bronwyn Bullen (who also had roles at Windrose in underwriting and deal management).

The report would focus on a lack of record keeping, conflicts of interest and unexplained spending, but it also details how the companies struggled under the debt load they were taking on.

The report found Mr. Clark’s companies spent at least $24.6-million on interest and carrying costs between 2019 and 2024, and only about $3.6-million on renovation and utilities, while transferring $20-million to other “related parties.” The revenue picture suggests the company collected $8.2-million in rent, $12-million came from inter-company transfers and another $29-million was borrowed directly from Ms. Drage’s investors.

KSV called some of those transfers “unjustifiable,” noting that $7.4-million went from insolvent companies to some of 20 other companies controlled by Balboa directors that are not part of the insolvency. For example, the largest transfer was $2.7-million to Mr. Suitor’s corporation, Old Thing Back Inc. As much as $5.9-million was transferred directly to Mr. Clark, Ms. Butt, Mr. Suitor and Mr. Maloney.

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In court filings, the Balboa directors claimed “approximately $4.4-million of the approximately $6-million in net disbursements” were for business expenses. As of June 23, they had not provided receipts for these expenses or others for inter-company transfers.

Some of the spending in the report is eye-opening: In 2021 and 2022, Pink Flamingo was billed $117,515 for luxury jewellery purchased at New York store Aviannes Inc. In 2021, $89,652 was spent on private jet company Paramount Business Jet. In 2021 and 2022 there were private home rentals of $59,034 and $92,000 (in Hawaii) that the applicants have called corporate retreats in responses to questions from The Globe. They also paid a variety of social-media influencers and entertainers tens of thousands of dollars, including $52,173 to Jas Prince (CEO of Young Money Entertainment) and $38,500 to Jay Petros, an influencer connected to Logan and Jake Paul.

On March 5, 2022, more than $25,000 was charged at a Miami night club and separate strip club (a business event where brokers of mortgages and insurance were feted, according to Mr. Suitor); and between July 10 and July 18 a series of expenses for luxury hotels in New York and Paris topped $20,000. As well, just under a million dollars in “dividends” were paid out to various directors after a bulk property sale to Toronto-based Core Development Group, spending KSV has called inappropriate given the indebtedness of the enterprise.

In responses filed in court, Mr. Clark has described the amount of discretionary spending at issue as being a small fraction of the overall money loaned and less than KSV spent investigating it. In an interview, he noted that his colleagues turned over the damaging spending records at KSV’s request. “If we were trying to hide stuff we would have done a better job,” he said.

As well as calling some of the travel “corporate retreats” in court filings, it was also explained as necessary to facilitate a major property sale.

Starting in January, 2022, Mr. Clark began negotiating the sale of 295 Balboa rental properties to private-equity-backed real estate developer Core for $118-million. But the deal dragged months past its expected close. Ultimately, the initial terms were whittled down to 230 properties sold for only about $75-million, according to KSV.

KSV reported the profits from the Core sale were as much as $22-million, though the Balboa directors claimed that $11-million of that paid down some – though not all – promissory notes associated with those properties. Whatever the actual profit from that sale, according to KSV it provided only a “brief runway” for the heavily indebted company.

Meanwhile, the cost of new debt was getting more expensive, not less. In March, 2022, the Bank of Canada raised interest rates for the first time in four years and would do so six more times throughout the year, dramatically slowing down the real estate market. By late 2022, Ms. Drage told KSV she stopped financing “future acquisitions” before the end of the year (though some sales still closed in 2023). At that point, the portfolio still held more than 400 properties.

Balboa’s home-buying had happened at such speed that Mr. Clark doesn’t remember how many homes were purchased in 2021. At roughly the same time, about a year after she began working with Mr. Clark and the Balboa companies, Ms. Drage let go of most of her agents – keeping just a few long-time colleagues – to shift the focus of the business to almost exclusively private lending.

Jenny Lynn was among the dozens of mortgage agents that left Windrose in 2021. But she bore Ms. Drage no ill will for the shakeup and, in July of that year, invested her pension savings (from her time working in policing and the public sector) in two private mortgages arranged by Windrose.

“Because I knew Claire – I worked with her for a year – I assumed she always did her due diligence,” said Ms. Lynn. The two deals added up to exactly the amount she had available in her pension account: $278,373. The mortgages paid 9-per-cent interest, almost triple the prevailing bank rates at the time. The mortgages were with two companies – The Pink Flamingo Inc. and DSPLN Inc. – run by the same real estate investor: Aruba Butt, Mr. Clark’s wife.

One of those mortgage agreements was $103,473 for a home in Sault Ste. Marie, Ont., where the agreement of purchase and sale documents attached stated Mr. Clark paid $120,000 for the house in April. That put the loan at 85 per cent of the house’s value – high but not unheard of in private lending.

Ms. Lynn renewed the loans – at higher rates – in 2022 and again in 2023 even after she had some worries because of a few missed payments. She tried to get out of the deals in June, 2023, but was told it would take 90 days to sell the houses, so she opted to renew for a three-month term. In September, the houses still hadn’t sold.

On Dec. 8, 2023, Ms. Lynn received a notice of an impending tax sale for one of the homes from the City of Sault Ste. Marie, demanding $8,969 in back taxes.

According to Ms. Lynn’s mother, who lives in the area, one of the buildings had been boarded up and appeared abandoned. Ms. Lynn was still reeling from this discovery and unable to get ahold of Ms. Drage, when news broke that the borrowers of her loans were declaring insolvency.

“Never in a million years would I think my entire life savings for retirement would be in jeopardy,” Ms. Lynn said.

Reviewing court filings, Ms. Lynn would learn a second mortgage for more than $530,000 had been registered against the first home in 2023, a fact not disclosed by Ms. Drage, even where mandated on mortgage-renewal forms.

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Ms. Lynn’s experiences would be echoed by dozens of lenders who spoke to The Globe, though many did not wish to comment on the record. A consistent theme is that they were never told by Ms. Drage that she had arranged $80-million dollars in mortgages, and $54-million more in promissory notes, to the Balboa group.

“At no time were we told from Windrose that they are part of this conglomerate of all these companies; we would never have done that,” said Catherine Hugh, a private mortgage lender who loaned $184,000 to DSPLN Inc. in 2021.

Some of those who made unsecured loans had to know they were playing with fire, according to one lender.

“You went in with eyes open; you said ‘Yes, I want risk.’ If you didn’t there’s no way you’d ever put your name on the promissory note,” said Robert Gaudet, a real estate investor who has loaned mortgage and promissory note money to Ms. Drage in the past and whose wife currently holds more than $100,000 in prom notes issued by Lion’s Share.

While Balboa was a major prom-note borrower, the scale of Ms. Drage’s own borrowing was staggering: On March 22, she filed an insolvency notice for Lion’s Share saying the company owed $89.417-million in promissory notes to “various corporate entities and individuals.” According to court filings from accounting and audit firm Fuller Landau, the receiver for Lion’s Share, there are about 1,000 prom notes from about 450 individual lenders outstanding with $43-million owed by the Balboa operation, and another $30-million owed by about 14 other real estate investors.

As Ms. Lynn and other lenders began experiencing payments issues last spring, it appears Ms. Drage paid – on behalf of the Balboa companies – some interest payments to secured lenders with funds from Lion’s Share, her promissory note company.

Ms. Hugh has retained records that show overdue mortgage payments from Aruba Butt and DSPLN Inc. being replaced with e-transfers from Lion’s Share accounts controlled by Ms. Drage in May, 2023.

Ron Butler, a mortgage broker with Butler Mortgage Inc., is shocked to hear allegations Ms. Drage may have used Lion’s Share funds to pay private mortgage debts held by her Balboa clients.

“You cannot make any payments on behalf of a borrower: it’s black-letter law,” Mr. Butler said. Ontario’s Mortgage Brokerages, Lenders and Administrators Act, established in 2006, restricts such payment remitting to mortgage administrators, a separate licensing category that Ms. Drage did not possess. It would fall to FSRA to investigate such allegations.

While Ms. Drage’s mortgage business is regulated by FSRA, the regulation of prom notes falls under the purview of provincial securities regulators, in this case the Ontario Securities Commission. Canada’s securities regime is described by legal experts as expansive, but with almost equally expansive exemptions that would allow an individual to issue a prom note without being a licensed securities trader.

The OSC declined to comment on whether any complaints against Ms. Drage have been received or whether any investigations are under way, but lenders have shared copies of information request documents from OSC investigators asking about Lion’s Share.

Mr. Clark and Mr. Suitor have claimed in virtual town halls and in affidavits that, up until the day they filed for insolvency, they were still trying to either refinance or arrange more large-scale sales to claw the business back to solvency.

By August, 2023, the Bank of Canada had stopped raising rates, and Mr. Suitor said Balboa received an offer from a non-bank lender to refinance 427 properties for $72-million with an interest-only payment schedule at a rate of 10 per cent for two years, with an option to renew at 12 per cent.

“At that point in time we knew ... it was not going to be an option that was going to allow us to refinance or pay everyone out,” Mr. Suitor said in a virtual town hall with lenders on April 9.

The passage of time meant that Balboa’s refinance options had gone from under 5-per-cent interest in early 2022 to higher than the original “short-term” high-cost rates of Ms. Drage’s private lenders.

In a deposition with KSV Ms. Drage said she never doubted that a solution would be found to the crushing debt loads.

But even as they were adding substantially to their debt burden, taking out new loans seems to have been a vital source of liquidity to keep existing lenders from withdrawing their funds.

“The promissory notes that I’ve borrowed were used for renovations as well as closing costs as well as some monthly payments on them through Lions Share Group,” Mr. Suitor told lenders.

The Balboa companies also began taking out second mortgages with Lift Capital Inc. on a number of properties in 2022; ultimately, it registered second mortgages on 121 properties worth $8.6-million.

Perhaps most troubling, KSV noted there are instances of what appear to be “inappropriate promissory note loan renewals.” For example, a house in Timmins had five promissory notes related to it – some of which were renewed after it was burned in a fire in mid-November, 2023.

Paul Searle of Burlington, Ont., filed an affidavit claiming he was never informed about the Timmins fire, despite his mother (for whom Mr. Searle has power of attorney for financial matters) having a $200,000 private mortgage registered against the property. According to Timmins officials, the building was demolished on March 31, 2024, but Mr. Searle says he didn’t learn about any of it until May.

In court filings from Bennett Jones, Mr. Suitor responded to the “unique” Timmins situation and describes a chaotic working relationship with Ms. Drage’s company, but claims she was informed of the fire.

On June 25, Ontario’s Superior Court revised the insolvency order covering Mr. Clark and his partners to remove them from any decision-making role in the companies after the lenders declared they had lost all faith in their management. A standard part of a Companies’ Creditors Arrangement Act insolvency is a legal order called a stay that blocks any new legal claims and halts existing ones.

But once KSV completes a management transition it has sole discretion on when to revoke that stay – and will burst the dam holding back dozens of legal claims against Mr. Clark and his partners.

Mr. Gaudet, who has been through a consumer bankruptcy himself, has a starker prediction, particularly for all the unsecured creditors such as prom-note lenders: “Every one of us is going to get pennies on the dollar. The only people who are going to get any money are lawyers.”