The Ontario Securities Commission will hold a hearing on November 14 to consider administrative charges against a collapsed Canadian hedge fund, its co-founders Boaz Manor and Michael Mendelson and compliance officers Michael Labanowich and John Ogg.

The OSC alleges Portus Alternative Asset Management Inc. misled investors and engaged in illegal distribution of securities over a period of two years.

The fund, which grew to be one of the largest in Canada with almost US$700 million assets, was placed in receivership in March leaving 26,000 investors, including 45 Bermuda-based investors in the lurch.

The administrative charges carry a maximum fine of CAD $1 million as well as a number of possible sanctions including bans on trading.

In a separate action, the OSC also filed three charges with the Ontario Court of Justice against Mr. Manor who co-founded Portus in 2003.

Besides accusing him of trading securities without being properly registered and without having filed a prospectus, OSC staff allege that, as the ?chief architect? of Portus investment products, Mr. Manor tried to hinder the investigation days before the official receiver was appointed by directing the destruction of documents and other records and submitting misleading information to the Commission.

Each charge carries a maximum penalty of five years less a day imprisonment and fines up to CAD $5 million.

The OSC alleges that Mr. Manor personally withdrew approximately 1.6 million euros in cash, used US$2.7 million for the payment of his legal fees and used approximately US$11 million for the purchase of gems and precious metals.

Before its collapse, 45 Bermuda-based investors pumped almost $1.2 million dollars into Portus Alternative Asset Management.

In a report issued last week, KPMG said Portus managers skimmed roughly 13.3 percent of invested funds and never used investor funds to buy shares.

Instead the money was sent through more than 130 Portus bank and investment accounts including four with the Cayman arm of Bermuda-based Lines Overseas Management where it was ?commingled at various times with monies? from other Portus series.

The funds which flowed through the LOM Cayman accounts have now been accounted for, LOM said in a statement last week.

Mr. Manor fled to Israel earlier this year and has refused KPMG?s requests to return to Ontario. The RCMP have launched their own investigation into the fund.