NEW YORK (Bloomberg) — Two co-founders of Portus Alternative Asset Management were charged by Canadian authorities with fraud, money laundering and obstructing justice in an alleged scheme related to the hedge fund firm's collapse.

Boaz Manor, 33, and Michael Mendelson, 41, of Toronto, were accused of using money from Canadian investors in ways not disclosed to them, the Royal Canadian Mounted Police said in a statement.

Portus managed C$800 million ($795.5 million) before it shut down.

"Any fraud related to investments and the investment industry has a broad impact," Superintendent Dave Truax, director of the Ontario Provincial Police's Anti-Rackets Section, said in the statement. "It affects public and private investors and creates a negative perception of the investment industry."

Portus, founded in 2002, attracted money from 26,000 investors before it closed following inquiries from Ontario regulators about transactions at the firm. About C$18 million remains missing, and C$110 million was improperly used to pay referral fees and cover withdrawals by investors, according to a May report by KPMG LLP, the firm's trustee.

The Ontario Securities Commission alleged that Manor and Mendelson last year failed to act in good faith with clients. Mendelson also allegedly engaged in unregistered trading and issued securities without filing a prospectus, according to the regulator.

Manor fled to Israel before the commission seized Portus's assets in March 2005. An arrest warrant has been issued for Manor, according to today's statement.

Mendelson's bail hearing, scheduled for yesterday, was postponed to October 10, RCMP spokeswoman Michele Paradis said.

The two men were also charged with possession of property obtained by a crime.

Manor defrauded foreign investors by not investing US funds deposited with Portus, Canadian police said.