In a significant development, a major Canadian music funder, the Foundation Assisting Canadian Talent on Recordings (FACTOR), has come forward with a shocking claim. It alleges that nearly $10 million of federal government money was stolen from its bank account. This case is set to be heard before a judge in Toronto on Friday morning.

Unraveling the Mystery of the Stolen Music Fund

How the Alleged Theft Unfolded

FACTOR's documents filed with the Ontario Superior Court of Justice Commercial List reveal that someone outside the organization managed to gain access to its Scotiabank account. In June alone, nearly $9.8 million was taken, accounting for almost one-fifth of its annual funding to Canada's music industry. The non-profit alleges that these funds were wired to a numbered company in Quebec and then to a cryptocurrency platform. There, the money was converted to crypto and used to purchase crypto-mining hardware.FACTOR's lawyers state in court documents that this alleged fraud occurred "as a result of gross negligence on the part of Scotiabank." They highlight multiple red flags that should have alerted the bank to the unauthorized transfer. This incident has raised serious questions about the security measures in place at both FACTOR and Scotiabank.

The Role of FACTOR and Its Impact

Established in 1982, FACTOR supports Canada's English-language music industry by providing a wide range of grants to musicians, record labels, event organizers, and others. It has played a crucial role in helping artists achieve success beyond Canada's borders. From rising stars like Jeremy Dutcher and Debby Friday to international success stories like Nickelback and Tegan and Sara, who were initially supported by FACTOR, the organization has made a significant impact.In the 2022-23 fiscal year, FACTOR offered over $51 million in total funding to more than 3,000 projects across Canada. Ebonnie Rowe, the founder of Honey Jam, a non-profit artist development program, was stunned when she heard about the missing funds. Honey Jam, which has been working with emerging female musicians for 16 years and has discovered and developed artists like Nelly Furtado and Jully Black, relies on FACTOR funding. Rowe emphasizes the essential role of FACTOR's support for arts and culture in Canada and for some artists, it is their only source of financial support.

The Court Proceedings and Arguments

FACTOR is now asking the court to direct Scotiabank and the customers allegedly involved in the transaction to refund the money. Its court filings note that Scotiabank has a guarantee on its website that it will "fully reimburse" clients if they lose money due to unauthorized activity. However, a Scotiabank spokesperson declined to comment as the case is before the courts.The statement argues that Scotiabank should have alerted FACTOR about abnormal activity in its account. The transfer was "more than 300x larger than any wire the organization has ever done, executed by an unauthorized user." FACTOR says the transfer was "highly unusual, suspicious, and illegal." It has retained expert investigators and forensic teams for four independent investigations, all of which found no evidence that FACTOR or any of its employees, agents, or contractors were responsible for the money going missing.A judge with the Ontario Superior Court of Justice in Toronto will determine how the transfer was carried out, how the unknown person got access to FACTOR's account, and whether FACTOR complied with its digital security obligations. This case has brought to light the vulnerabilities in the financial systems and the need for stronger security measures in the music industry.