"This is the worst conceivable thing in the whole world," Andrea McCarthy told a sanctioning hearing at the Ontario Securities Commission on Wednesday.
"People worked hard their whole lives to have money and to have it taken away from them is horrifying," she said.
McCarthy, who acted as a director and officer for BFM Industries Inc. and Liquid Gold International Inc., was found in January by the OSC to be a knowing participant in the scheme. It also said she "illegally distributed'' securities and trades without registering with the OSC.
It is alleged that from November 2008 to December 2010, the two companies defrauded 32 foreign investors by selling them $445,000 of worthless stock, and said McCarthy had been responsible for handling the day-to-day operations at the companies, including communicating with investors and withdrawing money from corporate accounts.
But in her testimony on Wednesday, McCarthy, 41, suggested she was simply following instructions from her boyfriend, Sandy Winick, who now faces criminal charges in the U.S. related to a fraud scheme, and said didn't think to question his requests.
"People were constantly asking Sandy for money; he was constantly giving money to people," she said.
McCarthy said she left a job at her ex-husband's company after meeting Winick, who began supporting her financially.
She didn't know what Winick actually did for a living and found him secretive about his businesses, but she was happy to incorporate BFM and list herself as a director when he asked.
"I didn't really appreciate the inner workings of it," she said.
"I thought it was exciting that he was building something I'd be able to work at and feel valuable."
The company seemed legitimate, she added, and she didn't think it was unusual when he also asked her to put her name on a bank account for Liquid Gold.
The pair had several joint accounts as well, and McCarthy was in charge of most of Winick's banking, which she did following specific instructions from him.
Aside from day-to-day living expenses, McCarthy said she received little profits from the alleged scheme beyond an expensive handbag and jewelry, which she later sold.
McCarthy's lawyer, Naomi Lutes, argued McCarthy's limited financial means should be considered by the commission as they deliberate her penalty, as should her willingness to co-operate with investigators and her show of remorse.
McCarthy has no assets, savings or investments, and was forced to cash in her RRSPs to pay her legal fees, Lutes said. She also recently sold her home.
"She's not saying that she didn't make mistakes here and shouldn't have asked more questions," said Lutes, who described McCarthy as a "financially unsophisticated woman."
Lutes is recommending a penalty of $23,300 plus a nominal administrative fine, and says McCarthy does not dispute a proposed 15-year ban on trading in securities.
Jonathon Feasby, a lawyer for the OSC, initially suggested staff were looking for $102,000 in repayment plus $50,000 in administrative fees, but acknowledged there were mitigating circumstances in the case.
OSC commissioner James Carnwath reserved his decision Wednesday.
The OSC has already banned Winick and his business partner, Gregory Curry, from securities trading and ordered them to pay more than $1 million in penalties for breaking securities law.
Those sanctions were related to separate schemes involving securities of BFM, Liquid Gold and a third company called Nanotech Industries Inc.
Winick and Curry are accused by the U.S. Attorney's office of being the leading figures in fraud schemes involving US$140 million and spanning dozens of countries, including Canada.
The two men were arrested in Thailand last summer after a multi-year investigation involving the FBI and the RCMP that also relied on wiretaps in the U.S. and undercover agents abroad.
It is believed there are tens of thousands of victims.
American authorities have also ordered Winick to pay back roughly $3.2 million in "ill-gotten gains'' obtained through what they call an "illicit trading scheme'' involving another penny stock issuer.