The commission says Theodore Ralph Everett and Robert H. Duke, along with their firms Micron Systems Inc., and Independent Academies Canada, were involved in the scheme and then breached the terms of a cease trade order.
The men admitted they distributed security shares to 126 investors worth $5.1 million for a development project called Sage Hills in the Comox Valley, without filing a prospectus.
The commission says the men were still selling shares in the project in July 2011, even though they had defaulted on the mortgage and the bank began foreclosure proceedings in 2009.
A commission panel found that for those two years the men were committing fraud by selling securities on the plan to 55 investors at a value of $1.45 million.
A hearing to decide a punishment has not yet been scheduled.