Statement of Allegations: In the Matter of Gold-Quest International et al.

Staff of the Ontario Securities Commission (“Staff”) make the following allegations regarding violations of the Securities Act, R.S.O 1990, c. S. 5, as amended (the “Act”) and conduct contrary to the public interest:

I. THE RESPONDENTS

i) Gold-Quest

1. Gold-Quest International (“Gold-Quest”) is a Panamanian corporation that was controlled by a number of individuals resident in the United States.

2. From June 2006 to May 2008, Gold-Quest accepted approximately $29 million (U.S.) from investors, including investors in Ontario, through direct solicitations, an Internet website maintained by Gold-Quest and by referrals from existing investors.

ii) The Ontario Respondents

3. 1725587 Ontario Inc., carrying on business as Health and Harmoney, (“Health and Harmoney”) is an Ontario corporation that was incorporated on September 20, 2007. Prior to being incorporated, Health and Harmoney operated as a general partnership whose business name was registered on November 14, 2006 with the Province of Ontario. Health and Harmoney carried out its business from an office located at Unit 390, 1288 Ritson Road North, Oshawa, Ontario.

4. The Harmoney Club Inc. (the “Harmoney Club”) is a Canadian corporation that was incorporated on December 21, 2007. The Harmoney Club also carried out its business from an office located at Unit 390, 1288 Ritson Road North, Oshawa, Ontario.

5. Donald Iain Buchanan (“Iain Buchanan”) is a director of both Health and Harmoney and the Harmoney Club. Iain Buchanan was also one of the partners of Health and Harmoney when it operated as a general partnership. Iain Buchanan resides in Oshawa, Ontario.

6. Lisa Buchanan is an employee of Health and Harmoney and a director of the Harmoney Club. Lisa Buchanan resides in Oshawa, Ontario.

7. Sandra Gale, also known as Sandi Gale, (“Gale”) is a director of both Health and Harmoney and the Harmoney Club. Gale was also one of the partners of Health and Harmoney when it operated as a general partnership. Gale resides in Oshawa, Ontario.

II. TRADING IN SECURITIES OF GOLD-QUEST

i) The Gold-Quest Pyramid Scheme

8. On May 6, 2008, the Securities and Exchange Commission of the United States (the “SEC”) filed a complaint in the United States District Court, District of Nevada, alleging that Gold-Quest was operating a pyramid or “Ponzi” scheme. Gold-Quest has never been registered in any capacity with the SEC. The SEC further alleged that Gold-Quest used very little of the money that it raised for legitimate investments but rather the vast majority of new investor funds was used by Gold-Quest to make payments to current investors and commissions to participants in the Ponzi scheme.

9. Individuals that introduced an investor to Gold-Quest would receive the title “Administrative Manager” for the new investor. Administrative Managers would receive an up-front commission of 10% of that investor’s original investment and then a further 4% per month for a year (for a total commission of 58% of the principal invested). The individual who introduced the Administrative Manager to Gold-Quest would receive the title “Managing Director” for the new investor and would receive a commission of 1.5% per month (for a year for a total of 18% of the principal invested). Lastly, the individual who introduced the Managing Director to Gold-Quest would receive the title “Supervisory Managing Director” for the new investor and would receive a commission of 1% per month for one year (for a total of 12% of the principal invested). In sum, when a new investor sent funds to Gold-Quest, 88% of that investor’s funds were earmarked for commissions to be paid to their Administrative Manager, Managing Director and the Supervisory Managing Director over the course of a year.

10. From June 2006 until May, 2008, despite receiving no income from its investments or business operations, Gold-Quest disbursed $20.3 million (U.S.) through distributions to investors and payment of commissions as set out in paragraph 9.

11. Gold-Quest has ceased to operate and has been put into receivership by order of the United States District Court. As of December 12, 2008, the receiver appointed by the United States District Court had only recovered $273,475.85 (U.S.).

ii) Trading in Gold-Quest Securities in Ontario

12. Gold-Quest has never been registered in any capacity with the Ontario Securities Commission (the “Commission”).

13. No preliminary prospectus or prospectus has ever been filed with the Commission to attempt to qualify the trading of Gold-Quest securities.

14. From November of 2006 until February of 2008 (the “Material Time”), Health and Harmoney, Iain Buchanan, Lisa Buchanan, and Gale (the “Ontario Respondents”) and the other employees, representatives and agents of Health and Harmoney promoted the trading of securities in Gold-Quest to Ontario residents (the “Gold-Quest Investors”).

15. Throughout the Material Time, the Ontario Respondents were not registered in any capacity with the Commission.

16. During the Material Time, the Gold-Quest Investors sent over $1,800,000 (U.S.) to Gold-Quest as a result of promotional and trading activities by the Ontario Respondents. These activities included recommending investing with Gold-Quest, providing specific information regarding the nature of the investment with Gold-Quest, providing the documents required to invest with Gold-Quest, and in certain cases facilitating the transfer of funds to Gold-Quest on behalf of investors.

17. The Gold-Quest Investors entered into one-year investment contracts with Gold-Quest. Gold-Quest stated investor funds would be invested in the foreign exchange or “forex” market. Gold-Quest informed the Gold-Quest Investors that they would receive an annual return on investment equal to 87.5% of the funds invested with Gold-Quest. However, in order to receive this 87.5% investment return, the Gold-Quest Investors would required to leave their funds with Gold-Quest for a year.

18. The Ontario Respondents were all aware of the terms of the investment contracts entered into by the Gold-Quest Investors as well as the commission structure outlined above in paragraph 9. However, the Ontario Respondents did not inform the Gold-Quest Investors of this commission structure.

19. There were no exemptions under the Act which allowed the Ontario Respondents to trade Gold-Quest securities in Ontario.

III. TEMPORARY CEASE TRADE ORDERS IN ONTARIO

20. On April 1, 2008, the Commission issued a temporary order under sections 127(1) and (5) of the Act (the “Temporary Order”). Pursuant to the Temporary Order, Health and Harmoney, Iain Buchanan, and Lisa Buchanan were prohibited from trading in any securities and that any exemptions contained in Ontario securities law did not apply to Health and Harmoney, Iain Buchanan, and Lisa Buchanan.

21. The Temporary Order also prohibited any further trading in securities of Gold-Quest.

IV. TRADING IN SECURITIES OF THE HARMONEY CLUB

22. The Harmoney Club was created by the Ontario Respondents who then offered securities in this corporation to approximately 138 Ontario investors (the “Harmoney Club Investors”) from October of 2007 until July of 2008.

23. Through the activities of the Ontario Respondents, the Harmoney Club received almost $2.5 million (U.S.) from the Harmoney Club Investors. These funds were then apparently used by the Harmoney Club for investments in the United States.

24. No preliminary prospectus or prospectus has ever been filed with the Commission to attempt to qualify the trading of Harmoney Club securities.

25. There were no exemptions under the Act available to the Ontario Respondents allowing them to trade Harmoney Club securities.

26. Over half of the Harmoney Club Investors purchased shares in the Harmoney Club from the Ontario Respondents after April 1, 2008, the date of the Temporary Order.

V. MISLEADING THE COMMISSION

27. Gale had notice of the Temporary Order in April of 2008. Gale stated to Staff that when she became aware of the Temporary Order she ceased trading in securities including securities of the Harmoney Club.

28. Gale continued to trade in securities of the Harmoney Club after she became aware of the Temporary Order.

V. VIOLATIONS OF THE SECURITIES ACT AND CONDUCT CONTRARY TO THE PUBLIC INTEREST

i) Conduct Related to Trading in Securities of Gold-Quest International

29. The conduct of Gold-Quest including its officers and directors, employees, representatives and agents was contrary to the public interest and constituted the following breaches of the Act:

(i) trading without registration contrary to section 25 of the Act; and

(ii) an illegal distribution of securities contrary to section 53 of the Act.

30. The conduct of Health and Harmoney, including its officers and directors, employees, representatives and agents was contrary to the public interest and constituted the following breaches of the Act:

(i) trading without registration contrary to section 25 of the Act; and

(ii) an illegal distribution of securities contrary to section 53 of the Act.

31. The conduct of Iain Buchanan was contrary to the public interest and constituted the following breaches of the Act:

(i) trading without registration contrary to section 25 of the Act;

(ii) an illegal distribution of securities contrary to section 53 of the Act; and

(iii) as a director of the Harmoney Club, directing, permitting or acquiescing in breaches of sections 25 and 53 of the Act by Health and Harmoney contrary to section 129.2 of the Act.

32. The conduct of Lisa Buchanan was contrary to the public interest and constituted the following breaches of the Act:

(i) trading without registration contrary to section 25 of the Act; and

(ii) an illegal distribution of securities contrary to section 53 of the Act.

33. The conduct of Gale was contrary to the public interest and constituted the following breaches of the Act:

(i) trading without registration contrary to section 25 of the Act;

(ii) an illegal distribution of securities contrary to section 53 of the Act; and

(iii) as a director of the Harmoney Club, directing, permitting or acquiescing in breaches of sections 25 and 53 of the Act by Health and Harmoney contrary to section 129.2 of the Act.

ii) Conduct Related to Trading in Securities of the Harmoney Club

34. The conduct of the Harmoney Club, including its officers and directors, employees, representatives and agents was contrary to the public interest and constituted the following breaches of the Act:

(i) trading without registration contrary to section 25 of the Act; and

(ii) an illegal distribution of securities contrary to section 53 of the Act.

35. The conduct of Iain Buchanan was contrary to the public interest and constituted the following breaches of the Act:

(i) trading without registration contrary to section 25 of the Act;

(ii) an illegal distribution of securities contrary to section 53 of the Act;

(iii) as a director of the Harmoney Club, directing, permitting or acquiescing in breaches of sections 25 and 53 of the Act by the Harmoney Club contrary to section 129.2 of the Act; and

(iv) trading in securities while prohibited from doing so by an order of the Commission contrary to section 122 of the Act.

36. The conduct of Lisa Buchanan was contrary to the public interest and constituted the following breaches of the Act:

(i) trading without registration contrary to section 25 of the Act;

(ii) an illegal distribution of securities contrary to section 53 of the Act;

(iii) as a director of the Harmoney Club, directing, permitting or acquiescing in breaches of sections 25 and 53 of the Act by the Harmoney Club contrary to section 129.2 of the Act; and

(iv) trading in securities while prohibited from doing so by an order of the Commission contrary to section 122 of the Act.

37. The conduct of Gale was contrary to the public interest and constituted the following breaches of the Act:

(i) trading without registration contrary to section 25 of the Act;

(ii) an illegal distribution of securities contrary to section 53 of the Act; and

(iii) as a director of the Harmoney Club, directing, permitting or acquiescing in breaches of sections 25 and 53 of the Act by the Harmoney Club contrary to section 129.2 of the Act.

iii) Conduct Related to Misleading the Commission

38. On October 16, 2008, Gale misled Staff contrary to section 122(1) of the Act and contrary to the public interest.

39. Staff reserve the right to make such other allegations as Staff may advise and the Commission may permit.

      DATED at Toronto, March 12, 2009.