Advice on Dealing with a Housing Scam

I recently assisted a friend who relocated to Peterborough in search of a room. We found a listing on Kijiji, and the landlord initially seemed friendly. Without a lease agreement, my friend paid the first and last month's deposit. However, about 1.5 months later, the landlord threatened my friend, a student, and three other students with eviction within 48 hours, claiming she would involve the authorities and immigration.

In response, the three students contacted the police, leading to the revelation that the so-called landlady didn't actually own the house but had sublet her lease to these students. It's a clear scam, but the police stated they couldn't take action because the students weren't the legal tenants. Furthermore, the lady refuses to return the security deposit and half a month's rent. Are there any steps we can take in this situation, experts?

This experience has taught me the importance of not relying on verbal agreements and being cautious in such situations.