ASIC acts against offshore Ponzi scheme
The Australian Securities and Investments Commission (ASIC) has taken action against the unlicensed operators of 14 unregistered offshore managed investment funds who allegedly targeted Australian investors and self-managed superannuation funds.
In the Supreme Court of New South Wales, ASIC named 19 defendants in the proceedings. But ASIC was principally concerned with David Hobbs of New Zealand, who is alleged to have controlled the operation of all 14 funds.
Since 2002, more than 700 Australians have invested over US$42 million in the funds, which were marketed as separate funds but were in fact one scheme.
ASIC alleges the scheme operators used off-shore companies, and required investors to set up their own off-shore companies, in countries such as the British Virgin Islands and Vanuatu so as to circumvent Australia’s financial services laws.
ASIC claims most of the investors were promised access to offshore investment opportunities generating returns of 3 to 4 per cent per month and that there was no risk of losing the invested money.
It is also alleged other investors were attracted into the funds by promises of a stake in offshore investment companies involved in project investments, principally in China.
ASIC believes investors’ funds were dispersed to various off-shore accounts and some were also used, as in a Ponzi scheme, to pay monthly returns to other investors.
It is thought that only a portion of investors’ funds were actually invested and, contrary to the promises made, these funds were used to engage in high-risk commodities, futures and options trading in the US.
ASIC alleges that each of the individual defendants breached the corporations legislation by misleading potential and existing investors and carrying on a financial services business without an Australian Financial Services Licence.
The directors are said to have breached their duties as directors, failed to act in the best interests of the companies and improperly used their positions to gain an advantage for themselves or someone else.
As well as seeking court orders disqualifying seven defendants from managing corporations and operating managed investment funds, ASIC has asked that a liquidator be appointed to wind up the funds and distribute the investors’ recovered money.
ASIC’s action is next in Court on 11 June, 2010.
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