Setting up a financial company these days has become a relatively easy task. If you happen to execute a scheme in New Zealand, today’s news proves that it might be a bit too easy. The long-ongoing issues of multiple registers for financial companies in the country are at the core of the problem.
One can actually have a company which is listed on the register of financial service providers without the firm being regulated by the New Zealand Financial Markets Authority (FMA). The loophole has been used by many firms over the years to market to clients a reputable regulatory destination.
Local authorities only addressed the issue only in the final days of 2017, effectively driving brokers away from the country.
Ponzi Scheme Operation
The latest case where the local system has been exploited is rooted in Auckland. The largest city in the country was home to Kelvin Clive Wood and his companies Forex (NZ) Limited and Forex NZ 2000 Limited.
Both companies went into liquidation back in 2017, when the local Serious Fraud Office (SFO) publicized its allegations. At the time of the news, however, the magnitude of the scheme was unknown.
2020 Global Market Outlook: How the “Known Unknowns” Can Affect CurrenciesGo to article >>
Today the SFO published its findings in full, revealing that the Ponzi scheme he orchestrated defrauded his clients of more than $7 million. Kelvin Clive Wood who’s 69 years old, pleaded guilty at the Auckland District Court.
He admits having deceived clients and stolen a significant amount of money as his brokerage operations turned south. As the foreign exchange brokerage, he ran started losing money he used client money from new customers to replay the misstated profits he tricked the old ones to have gained.
“None of Mr. Wood’s clients were aware that their funds were being used to repay other investors.
More than $7 million of investment principal belonging to 18 investors was lost by the defendant over an eight-year period,” the statement of the New Zealand SFO elaborates.
Kelvin Wood was intentionally reporting fictitious profits for his clients and was also providing them with statements that included trades that were never executed. “Mr. Wood earned the trust of a group of investors through his personal and professional association with them,” said the Director of the SFO, Julie Read.
After misinforming his customers that they have profits, they were reassured not to ask for redemptions. The SFO is at present prosecuting the individual, and the defendant is expected to get sentenced on the 24th of July.