The British Columbia Securities Commission has levied a $6.3-million fine against two men and their associated companies for running what it determined was a Ponzi scheme.
The panel’s order has named Richmond resident Todd Norman John Bezzasso as the mastermind behind the scam, having raised roughly $5 million from 85 investors between February 2015 and March 2016. Bezzasso solicited investments for two companies he controlled: Bezzaz Holdings Group Ltd. and Nexus Global Trading Ltd.
In a news release, BCSC said Bezzasso engaged fellow Richmond resident Wei Kai Liao, also known as Kevin, worked with him to raise the funds for the Ponzi scheme.
While it was actually running a Ponzi scheme, the defendants claimed that these funds would participate in various business interests including the sale of health supplements and e-cigarettes. Promotional materials for investors promised returns of between five and 30 percent, payable through postdated cheques.
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The BCSC concluded that Bezzasso and his two companies had committed fraud against all 85 investors. As a result of his misconduct, he was ordered to pay an administrative penalty of $4.5 million. In addition, the regulator handed down another decision to hit Bezzasso, Bezzaz and Nexus with a joint penalty of $1.6 million.
The commission panel also determined that Liao committed fraud against one investor by failing to tell him about repayment problems that other investors in the scheme had been facing. His actions in raising money for investors also amounted to trading in securities, something Liao was not licensed to do, the BCSC said.
Instead of using the investors’ funds for business purposes, the fraudsters misappropriated all of the pool participants’ funds, which were largely spent on personal expenses. As also charged, they used some new investors’ funds to pay back other investors in a Ponzi-like fashion, so that they would invest or refer additional money, thereby allowing the scheme to continue for a longer period of time.
In its sanctions decision, the panel noted that although both defendants were never licensed to trade securities, the commission permanently banned Bezzasso and prohibited Liao for 15 years from Canada’s capital markets, act as director or advisors of a registered company.