New Zealand-based Arena Capital Limited, operating a website under the moniker BlackfortFX, was ruled to be a Ponzi scheme by a NZ High Court recently, which decreed that the firm owes clients a total of $7.0 million for illicit activity, according to a NZ Herald report.
BlackfortFX has been under investigation and in the regulatory crosshairs by the country’s Financial Markets Authority (FMA) since last May, which consequently froze its assets, paving the way for liquidation in August. Arena Capital Limited is registered on NZ’s Financial Service Providers Register, having claimed to be providing foreign exchange (FX) trading services to its clients.
However, a subsequent probe by both the FMA and the Serious Fraud Office into Arena Capital’s activities was launched after numerous complaints from overseas clients questioning the status of their funds. As of last August, liquidators from insolvency firm KordaMentha noted that Arena Capital had upwards of 1,110 clients.
Neale Jackson, co-liquidator in the Arena Capital case, also failed to find any evidence that Arena Capital had actually engaged in trading across FX markets, ultimately failing to generate profits for itself or clients. Following an investigation lasting over six months however, the NZ High Court has now determined that BlackfortFX was operating as a Ponzi scheme, and it is now on the hook for upwards of $7.0 million to clients, despite having only $728,000 in the company’s bank account.
According to NZ Justice, Cameron Mander, in a recent statement on the case: “The investment activity, which the company purported to operate, was a fraud. The monies deposited by all the investors were not used for the purpose for which they were provided and, to that extent, all the investors share that common complaint.”