Ponzi Scheme Eh? Ontario Regulator To Hear FX Fraud Case Tomorrow at 10.00am

Whilst the US government, and its associated financial markets' regulatory bodies continue the extensive reform of the entire national capital markets' economy, and clamp down on those with nefarious intentions, publicly highlighting them and often issuing very fitting sentences, things are somewhat different north of the border.

Tomorrow at 10.00 am, the Ontario Securities Commission is scheduled to hear the case of Rezwealth Financial Services and its senior management, on charges of operating an illegal FX trading and distribution scheme.

The Hare And The Tortoise

Whilst the United States often responds quickly and dispenses long sentences subject to federal law, Canada’s regulatory rulings are dispensed on a provincial basis, differing slightly between each province of Canada.

With Toronto being home to Canada’s financial sector, the Ontario Securities Commission is the most adept at dealing with cases relating to individuals or firms wishing to bilk their customers.

Despite this, it takes a long time to bring a case to justice, and in the case of Rezwealth Financial Services, tomorrow’s hearing signifies the latest in what is proving to be a lengthy case, with no definitive outcome almost four years after the perpetrators were apprehended, and two years after the case was brought to court.

Trickster Boasted of Successful FX Trading

Between August 22, 2006 and December 31, 2009, one of the defendants, Sylvan Blackett, held himself out as a successful foreign currency trader. He solicited investments from Ontario residents, purportedly to engage in foreign currency trading (Forex Forex Foreign exchange or forex is the act of converting one nation’s currency into another nation’s currency (that possesses a different currency); for example, the converting of British Pounds into US Dollars, and vice versa. The exchange of currencies can be done over a physical counter, such as at a Bureau de Change, or over the internet via broker platforms, where currency speculation takes place, known as forex trading.The foreign exchange market, by its very nature, is the world’s largest tradi Foreign exchange or forex is the act of converting one nation’s currency into another nation’s currency (that possesses a different currency); for example, the converting of British Pounds into US Dollars, and vice versa. The exchange of currencies can be done over a physical counter, such as at a Bureau de Change, or over the internet via broker platforms, where currency speculation takes place, known as forex trading.The foreign exchange market, by its very nature, is the world’s largest tradi Read this Term trading) using investor funds.

Investors entered into written agreements with Mr. Blackett and the company of which he was the sole director, 215 Incorporated, with respect to these investments.

Mr. Blackett then solicited Ontario residents, both directly and through Willoughby Smith and 1778445 Ontario Incorporated, to invest in investment contracts offered by Mr. Blackett.

The remainder of the defendants in this case, Rezwealth Financial Services, Pamela Ramoutar and Justin Ramoutar, then in turn solicited Ontario residents, both directly and through another party, Daniel Tiffin and Tiffin Financial Corporation, to invest in investment contracts offered by Rezwealth Financial Services.

Rezwealth Financial Services in turn invested part of the investor funds received with Mr. Blackett.

Very Unrealistic Returns

Although the Blackett Investment Contracts were characterized as “loan agreements” between Blackett and/or 215 Incorporated and investors, Mr. Blackett informed investors that he used investor funds to engage in Forex trading, and that the monthly returns payable to investors, would be funded by the profits he generated through Forex trading.

Investors were typically promised a fixed return of 5% per month, equating to 60% per annum, although, some investors were promised a fixed return of as much as 10% per month, amounting to 120% per annum.

In order to perpetrate the scheme, Mr. Blackett solicited Ontario residents to invest in the Blackett Investment Contracts by meeting with potential investors, discussing the nature of the investment and promised returns, as well as showing some investors a purported example of the profits he had generated through Forex trading.

He prepared and signed the Blackett Investment Contracts and deposited investor funds to several bank accounts in his name, and in the name of 215 Incorporated, as well as soliciting further investors to pay funds into the Blackett Investment Contracts via associates, including Mr. Smith and 177 Incorporated.

Fraudulent Conduct

Tomorrow’s case will hear the circumstances by which, contrary to the representations made by Mr. Blackett to investors, most of the investor funds he and 215 Incorporated received, were not used for Forex trading.

Rather, a large portion of investor funds deposited into the Blackett Accounts were used by Mr. Blackett himself, which he then blew on personal expenditures, and to make monthly return and redemption Payments Payments One of the bases of mediums of exchange in the modern world, a payment constitutes the transfer of a legal currency or equivalent from one party in exchange for goods or services to another entity. The payments industry has become a fixture of modern commerce, though the players involved and means of exchange have dramatically shifted over time.In particular, a party making a payment is referred to as a payer, with the payee reflecting the individual or entity receiving the payment. Most commonl One of the bases of mediums of exchange in the modern world, a payment constitutes the transfer of a legal currency or equivalent from one party in exchange for goods or services to another entity. The payments industry has become a fixture of modern commerce, though the players involved and means of exchange have dramatically shifted over time.In particular, a party making a payment is referred to as a payer, with the payee reflecting the individual or entity receiving the payment. Most commonl Read this Term to other investors.

On this basis, between the period of January 1, 2008 and April 14, 2009, a total of approximately $4.2 million was deposited into the Blackett Accounts, of which at least $3 million was investor funds.

A much smaller sum, approximately $542,000 was transferred from the Blackett Accounts to Forex trading accounts, and only around $28,000 was deposited back into the Blackett Accounts from Forex trading accounts.

Approximately $1.6 million was paid to investors from the Blackett Accounts to satisfy monthly return and redemption payments, and approximately $1 million was paid out of the Blackett Accounts for personal expenditures by Mr. Blackett, including cash withdrawals and credit card payments.

In addition to the fraudulent activities committed by Rezwealth Financial Services and its management team between July 1, 2009 and December 31, 2009, during which the company accepted at least $904,000 in new investments in the Rezwealth Investment Contracts, while continuing to make monthly interest payments to investors, and to repay the principal of investors who elected to redeem.

Rezwealth stopped receiving monthly return payments from Mr. Blackett in April 2009. However, during the period between July 1, 2009 and December 31, 2009, Rezwealth Financial Services’ other investments and business operations did not generate sufficient revenue to cover its interest and principal repayment obligations to investors.

Illegal Distribution

Mr. Tiffin solicited Ontario residents to invest in the Rezwealth Investment Contracts, both directly and indirectly through Tiffin Financial. He sent emails to potential investors, and posted promotional materials on Tiffin Financial’s website regarding the Rezwealth Investment Contracts.

In these materials, Tiffin stated that he had “joined forces with Rezwealth” to offer the Rezwealth Investment Contracts, and that they offered guaranteed returns of 24% per annum, as well as guarantees on investors’ principal. Tiffin also met with investors, discussed the features of the investment, assisted investors in completing the Rezwealth Investment Contracts, and facilitated the payment of investor funds to Rezwealth Financial Services.

As a result of these activities, at least 19 investors invested at least $2 million in the Rezwealth Investment Contracts, during the period of time relating to the court case.

Mr. Tiffin and Tiffin Financial received commission payments from Rezwealth for referring investors. Rezwealth agreed to pay Tiffin a trailer fee of 2% per month (or 24% per annum) of the principal invested by the Tiffin Investors. During the material time, Tiffin and Tiffin Financial received a total of approximately $548,000 in trailer fees from Rezwealth Financial Services.

According to the Ontario Securities Commission, none of the parties cited in this case were registered to trade in securities or provide Forex trading services to clients, representing a further transgression of the law, and demonstrating that Ontario, until recently a region with very little experience in asserting legal enforcement over Forex firms and traders, is, although very slowly, getting to grips with those who seek to commit criminal activity in which substantial sums of money are misappropriated.