The B.C. Securities Commission (BCSC) penalized three people close to $1 million for their part in an international Ponzi scheme involving non-existent gold mining operations in Africa and Brazil.
On Tuesday, a commission panel ordered Sabrina Ling Huei Wei, previously of Vancouver, to pay a $500,000 administrative penalty on top of the $90,000 she received from the scheme. Also, James Bernard Law, who also lives in Vancouver, must pay $150,000 for his part. Lastly, Justin Colin Villarin of Surrey must pay $200,000 plus a repayment of $15,718 for his part in the scheme.
The three schemers organized events and sold membership units to American companies promising high, no-risk returns for fake gold mining operations. This turned out to be a classic Ponzi scheme, because the commission noted in a statement Oct. 6, 2022, that DFRF Enterprises LLC’s only source of revenue was from investors.
The BCSC found 137 residents of the province or people connected to the province lost a total of $1.5 million.
The BCSC also levied bans from participating in British Columbia’s capital markets for varying amounts of time. Wei’s ban is permanent, while Villarin and Law have received 25 year and 20 year bans respectively.
A Ponzi scheme is a type of investment fraud where a fraudster uses the funds from new investors to pay returns to earlier investors, rather than using the money to generate legitimate returns. The scheme needs a constant influx of new investors to sustain the illusion of profitability and to continue paying out returns to earlier investors.
Typically, ponzi schemes collapse when the operator can’t attract enough new investors or when too many investors attempt to withdraw their funds at once. In many cases, investors lose all of their money when the scheme collapses.
Read more: Mine reclamation loophole creates environmental risk
Read more: Costa Rica declares water emergency over mercury contamination due to illegal gold extraction
Ponzi scheme draws significant penalties
The three worked in conjunction with American and Brazilian promoters. These promoters had also been found guilty of fraud in a civil case brought by the U.S. Securities and Exchange Commission (SEC). In 2019, the SEC obtained judgments against four promoters of the scheme. They raised over USD$15 million from at least 1,400 investors by recruiting new members to keep the fraud afloat.
Three fraudsters paid a USD$160,000 penalty. The lead promoter, Daniel Fernandes Rojo Filho, received a $1 million fine and was ordered to pay USD$10.2 million.
“Bank records show no proof that DFRF had other legitimate business activities. Filho used more than US$6 million of investors’ money for personal expenses and luxury cars,” stated the BCSC.
The legislator also laid out how it found and caught the culprits.
Acting on a tip the BCSC investors went to an event held at the Fairmont Pacific Rim Hotel where Wei put on a promotional show for the crowd. The group’s scheme offered a monthly return of up to 15 per cent interest on their membership with their principal guaranteed by insurance.
Also, as part of the ruling against Wei, Law and Villarin, a panel found Monita Hung Mui Chan of Burnaby and Marie-Joy Vincent of Surrey culpable of defrauding 52 B.C. investors as part of the scheme.
The principle problem now is collection. Collecting fines has proven difficult for the BCSC in the past.
The BCSC claims it’s improving its collection powers. Conversely, it notes some fines are so large they may only act as a deterrence to others. The commission may not see all the fines recovered.
Follow Joseph Morton on Twitter
joseph@mugglehead.com
