Auckland foreign exchange broker pleads guilty to running a Ponzi scheme to defraud his clients of more than $7 million

Auckland foreign exchange broker pleads guilty to running a Ponzi scheme to defraud his clients of more than $7 million

The statement below was issued by the Serious Fraud Office.

A foreign exchange broker has pleaded guilty to running a Ponzi scheme to defraud his clients of more than $7 million.

Kelvin Clive Wood (69) pleaded guilty today at the Auckland District Court to representative charges of ‘Obtaining by deception’ and ‘Theft by person in a special relationship’ brought by the Serious Fraud Office.

The Auckland man created a Ponzi scheme after his foreign exchange brokerage began to suffer net trading losses. He used new investors’ funds to pay other investors their reported gains or to refund investment principal. 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 defendant knowingly reported fictitious profits and false or inaccurate foreign currency trades to investors.

The Director of the Serious Fraud Office Julie Read said, “Mr Wood earned the trust of a group of investors through his personal and professional association with them. He misappropriated their funds and falsely reported trading profits so they would not seek to withdraw their funds. The SFO will prosecute all serious fraud matters brought to our attention to protect other investors and New Zealand's reputation as a corruption-free market."

The defendant has been remanded on bail to reappear for sentencing at the Auckland District Court on 24 July.

The Financial Markets Authority referred the case to the SFO to investigate in May 2017.

BACKGROUND TO INVESTIGATION

Kelvin Clive Wood (69) of Auckland facilitated foreign exchange and trading services through two companies – Forex (NZ) Limited and Forex NZ 2000 Limited.

Mr Wood’s clients placed money with him through his companies for the purpose of fixed interest term deposits, the purchase of foreign currency, general investment and foreign exchange trading purposes. 

Clients invested on the basis that their principal was not at risk.

CRIMES ACT OFFENCES

240 Obtaining by deception or causing loss by deception
(1) Every one is guilty of obtaining by deception or causing loss by deception who, by any deception and without claim of right,—

(a) obtains ownership or possession of, or control over, any property, or any privilege, service, pecuniary advantage, benefit, or valuable consideration, directly or indirectly; or

(b) in incurring any debt or liability, obtains credit; or

(c) induces or causes any other person to deliver over, execute, make, accept, endorse, destroy, or alter any document or thing capable of being used to derive a pecuniary advantage; or

(d) causes loss to any other person.

(1A) Every person is liable to imprisonment for a term not exceeding 3 years who, without reasonable excuse, sells, transfers, or otherwise makes available any document or thing capable of being used to derive a pecuniary advantage knowing that, by deception and without claim of right, the document or thing was, or was caused to be, delivered, executed, made, accepted, endorsed, or altered.

(2) In this section, deception means—                                                                                             

(a) a false representation, whether oral, documentary, or by conduct, where the person making the representation intends to deceive any other person and—

(i) knows that it is false in a material particular; or

(ii) is reckless as to whether it is false in a material particular; or

(b) an omission to disclose a material particular, with intent to deceive any person, in circumstances where there is a duty to disclose it; or

(c) a fraudulent device, trick, or stratagem used with intent to deceive any person.

220 Theft by person in special relationship

(1) This section applies to any person who has received or is in possession of, or has control over, any property on terms or in circumstances that the person knows require the person—

(a) to account to any other person for the property, or for any proceeds arising from the property; or

(b) to deal with the property, or any proceeds arising from the property, in accordance with the requirements of any other person.

(2) Every one to whom subsection (1) applies commits theft who intentionally fails to account to the other person as so required or intentionally deals with the property, or any proceeds of the property, otherwise than in accordance with those requirements.

(3) This section applies whether or not the person was required to deliver over the identical property received or in the person’s possession or control.

(4) For the purposes of subsection (1), it is a question of law whether the circumstances required any person to account or to act in accordance with any requirements.

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Jail for this thief who learnt nothing from previous cases

Clients invested on the basis that their principal was not at risk.

An identity as brazen as this, is beyond recognition of anything other than their own enrichment. Unfortunately not the first, and more unfortunately, odds on, not the last. Folks, the best return on capital is the return of capital and if some person or outfit is capable of returns well above the market, they wouldn’t ordinarily be sharing it around.