Role in $8.3m Ponzi scheme admitted

May 10, 2018 | By More

A Christchurch man has admitted his role in an $8.3 million Ponzi scheme that drew in 900 investors.

Jimmie Kevin McNicholl, 56, today admitted the fraud charge – obtaining registration as a Financial Service Provider by deception – in the Christchurch District Court and was remanded on bail for sentencing in June.

Another man, Lance Jack Ryan, 44, of Auckland, has earlier admitted five charges and both will be sentenced on June 20. Ryan has admitted charges of theft by a person in a special relationship, forgery, two of altering a document, and false accounting. Ryan is also known as Lance Jared Thompson.

He was brought to Christchurch for a pre-trial argument on a further charge, heard by Judge David Saunders, who reserved his decision.

The Serious Fraud Office called the scheme a Ponzi type arrangement.

McNicholl was a director of Arena Capital which purported to run a foreign exchange scheme called BlackfortFX which was said to be controlled by expert analysts and traders. It was put into receivership in May 2016 after intervention by the Financial Markets Authority.

The receivers found BlackfortFX had never traded in foreign exchange and any profits said to have been earned were fictitious. Arena Capital also went into liquidation.

The SFO alleged that about 900 clients paid about $8.3 million into BlackfortFX.

The judge remanded McNicholl for a pre-sentence report which will cover his suitability for a home detention sentence, though he said that was not an indication of the likely sentence.

He also remanded the case for a possible restorative justice meeting with the victims. The court was told that the liquidators were in contact by email with the long list of victims, and a message could be sent to them ahead of the sentencing.

The SFO said the two men were actively engaged in the development and promotion of BlackfortFX as a Forex trading opportunity. Arena Capital Ltd was registered with the Companies Office as the corporate body for BlackfortFX.

McNicholl was the sole director listed in the Companies Office register, but a shareholders’ agreement shows that McNicholl and Ryan had a 50 percent share interest in BlackfortFX.

The SFO said: “Ryan was a defacto director who was instrumental in orchestrating the planning, development, and the purported day to day operations of BlackfortFX.

“McNicholl, with the assistance and guidance of Ryan started promotion of BlackfortFX to friends and family, associates and members of the public through word of mouth, as well as through the internet using BlackfortFX’s webpage.”

The scheme represented to investors that it was a supported by a key trading strategy developed from five years of research and the return on investors’ funds was between 1 percent and 1.5 percent a day.

McNicholl admitted signing a letter seeking FSP registration, saying that Ryan was no longer involved, because of the Financial Market Authority’s concerns about Ryan’s background.

The SFO said: “Neither McNicholl nor Ryan transferred or paid any of the funds received from investors toward any legitimate Forex trading platform. Both knew that every request by an investor to withdraw money from their respective investiment accounts with BlackfortFX was being paid from the collective pool of investors’ funds.”

Between May 2014 and May 2015, about 900 investors paid about $8.3 million into the scheme.

BlackfortFX was placed into liquidation on July 24, 2015. Forensic analysis established that in addition to the amounts specifically attributed to Ryan and McNicholl from the bank account, there were also large amounts of money spent on other personal items including horses, motor vehicles, medical costs, and travel.

A liquidators’ report in February 2017 indicated that distribution of the remaining funds would yield 34 cents in the dollar for each investor and creditor.

An Asset Protection Order was obtained. In a settlement agreement with the liquidator, McNicholl agreed that at least $767,838 of Arena’s funds were used for the personal benefit of him and his partner. The summary of facts refers to a $350,000 deposit on a $3.5 million property in Christchurch, and purchase of a $111,000 car.

No less than $1.393 million was taken by Ryan, including payments to a family trust and a settlement payment for a $1 million property in Helensville.

In explanation, McNicholl said that he knew that if they wanted to grow BlackfortFX to where Ryan wanted it to go, they needed to be FSP-registered. He said everything was basically run by Ryan and that it was his trading platform that they were going to be using.

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