A $8.3 million Ponzi schemer’s offer to pay reparation to his hundreds of victims – when he gets a chance – has been rejected with scepticism from the Crown and the judge.
The prospects of any repayment looked very bleak as 44-year-old Lance Jack Ryan faced sentencing for the Blackfort FX scheme that sucked in 900 investors.
Ryan had written Christchurch District Court Judge Jane Farish a letter apologising for his offending and offering to set up trading trust fund in the future to fund reparation.
Serious Fraud Office prosecutor Philip Gardyne said the office was sceptical and asked for a non-parole term to be imposed on Ryan.
Judge Farish said Ryan’s offer of repayment was “quite ridiculous” and not realistic at all. She told Ryan: “You should never be involved in any companies.”
Ryan’s offer came while he was bankrupt, facing a long jail term, and with uncertainty about his ability to generate any funds that could be diverted for reparations.
The liquidators of Blackfort FX reported that investors could only expect to get back 34 cents in the dollar on outstanding losses with assets recovered so far. Those shortfall on the $8.3 million that people invested now amount to about $4.4 million.
Ryan was appearing for sentencing on six charges including theft by a person in a special relationship, forgery, two of altering a document, and false accounting. He is already a prisoner serving time for other offending.
Jimmie Kevin McNicholl, 56, of Christchurch, had pleaded guilty to a fraud charge – obtaining registration as a Financial Service Provider by deception.
Judge Farish jailed Ryan for seven-and-a-half years with a non-parole term of three years nine months, and she allowed home detention for McNicholl.
Mr Gardyne said the SFO believed Blackfort was only ever a Ponzi scheme. No foreign exchange had ever been traded and no investments were ever made. A scheme was set up with the investors having passwords to access their accounts in a “cloud” to see how much profit their investments were generating – all of it fictitious.
Items recovered after the collapse included a $1.4 million property that had been held in a trust by Ryan, and a Bentley car bought for $205,000.
The court was told about victims living with stresses, strained relationships, people struggling with their daily lives, and families not having money available to help children, or give an elderly parent the care they needed as they struggled with Alzheimer’s disease.
Defence counsel for Ryan, Tim Fournier, said his client disputed that Blackfort had been a Ponzi scheme from the beginning, but accepted that it became one.
For McNicholl, defence counsel James Rapley said his client had “fallen under the spell” of Ryan and his foreign exchange trading scheme. He had believed that the Financial Markets Authority was being too strict in refusing approval because of Ryan’s background. He had signed a letter saying that Ryan was not involved and approval was then given, enabling the scheme to go ahead. Ryan’s record includes 63 fraud convictions in 2005.
People who signed up to the scheme also got family and friends involved. McNicholl himself got a family member involved and she had not spoken to him since, the court was told.
Mr Rapley said he accepted that the scheme had caused devastating consequences. “Mr McNicholl was dumbstruck when he found out it wasn’t true,” he said.
Judge Farish said Ryan had created false emails showing balances for the scheme in the millions, and referring to transfers of similar amounts. She described it as “an elaborate farce” by Ryan who had used McNicholl as a patsy and a dupe.
She reviewed the effects on victims including lost friendships, lost savings, a family home that had to be sold, and lost business opportunities. Some victims had struggled through the Christchurch earthquakes and had invested pay-outs to try to recoup some of their quake losses.
Some had lawyers and accountancy firms carry out due diligence on Blackfort FX, and they had been duped. The people would not have invested if the scheme did not have Financial Service Adviser accreditation. Ryan had undermined trust in the financial market in New Zealand by his deception.
She said Ryan had “conned” his family as much as he had conned his victims.
She said McNicholl had filed an affidavit in support of the SFO’s prosecution of Ryan. It was a significant abuse of trust that McNicholl had defrauded the Companies Office and the FMA with his letter about Ryan’s non-involvement. She told McNicholl: “You were under the spell of making money.” There was no evidence he knew the scheme was false.
Judge Farish imposed an 11-month home detention sentence on McNicholl, plus 350 hours of community work, and reparation totalling $50,000 to be paid back at $10,000 a year.