When I read the story about Anwar Badshah in the Surrey North Delta Leader, some obvious red flags leaped out at me. Last June, he pleaded guilty to three counts of fraud over $5,000 and was sentenced to 18 months of house arrest by a provincial court judge in Port Coquitlam. BCSC investigators described the Badshah promotion as a Ponzi scheme.
This was a serious crime. Documents on our website show that at least 150 people had invested more than $2.2 million with Badshah Communications Group Ltd. by the time the investigation was initiated. The effect on these investors’ lives was devastating as voiced in the impact statements provided to the court.
One of the most obvious red flags in this particular investment scheme was the promise of very high returns – 100 per cent return within months of investing the money.
Another important red flag was the fact that the company was not registered with BCSC, a legal requirement for selling promissory notes to investors.
Finally, there was another hint that there might be something suspicious about this scheme. Mr. Badshah targeted members of the Fijian Muslim community, the community in which he was born and raised. This technique is called affinity fraud. It exploits the trust and friendships that exist in groups of people who have something in common. Many affinity scams involve Ponzi schemes, making this a classic case of investment fraud.
With Fraud Prevention Month winding down, I thought it would be a good time to point people to a special information feature in the Globe and Mail’s Special Reports section. The Canadian Securities Administrators (CSA) and other organizations participated in a three-page supplement that ran at the end of the Globe’s business section on March 22, 2011. […]