Investment schemes don’t have borders

The Canadian Securities Administrators just issued their third annual Enforcement Report. In it, there are many stories of how investors lost money.

Here’s an example of how enforcement teams work together to warn investors and penalize the bad guys. Nevada based Gold-Quest International was an investment scheme which raised about $29 million US from over 3,000 investors in Canada and the United States.

Gold-Quest was a classic Ponzi and pyramid scheme. In 2008, the BC Securities Commission and the Manitoba Securities Commission issued a joint investor alert warning of Gold-Quest International’s activities.

The alert outlined the details of the scheme. Investors were promised unusually high returns – 87.5 per cent – and commissions for bringing in new investors. People were approached to invest in a ‘family and friends private placement program’ in which Gold-Quest would trade in foreign exchange markets (forex) on their behalf.

To make matters worse, people were encouraged to bring new investors into the program and offered an initial 10 per cent commission and an ongoing monthly commission of 4 per cent for 12 months.

Four Canadian securities commissions issued interim orders prohibiting Gold-Quest International from trading securities in their jurisdictions. The US Securities Exchange Commission obtained a court order against Gold-Quest, and the Ontario Securities Commission concluded proceedings against three individuals in Ontario.

Finally, in June 2010, the Alberta Securities Commission issued permanent cease trade orders and permanently banned the schemes’ creator and operator, David Michael Greene and his associate John Jenkins from the Alberta capital markets.

The Commission panel ordered each to pay a penalty of $2 million, the largest ever applied to individuals by the Alberta Securities Commission.

We know from phone calls that the initial alert helped warn prospective investors and helped unravel the scheme. That’s why if you ever get information about a possible investment scheme, you need to contact us so that we investigate, warn investors and stop the scheme from continuing.