Defendant pleads guilty during trial in SFO prosecution

Defendant pleads guilty during trial in SFO prosecution

Mark James Whelan (41) pleaded guilty in the Auckland District Court today after giving evidence at his trial. The trial related to a second Serious Fraud Office (SFO) investigation against Mr Whelan.
   
The SFO's charges against Mr Whelan related to his involvement with options trading company Derivatek New Zealand Limited (Derivatek) and his own company Global Futures Trading Limited. Mr Whelan faced 10 Crimes Act charges, comprising of three of theft by person in a special relationship and seven charges of false statement by promoter.

Mr Whelan incorporated Global Futures Trading Limited (Global Futures) in November 2006. From mid-2007 until February 2009, Mr Whelan used Global Futures to obtain funds from high net worth individuals to be traded through Derivatek.

Mr Whelan used investors' funds to fund an advance fee for a US$20 million loan, for personal use and to repay other investors. To conceal this activity, Mr Whelan issued false statements to the investors.

SFO Director, Julie Read said, "This investigation uncovered a multi-layered fraud, with the need to fund one fraud driving further offending. Where the return on investment is significantly higher than market rates investors should be aware that they may lose their money, because very high returns generally equal very high risk or, in some cases, fraud."

Mr Whelan has been remanded in custody until 3 July 2014 for a sentencing date to be fixed.

ENDS

For further information

Andrea Linton
Serious Fraud Office
027 705 4550

Note to editors

Background to investigation

The SFO commenced an investigation into Derivatek New Zealand Limited (Derivatek) as a result of information obtained during an earlier investigation into an options trading company operated by Mr Gregory Arnott. Mr Arnott has also pleaded guilty to charges laid in relation to Derivatek and has also been remanded to 3 July 2014.

Crimes Act offences

Section 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.

Section 242 False statement by promoter, etc
(1) Every one is liable to imprisonment for a term not exceeding 10 years who, in respect of any body, whether incorporated or unincorporated and whether formed or intended to be formed, makes or concurs in making or publishes any false statement, whether in any prospectus, account, or otherwise, with intent-
(a) to induce any person, whether ascertained or not, to subscribe to any security within the meaning of the Securities Act 1978; or
(b) to deceive or cause loss to any person, whether ascertained or not; or
(c) to induce any person, whether ascertained or not, to entrust or advance any property to any other person.

(2) In this section, false statement means any statement in respect of which the person making or publishing the statement-
(a) knows the statement is false in a material particular; or
(b) is reckless as to the whether the statement is false in a material particular.

About the SFO

The Serious Fraud Office (SFO) was established in 1990 under the Serious Fraud Office Act in response to the collapse of financial markets in New Zealand at that time.

The SFO's role is the detection, investigation and prosecution of serious or complex financial crime. The SFO's focus is on investigating and prosecuting criminal cases that will have a real effect on:

• business and investor confidence in our financial markets and economy
• public confidence in our justice system and public service
• New Zealand's international business reputation.

The SFO operates three investigative teams:

• Evaluation and Intelligence;
• Financial Markets and Corporate Fraud; and
• Fraud and Corruption.

The SFO operates under two sets of investigative powers.

Part I of the SFO Act provides that it may act where the Director "has reason to suspect that an investigation into the affairs of any person may disclose serious or complex fraud."

Part II of the SFO Act provides the SFO with more extensive powers where: "...the Director has reasonable grounds to believe that an offence involving serious or complex fraud may have been committed..."

The SFO's Annual Report 2013 sets out its achievements for the past year, while the Statement of Intent 2014-2018 sets out the SFO's three year strategic goals and performance standards. Both are available online at: www.sfo.govt.nz(external link)