SFO alleges fictitious Forex trading and profits

A man has appeared in the Christchurch District Court today on charges filed by the Serious Fraud Office (SFO) in relation to an alleged foreign exchange (Forex) trading scheme purportedly operated by Arena Capital Limited trading as BlackfortFX.

Jimmie McNicholl has been charged under the Crimes Act with one charge of ‘Obtaining by deception'.

Another person has been charged and is yet to appear on this matter.

The SFO alleges that BlackfortFX obtained registration as a financial services provider by deception. Between May 2014 and May 2015 BlackfortFX is alleged to have been used as a façade purporting to offer a Forex trading service/platform to potential investors.

The SFO alleges that BlackfortFX was a Ponzi scheme into which investors paid approximately $8.3 million when there was in fact, no trading undertaken.

In May 2015 the Financial Markets Authority obtained asset preservation orders which lead to the appointment of a receiver and a liquidator. 

SFO Director, Julie Read said, "There are hundreds of potential victims in this scheme whose funds will be at risk. Following the efforts of the FMA to obtain asset preservation orders, the SFO investigation has concluded that there is a serious case to answer regarding the activities of these two people."

Both defendants will next appear in the Christchurch District Court on 17 November.

The SFO acknowledge the assistance of the Financial Markets Authority in the initial stages of this investigation.

ENDS

For further media information

Andrea Linton
Serious Fraud Office
027 705 4550

Note to editors

Background to investigation

Arena Capital Limited (Arena) was registered on the Financial Service Providers Register and purported to offer foreign exchange services to clients. In May 2015 the FMA confirmed that it was undertaking an investigation into Arena, trading as BlackfortFX. The FMA obtained asset preservation orders over the assets of Arena and associated persons. The matter was also referred to the Serious Fraud Office.

Arena was placed into liquidation in the Christchurch High Court on 24 July 2015.

Crimes Act offences

Section 240 Obtaining by deception or causing loss by deception
(1) Every one is guilty of obtaining by deception or causing loss by deception who, by any deception and without claim of right,-
(a) obtains ownership or possession of, or control over, any property, or any privilege, service, pecuniary advantage, benefit, or valuable consideration, directly or indirectly; or
(b) in incurring any debt or liability, obtains credit; or
(c) induces or causes any other person to deliver over, execute, make, accept, endorse, destroy, or alter any document or thing capable of being used to derive a pecuniary advantage; or
(d) causes loss to any other person.

(1A) Every person is liable to imprisonment for a term not exceeding 3 years who, without reasonable excuse, sells, transfers, or otherwise makes available any document or thing capable of being used to derive a pecuniary advantage knowing that, by deception and without claim of right, the document or thing was, or was caused to be, delivered, executed, made, accepted, endorsed, or altered.

(2) In this section, deception means-
(a) a false representation, whether oral, documentary, or by conduct, where the person making the representation intends to deceive any other person and-
(i) knows that it is false in a material particular; or
(ii) is reckless as to whether it is false in a material particular; or
(b) an omission to disclose a material particular, with intent to deceive any person, in circumstances where there is a duty to disclose it; or
(c) a fraudulent device, trick, or stratagem used with intent to deceive any person.

About the SFO

The 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 operational teams; the Evaluation and Intelligence team along with two investigative teams.

The SFO operates under two sets of investigative powers.

Part 1 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 2 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..."

In considering whether a matter involves serious or complex fraud, the Director may, among other things, have regard to:

• the suspected nature and consequences of the fraud and/or;
• the suspected scale of the fraud and/or;
• the legal, factual and evidential complexity of the matter and/or;
• any relevant public interest considerations.

The SFO's Annual Report 2015 sets out its achievements for the past year, while the Statement of Intent 2014-2018 sets out the SFO's strategic goals and performance standards. Both are available online at www.sfo.govt.nz(external link)