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Court orders Pyramid and Ponzi scheme fraudsters to compensate investors

Issue date: 2022-05-16 16:38:49

The Court of First Instance has granted orders sought by the Securities and Futures Commission (SFC) against fraudsters of a global Pyramid and Ponzi scheme to compensate victims following legal proceedings under section 213 of the Securities and Futures Ordinance (SFO) (Notes 1 & 2).

The scheme was operated by DFRF Enterprises LLC and DFRF Enterprises, LLC (collectively, DFRF) and their founder, Mr Daniel Fernandes Rojo Filho, between 2014 and 2015 (Note 3).

Under the scheme, DFRF and Filho falsely claimed that DFRF, whose main business was gold mining operations, would soon be listed in the US and persuaded a number of Hong Kong investors to acquire “membership units” of its membership program for a monthly return.  Around May 2015, they falsely claimed that DFRF had been listed in the US and offered investors the option to convert their “membership units” into preferred shares of DFRF at a certain price.

In December 2016 and March 2017, the SFC obtained interim injunctions to freeze assets in the two bank accounts that received monies from investors for the purpose of acquiring “membership units” and converting them into preferred shares (Notes 4 & 5).

The Court has appointed administrators to receive and distribute the proceeds of the scheme remaining in the two bank accounts – approximately totalling $2.8 million – for the benefit of the investors on a pro rata basis (Notes 6 to 8).

End

Notes:

1. A Pyramid and Ponzi scheme is an investment fraud in which fraudster purports to operate a business or an investment which offers promised returns to victims at a later pay date and victims are persuaded to recruit other people to participate in the business or the investment.
2. The Reasons for Judgement is available on the Judiciary’s website (Court Reference: HCA 2189/2016).
3. DFRF Enterprises LLC and DFRF Enterprises, LLC were incorporated in the US.  Neither the companies nor Filho held SFC licences to carry on any regulated activity.
4. The two bank accounts were respectively held by Mr Heriberto C. Perez Valdes and Sealand Trading (Hong Kong) Limited (Sealand).
5. Please see the SFC’s press release dated 22 March 2017.
6. The administrators are Mr James Wardell and Mr Jackson Ip of Moore Recovery Limited.
7. On 20 April 2022, the Court entered judgment against the defendants and made declarations that DFRF and Filho had contravened sections 114(1)(a), 114(1)(b), 109(1), 103(1) and 107(1) of the SFO for (i) carrying on a business and holding themselves out as carrying on a business in a regulated activity whilst unlicensed; (ii) issuing advertisements in which they held themselves out as being prepared to carry on the regulated activity of advising on securities (Type 4) whilst unlicensed; (iii) issuing unauthorised advertisements, invitations or documents containing an invitation to the public to enter into an agreement to acquire or subscribe for securities; and (iv) making fraudulent or reckless misrepresentations for the purpose of inducing another person to enter into an agreement to acquire or subscribe for securities.
8. The Court also made declarations that by receiving funds from the investors, Valdes and Sealand had aided, abetted or otherwise assisted, counselled or procured or conspired with DFRF and Filho in their contraventions of the SFO, or alternatively, directly or indirectly have been in any way knowingly involved in their contraventions.

News captured as of:2022-05-16 16:42:16

Source: SFC