Woman allegedly ran $135 million Ponzi scheme

The executive director of the British Columbia Securities Commission has issued a notice of hearing that alleges a Canadian citizen both perpetrated a fraud and made false statements to regulators.

The BCSC’s notice alleges Doris Elizabeth Nelson operated a payday loan business that was actually a Ponzi scheme, through which she raised $135.4 million from at least 800 investors in Canada and the U.S.

It adds Nelson ran her business through a group of companies she directed—collectively called the Little Loan Shoppe.

It says she financed the growth of her business by raising funds from investors in B.C. and the U.S., and that she used existing investors to recruit new investors. Regulators allege she had her companies issue promissory notes in return for the funds.

The BCSC says she represented to investors that because her business was so profitable, she could afford promissory notes paying annual interest rates of 40%-to-60%. In reality, says regulators, her business wasn’t profitable due to its high rate of customer loan defaults.

The notice says one of the companies Nelson controlled and used to issue promissory notes was 0738126 B.C. Ltd, and adds that on July 11, 2008, commission investigators notified her that its capital-raising activities were under investigation.

The notice adds Nelson then emailed investors, telling them she planned to make false statements to the commission.

The BCSC says she then produced a false affidavit in which she misrepresented the number of Canadian investors involved, and that she attached false evidence purporting to establish exemptions for those distributions that 0738126 had already made.

It adds two of Nelson’s companies have entered bankruptcy proceedings since 2009, and says she’s also the subject of civil proceedings brought by the Washington State Department of Financial Institutions and the U.S. Securities and Exchange Commission.

Additionally, the BCSC finds she’s awaiting trial in federal criminal court in Spokane, Washington, currently scheduled to be held in June 2013, on 71 counts of wire fraud, 22 counts of mail fraud, and 17 counts of international money laundering.

These allegations have not been proven. Counsel for the executive director will apply to set dates for a hearing into the allegations before a panel of commissioners on February 19, 2013 at 9:00am.

Staff

The staff of Advisor.ca have been covering news for financial advisors since 1998.