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- Thinking Ahead Issue 4
Our People in Corporate Recovery and Insolvency
ASIC obtains court orders against Gold Coast-based investment scam
ASIC obtained court orders on 4 July 2012 against the operators of a Gold Coast-based unlicensed financial services business, preventing it from carrying on its activities.
Chief Justice De Jersey of the Supreme Court of Queensland made declarations against West Trade Group Pty Ltd (West Trade Group), West Trade Cars Pty Ltd (West Trade Cars), West Two Pty Ltd (West Two) and its directors Tiffany Lea O’Donnell, Russell John Lewis and John Steven Pitcher, finding the companies had carried on a financial services business without holding an Australian financial services (AFS) licence in contravention of the Corporations Act and that each of the directors were involved in those contraventions. The companies and the directors were restrained from carrying on any financial services business in Australia without being licensed to do so and were ordered to pay ASIC’s costs of the proceedings.
The court also ordered West Trade Group, West Trade Cars and West Two be wound up.
ASIC alleged that West Trade Group, West Trade Cars and West Two used cold calling and a website to induce investors to deposit funds into a number of bank accounts held in the names of West Trade Group, West Trade Cars and West Two with the promise that the funds would used to buy shares on behalf of the investors and generate returns well above markets.
ASIC further alleged that O’Donnell, Lewis and Pitcher withdrew the money from company bank accounts in cash. ASIC’s inquiries to date have not been able to substantiate that shares were purchased by West Trade Group, West Trade Cars and West Two on behalf of investors.
ASIC is aware at this stage of its investigation that, between mid-September to late-December 2011, approximately $790,000 was deposited by investors into these accounts. During the same period of time, approximately $680,000 was withdrawn in cash, meaning it is likely the funds may not be recovered.
The court also ordered the remaining $110,000 be frozen.
ASIC achieved this result with the assistance and cooperation of the Queensland Police Service and the Australian Crime Commission.
Today’s proceedings follow ASIC and State and Territory police services urging consumers to be alert to investment fraud, having seen an increase in cold-calling activity across Australia.
In June 2012 ASIC urged consumers to avoid Connaught Investment Group*, an unlicensed financial services business purporting to be based in the Sydney suburb of St Leonards, which offers fake investment opportunities (refer 12-121MR).
In May 2012 ASIC issued a public warning notice about Dellingworth Pty Ltd, an unlicensed financial services business purporting to be based on the Gold Coast offering investors returns of up to 50% (refer 12-95MR).
In February 2012, unlicensed financial planning business Golden Sparrow Pty Ltd was wound up following an application by ASIC to the Supreme Court of Queensland (refer 12-16AD).
In December 2011, a joint operation between the Queensland Police Service (QPS), the Australian Crime Commission (ACC) and ASIC saw multiple search warrants executed across a number of premises and a call centre targeting individuals allegedly involved in investment scams (refer 11-297AD).
* Connaught Investment Group is not associated with the registered company Connaught Consultants (Finance) Pty Ltd (ACN 002 102 203), which holds a legitimate AFS licence.
Be alert to Investment fraud
Cold-calling fraudsters usually contact their victims by telephone and convince them to invest in schemes involving the purchase of shares or investment in index funds or currency trading schemes. Once an investment is made, the fraudsters provide access to a website that shows projected returns, however those returns are completely fictitious. These fraudsters operate without AFS licences and use false addresses and phone lines routed often to another address. In the vast majority of cases, investors lose all of their money.
Significant features of this type of scam are:
- the promoters sometimes adopt the company names of legitimate companies who are licensed to provide financial services
- the scam is supported by sophisticated internet technology including a website which purports to provide investors with real-time information in relation to their trading
- victims are often initially cold-called by a person purporting to survey their interest in investing generally
- victims are lured with promises of high returns and then subjected to pressure in order to induce them to hand over their money, and
- when a person falls victim a first time, they are often called back and encouraged to invest in a more sophisticated trading strategy which requires even more money
If you are suddenly and unexpectedly contacted by somebody trying to sell you a financial product, you should:
- hang up the telephone
- check the ASIC Registers accessible on www.asic.gov.au to see if the person or company selling the financial product is licensed or authorised to do so, if not then do not invest
- call the company back using the details on the ASIC register to verify its identity
- if in any doubt contact ASIC on phone 1300 300 630 or visit ASIC’s MoneySmart website (new window), and
- remember if it is too good to be true it probably is.
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