He thought he was investing on the international share market, with his portfolio worth tens of millions of dollars. But the financial scheme was a lie and the Auckland pensioner was forced to take out a reverse mortgage on his house after losing $1.4m to off-shore scammers. Lane Nichols reports.
Auckland pensioner takes out reverse mortgage on house after losing $1.4m in fictitious 43-mth share market investment scam
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Off-shore fraudsters convinced an Auckland pensioner to wire $1.5 million overseas as part of an elaborate share trading scam.
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He would ultimately sink $1.4m into the bogus scheme in a prolonged series of international money transfers spanning an astonishing 43 months.
At one point his bank, TSB, warned it was likely a scam and refused to conduct further foreign exchange transactions.
But Sam was so convinced of the scammers’ authenticity, he ignored TSB’s warnings and continued to send money through private remittance companies until his cash eventually ran out.
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Police say the scammers are likely based offshore, there are no lines of inquiry, and the investigation has been shelved.
Sam was initially contacted by a David Southwell, who claimed to be the head of global finance for Hong Kong-based Broad Capital. Smooth-talking and extremely well-mannered, Southwell introduced the firm’s services and discussed Sam’s investment goals and risk appetite.
“They were all very professional and didn’t let it slip,” Sam told the Herald.
“They were human and they sounded educated. They didn’t sound like scammers or criminals.”
After canvassing a range of investment opportunities, Sam agreed to purchase an initial 1500 shares in a Richard Branson-backed company, Virgin Hyperloop One (VHO).
Glossy prospectus material emailed to Sam said the company was raising capital to build a futuristic transportation system that could send passengers and freight at super speeds in a high-tech capsule through a network of pressurised tubes.
Sam - a “high-risk man” - googled the operation and confirmed the company and venture were real.
The former mechanic had been dabbling in the sharemarket since 1972, making some decent coin backing up-and-coming firms on the New Zealand and Australian stock exchanges.
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He considered himself financially savvy and certainly “didn’t come down in the last shower”.
Impressed by the cutting-edge technology of VPO, and assured of his slick Hong Kong broker’s legitimacy, Sam wired US$5252 (NZ$8508) on July 27, 2019 to a specified overseas bank account to complete the initial share purchase.
It would be the first of 16 foreign exchange payments to a series of off-shore “escrow” accounts as the pensioner built what he believed was a sizeable international investment portfolio with the help of his expert financial advisors.
Over the years, Sam would deal with various Hong Kong brokers. Communication was by email or phone.
His key advisor became a Robert Burns from boutique international investment firm SW Investments, after the company apparently bought out Broad Capital and took over Sam’s account.
Burns was a professional finance expert with a silky English accent. He told Sam he was from Scotland, had once worked on the New York investment markets, but moved to Hong Kong with his young son after his wife died of cancer.
Burns and his team oversaw many of Sam’s trades. This included selling most of his VPO shares and investing the proceeds in an initial public offering for Elon Musk’s satellite-based high-speed internet company Starlink in January 2021.
A Starlink investment brochure sent to Sam was emblazoned with Broad Capital’s logo and listed the firm’s address as the Grand Millennium Plaza, Sheung Wan, Hong Kong.
Sam was told the Starlink shares were eventually sold and the profits reinvested in a third company, Silkway Development.
That company’s website describes itself as an “exclusive venture capital enterprise generating private investment for renewable energy projects” connecting the Eurasian corridor.
Financial records obtained by the Herald show that between July 2019 and October 2022, Sam made seven money transfers totalling more than US$235,000 (NZ$366,000) - supposedly to purchase shares in the three companies.
And while those investments appeared to be generating significant returns as the share prices increased, there were also significant costs.
After offloading the VHO shares to invest in Starlink, Sam was told he must pay US$260,000 (NZ$395,000) in capital gains tax to the Hong Kong government. He dutifully forwarded the money in two payments to a nominated account in late 2020.
There were also large “security bond deposit” payments which Sam was told were mandatory for both buyers and sellers to secure each trade. These bonds - like a house deposit - could be forfeited if you backed out of the deal.
The documents show Sam made seven such payments totalling US$453,0000 (NZ$619,000). He thought this money was being reinvested back into his share portfolio after each share trade deal was completed.
By late 2022 he was rich on paper and living mortgage free in one of Auckland’s most affluent suburbs.
Sam’s personalised client portal still shows he owns more than 1.5m shares. He was told buyers were lined up for the share parcels which had an indicative current worth of US$21m
A “letter of credit” purportedly sent last year from the Industrial and Commercial Bank of China says Sam held a Sunny World Investment Trading Account and the huge pending sale proceeds would be transferred to a nominated beneficiary account under the name of Ozforex Pty Ltd at the Bank of New York Mellon.
The letter lists a money transfer swift code and states that the remittance will be in US dollars.
Sam was so sure it was a sound investment he even convinced his wife and a friend to put money into the scheme.
He had a “detailed plan” for the fortune, including donations to various causes and setting up an endowment scheme to help those less fortunate access health care.
But those plans were not to be.
Though he appeared to have millions in equity, the constant drain of tax and security bond payments to secure his next shareholding eventually created significant cash flow problems.
Sam and his wife had effectively run out of money.
After pestering from Burns for the next bond payment, Sam sought a short-term loan from Plus Finance in Hamilton late last year.
“That was the only way,” Sam says. “We had no other funds except selling the house, which wasn’t an option.”
The finance company agreed to lend Sam $240,000. He immediately wired the money overseas.
After receiving the money, and sensing they had now bled Sam dry, Burns and his crew cut communications - ending an elaborate scam that had been running for 3.5 years.
With his phone calls and emails no longer being answered, Sam realised he had been duped.
“It was a bit of an emotional trip for a while. The shit hit the fan. We had to find money in a hurry to repay the loan to Plus Finance.”
With interest on the loan compounding, Sam and his wife took out a reverse mortgage on their home to repay the finance company. The money will be deducted from the sale proceeds of their house after they die.
Sam says with the benefit of hindsight, there were warning signs it was a scam, but he “never suspected”.
“They were draining me out and sucking me in.
“It all looked legitimate. But all the conversations I had with them, now I see they were just one step ahead of me.
“Hindsight’s a horrible word.”
Sam says he’s “not usually gullible” and is amazed by the criminals’ patience and perseverance.
“They were in no great hurry to enrich their pockets.”
The financial loss will restrict the couple’s retirement and they are now more reliant on superannuation.
He is not looking for sympathy by speaking out but hopes to stop other investors being caught out by scammers.
“I wonder how they sleep at night and if they have a conscience.”
A TSB Bank spokeswoman says it wrote to Sam in July 2020 after he instructed TSB to make a payment to an overseas company.
TSB had concerns about the recipient account, the legitimacy of the receiving party’s website and unusual communications associated with the receiving company.
“We advised [Sam] that due to our concerns we were not willing to process the payment. In our letter we strongly urged him to seek advice from a solicitor or financial adviser, and carry out further due diligence if he was considering proceeding with another bank.”
Auckland City Financial Crime Unit Detective Senior Sergeant Craig Bolton says police believe the offenders are based overseas, which poses significant jurisdictional challenges.
“Despite efforts to identify any alleged offenders, police have no local lines of inquiry to progress this offshore scam and the case was filed in late March.”
Police had not approached international agencies, but advised the victim to report the fraud to Hong Kong Police.
A Financial Markets Authority (FMA) spokesman said it posted a public warning about the scam on its website after receiving a complaint earlier this year.
The warning says SW Investments Ltd offered fictitious share investment opportunities to a New Zealander and unreasonably withheld the money invested.
“FMA are concerned that SW Investment Limited and sw-investment.com may be operating a scam.”
The Hong Kong Securities and Futures Commission issued its own warning this month.
The FMA urges investors to exercise caution, check its website for known scams, and only deal with registered financial service providers.
* The victim’s name has been changed to protect his identity.
Don’t get scammed:
- Check the site you’re using is genuine. Make sure the company is based here, has a New Zealand phone number and the website URL matches the company.
- Check very carefully before sending any money or personal information to an investment opportunity, even if you think you’re investing with a legitimate or well-known financial institution. Do not trust links, emails or contact details supplied by callers. Check for yourself with the institution.
- Banks and fund managers are licensed and regulated and do not generally call you out of the blue, offering a new opportunity that demands you immediately send them money.
- Pay attention, listen to your bank if it raises questions or concerns about your payment requests or money transfers – they may have seen other customers lose money responding to the same opportunity. Check with a trusted adviser, friend or family member – often all it takes is a fresh set of eyes to raise red flags you may not have considered.
Source: FMA
Lane Nichols is a senior Herald journalist and deputy head of news based in Auckland. He has worked for the Herald for 10 years covering property, financial fraud, crime, mental health care and workplace deaths. Before coming to the Herald, he spent 10 years at Wellington’s Dominion Post and the Nelson Mail.
