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An Auckland foreign exchange broker with an "ultra-ego" who once invested sums of up to $200 million has been jailed for running a Ponzi scheme which defrauded his clients of millions of dollars.
Kelvin Clive Wood was sentenced this morning in the Auckland District Court by Judge Robert Ronayne ontwo representative charges of obtaining by deception and theft by person in a special relationship.
The 70-year-old was jailed for six years and three months, while the judge also imposed a minimum period of imprisonment of two years and 11 months.
The Serious Fraud Office (SFO) prosecuted Wood for the Ponzi scheme he ran between 2010 to 2017 when his foreign exchange brokerage began to suffer net trading losses.
A Ponzi scheme is a fraud that promises high returns for investors, but those returns are paid to older investors through revenue paid by new investors.
Kelvin Clive Wood was jailed today for more than six years for running a Ponzi scheme. Photo / Sam Hurley
Wood used new investors' funds to pay other investors their reported gains or to refund investment principal. None of Wood's clients, however, were aware their funds were being used to repay other investors.
Forex NZ Ltd and Forex NZ 2000 Ltd were the trading names of Wood's foreign exchange brokerage, which also had Wood's son Adam Wood as a director and shareholder until 2015.
The court heard today that some $22.5 million was invested with Wood over about a seven year period, with more than $7m of investment principal belonging to at least 18 investors lost.
Wood's clients invested money with him for fixed interest term deposits, the purchase of foreign currency, general investment and foreign exchange trading purposes.
All of the investors' identities were permanently suppressed by Judge Ronayne today, but he said three victims have suffered losses exceeding a million dollars - one losing $1.7m.
In a statement one victim said: "We are broken people, shadows of our former selves."
Another said: "I cannot recall feeling happy since this incident as I'm always working to make ends meet."
An elderly victim said her life savings were now vanished and recalled when Wood was confronted he made an offhand comment about being only concerned of facing a possible prison term.
"We have to face the rest of our retirement and future financial commitments with no financial backup," the woman said.
SFO prosecutor Annabel Maxwell-Scott said Wood made some 223 false investment reports and continued with his fraud "to save face" while the "lives around him were slowly being devastated".
While Wood, who is now suffering from ill health, did not live a high life of fast cars and island holidays, Maxwell-Scott said there was still some "self interest" in the fraud.
Wood's lawyer Shane Tait said his client was once considered a highly successful financial investor who had dealt with sums of up to $200m for his clients.
Judge Ronayne said from 2008 onwards, Wood knew he could not repay his investors and quickly became reliant on new funds to repay interest and debts.
Wood, who has been declared bankrupt, continued to falsely report trading profits throughout the scheme to prevent investors withdrawing their funds, Judge Ronayne said.
The judge said Wood knew his Ponzi scheme was doomed from the beginning but continued to steal his clients' cash.
In 2017, Wood voluntarily approached the Financial Markets Authority (FMA) to admit his fraud.
He told the FMA, which referred the case to the SFO, he believed some 20 clients were owed about $8m in investment principal.
The court also heard Wood had previously worked in the banking sector, where he described himself as "the youngest manager in ASB" earlier in his career.
He also said he developed an "ultra-ego" which he was unaware of prior to his arrest.
Acting director of the SFO, Rajesh Chhana, said in a statement after sentencing that Wood "earned the trust of a group of investors through his personal and professional association with them".
"His breach of that trust is reflected in the sentence imposed today," she said.
"The prosecution of such matters holds to account those who fail to conduct business in accordance with the expectations of a reputable market."
The case against Wood is part of several recent forex frauds prosecuted by the SFO.
Just yesterday, a Queen St forex broker whose business collapsed, leaving clients out of pocket for reportedly millions of dollars, pleaded guilty to 47 fraud charges.
The charges against Russell Maher, 52, relate to his foreign exchange service Forex Brokers Ltd.
