3 B.C. residents found to have participated in fake gold mine scheme

Gold bars are shown. (Shutterstock.com)

Three B.C. residents participated in an elaborate international fraud that U.S. investigators have called both a Ponzi and a pyramid scheme, the province's financial markets regulator has ruled.

In a decision issued this week, a panel of the B.C. Securities Commission concluded that Sabrina Ling Huei Wei, Justin Colin Villarin and James Bernard Law participated in the scheme, which promised investors huge returns from gold mining operations in Africa and Brazil that didn't actually exist.

Two other B.C. residents, Monita Hung Mui Chan, of Burnaby, and Marie-Joy Vincent, of Surrey, admitted to participating in the scheme and were fined in settlements negotiated with the BCSC last year.

Wei, Villarin and Law "solicited investors, organized events and sold membership units" in U.S. based companies incorporated in Massachusetts and Florida, according to the BCSC ruling.

The conduct occurred in 2014 and 2015.

"Investors were promised extraordinarily high, no-risk returns on supposedly lucrative gold mining operations in Mali and Brazil," the commission said in a news release announcing the decision.

"In reality, (the companies') only source of money was investors."

The fraud was orchestrated by Daniel Fernandes Rojo Filho, a Brazilian national living in Florida, according to the BCSC.

The U.S. Securities and Exchange Commission says the fraud raised more than US$15 million from more than 1,400 investors, and the BCSC found 137 people with B.C. connections lost a total of C$1.5 million to the scheme.

The companies, both known as DFRF, promised investors monthly returns of 15 per cent, as well as 10 per cent commissions on memberships purchased by people they referred to DFRF, according to the BCSC decision.

Filho – and people who promoted the companies on his behalf in YouTube videos and at seminars – also claimed that the investments were insured and that DFRF would soon be going public.

"None of the funds raised by investors were used for gold mining, and bank records show no proof that DFRF had other legitimate business activities," the BCSC said in its release.

"Filho used more than US$6 million of investors’ money for personal expenses and luxury cars."

The B.C. investigation began in 2015, when the BCSC received a tip about a presentation for DFRF at a downtown Vancouver hotel and sent investigators to attend.

"At the presentation, Wei described the scheme to potential investors as an opportunity to amass great wealth," the commission's release reads.

"Law claimed experience as a gold exporter in Mali, encouraging investors to believe that DFRF had direct access to an abundance of gold."

Shortly after the event, the BCSC issued an investor alert about DFRF, warning that the companies' claims were "characteristic of investment fraud."

"The BCSC panel found that Wei, Law and Villarin chose to enable Filho’s deceitful acts, and knew – or should have known – that Filho’s claims, and theirs, were fraudulent," the BCSC said. "Although they became increasingly aware of red flags surrounding DFRF, including the promise of unreasonably high returns, the lack of details about its finances or mines, and the BCSC’s investor alert, Wei, Law and Villarin continued to promote it to unwitting investors."

Punishment for the B.C. residents has not yet been determined. The panel directed the BCSC's executive director to make submissions on proposed penalties by Oct. 25, and the respondents will have until Nov. 15 to respond to the proposal.

The panel will consider sanctions once all submissions have been received. It will also consider B.C.-specific sanctions against Filho based on a U.S. court judgment against him.