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CALGARY, Alberta (Reuters) - Securities regulators in the Canadian province of Alberta said on Thursday that Gold-Quest International Inc was a classic Ponzi scheme that bilked investors out of $29 million with the promise of sky-high returns from foreign currency trading.
A panel convened by the Alberta Securities Commission said Gold-Quest, operated from Las Vegas but registered in Panama, promised investors an 87.5 percent return on money invested in the company for one year, as well as payments for convincing others to invest in the scheme.
The commission also said Gold-Quest illegally distributed securities in the province and made untrue statements about the safety of the investments and anticipated returns.
"Gold-Quest International Corp. raised approximately US$29 million from approximately 2,940 investors ... through a sham investment scheme that was both a classic Ponzi scheme and a classic pyramid scheme," the commission said.
The firm operated from June 2006 to May 2008, when it was shut down by the U.S. Securities and Exchange Commission.
A number of such schemes, which use cash from new investors to pay returns to earlier participants, have been uncovered in North America since an estimated $65 billion swindle by financier Bernard Madoff was revealed in December 2008.
In its decision, the commission said Gold-Quest investors were told the firm had developed proprietary strategies for trading currencies, which generated high returns. However most of the money raised was paid out as commissions and the firm did no currency trading.
No officials from Gold-Quest could be immediately located for comment.
The panel will meet again in March to decide on penalties.
Reporting by Scott Haggett; editing by Rob Wilson