B.C. woman accused in $135-million Ponzi scheme
Canadian dollars are pictured in Vancouver, B.C. in this file photo. (Jonathan Hayward / THE CANADIAN PRESS)
Published Tuesday, January 22, 2013 9:07AM PST
Last Updated Tuesday, January 22, 2013 9:09AM PST
VANCOUVER -- The B.C. Securities Commission accused a woman on Monday of running a Ponzi scheme and raising $135.4 million from at least 800 investors in Canada and the United States.
The regulator alleged Doris Nelson operated a payday loan business called the Little Loan Shoppe and told investors that because her business was so profitable, she could afford promissory notes paying annual interest rates of 40 per cent to 60 per cent.
"Nelson paid out purported returns to some investors, but her business was not profitable," the regulator said.
"Instead it consistently lost money due to its high rate of customer loan defaults. Nelson was able to create the appearance of profitability, and to pay high rates of interest on the promissory notes, only because she used money obtained from later investors to make payments to earlier investors."
The commission accused Nelson, a Canadian citizen living under house arrest in Colbert, Wash., of fraud and making false statements to the commission.
The allegations have not been proven.
The regulator said Nelson paid out a total of $118 million to investors, including $2.2 million in commissions to recruiters.
It's alleged that operating losses, money she withdrew from the business for her own use, and other unaccounted for losses made up the remaining $17.4 million, which the regulator said did not appear recoverable.
Nelson stopped making payments to investors in 2009 and three months later, a group of investors petitioned one of Nelson's companies into bankruptcy, and another filed a voluntary petition for bankruptcy.
The B.C. regulator's case follows charges in the U.S. where Nelson is awaiting trial on 71 counts of wire fraud, 22 counts of mail fraud, and 17 counts of international money laundering.