Canadian Jury Convicts Two Men for Running $400 Million Ponzi Scheme
On Feb. 14, a jury in Calgary, Alberta convicted Gary Sorenson and Milowe Brost of securities fraud for their role in what has been described as the largest Ponzi scheme in Canadian history. Prosecutors for the Canadian Crown presented evidence Sorenson and Brost defrauded more than 3,000 people, including a number of U.S. residents, out of as much as $400 million over more than a decade. The two men will be sentenced later this month, and each faces a maximum prison sentence of 14 years.
Sorenson and Brost previously faced regulatory action in this country. In 2010, the U.S. Securities and Exchange Commission obtained a default judgment against both men from a federal judge in Seattle. The judgment froze the pair’s U.S. assets and ordered them to pay approximately $310 million in disgorgement and civil penalties. The Alberta Securities Commission issued its own administrative order against Sorenson and Brost in 2012, fining them an additional $54 million. (In Canada, securities regulation is usually handled at the provincial, rather than federal level.)
According to the SEC’s account in its 2010 complaint, Sorenson and Brost’s Ponzi scheme was a “multi-level marketing organization” that utilized more 80 separate legal entities. This was a truly international scheme, involving entities in the U.S., Canada, Portugal, Malaysia and various Latin American countries. The focal point of the scheme was Syndicated Gold Depository, Inc. (SGD), an entity owned by Sorenson and Brost. They sold promissory notes on behalf of SGD, which they falsely claimed was an independent company. SGD claimed it would pool investor funds and loan them to another entity, Merendon Mining Corp. Ltd., which supposedly invested in gold mining operations in Honduras. Sorenson and Brost said Merendon had enough assets to back the promissory notes.
But in reality, Merendon was insolvent and SGD merely a front for Sorenson and Brost “to purchase and outfit luxury resorts, extravagant homes, and purchase recreational vehicles” for themselves. As is typical in a Ponzi scheme, Sorenson and Brost used new client funds to repay older clients, which eventually led them to sell securities in other insolvent shell companies under their control. The scheme ultimately collapsed in 2008 when Sorenson and Brost could no longer attract sufficient new investment to pay outstanding obligations.
Seniors Lost Homes, Retirement Accounts
The SEC noted many of Sorenson and Brost’s victims were elderly and “saw their homes go into foreclosure and have been forced to postpone or reverse retirement decisions as a result” of losing money when the Ponzi scheme collapsed. Brian Holtby, the Canadian prosecutor in charge of the criminal case, said many of the victims were “vulnerable and attracted to unregulated investments.” He told the Toronto Globe and Mail that Brost in particular “preyed” upon “middle-aged investors” whom he convinced to “part with their savings for the lure of big returns in low-risk ventures, supposedly backed by gold deposits.”
Anyone can be the target of a Ponzi scheme. Even if you are an experienced investor, you may fall prey to a slick sales pitch by a hustler offering a seemingly can’t-lose venture. And many times you won’t realize your mistake until it is too late. If you have been the victim of a Ponzi scheme and require independent legal advice, contact Florida securities fraud attorney Gregory Tendrich, P.A., right away.