US arrests made in connection with Guernsey’s Providence case
Two executives of the Miami-based parent of Guernsey-based Providence Global Ltd, which collapsed in 2016, have been federally indicted, and third defendant pleaded guilty to his role “in the multi-million dollar fraud scheme”, according to court documents published in the US last week.
According to the documents, Antonio Carlos Buzaneli, 56, and Jose Manuel Ordoñez, 46, were taken into custody on 17 November in Florida, where they live, and made an initial appearance in US District Court in Miami that afternoon. They are being charged in connection with what the documents call “a US$150m investment fraud scheme involving purported Brazilian factoring”.
The third defendant, Julio Enrique Rivera, 61, also a Florida resident, pleaded guilty to one count of conspiracy to commit mail fraud.
The three men “were the principals of Providence Holdings International, Inc, a company based in Key Biscane, Florida”, the court documents note, adding that “in 2009 and 2010, [they] formed Providence Financial Investments Inc and Providenced Fixed Income Fund LLC – collectively, along with Providence Holdings International Inc – in order to raise money from investors.”
They did this, the document goes on to explain, from about 2010 to June 2016, raising approximately $US150m “from investors worldwide by representing that Providence would invest the money in Brazilian factoring”, which they said would enable investors to make a 48% annual return.
Offices and affiliates were opened around the world, including in London, Hong Kong, Taipei, Shanghai, Singapore, Vancouver and Panama, the court document states, but in reality the money was not used to purchase receivables in the Brazilian factoring market, but was instead channeled elsewhere, much of it to other Providence-controlled entities around the world as well as to bank accounts controlled by Buzaneli and Ordoñez. From these accounts, “the money was used for payments unrelated to Brazilian factoring, including to pay commissions to US brokers and to make interest payments to American investors in Providence’s US-based entities”.
This, the court document goes on, led to Providence Financial Investments and the Providence Fixed Income Fund filing for Chapter 7 bankruptcy protection on 28 July 2016, and to the subsequent collapse of the various arms of the business, including those on Guernsey.
To read the court document on the US Department of Justice’s website, click here.
As reported, arrests have also been made subsequently in Guernsey, where four men faced fraud charges, following an investigation led by Guernsey’s Economic Crime Division.
The case has been of interest to investors not just in the USE and Guernsey, but on Guernsey’s neighbouring island of Jersey, where the Providence products were also sold.
In addition to Providence Investment Funds and Providence Investment Management International, Providence Global’s businesses included a Brazilian factoring company, Providence Fomento Mercantil, Investimentos e Participações Ltda into which the Providence fund had invested, according to the GFSC. Among its products were two mini-bonds, Providence Bonds plc and Providence Bonds II plc.
UK investors were also caught up in the scam, according to reports that emerged after the bankruptcy was announced, which said that some 800 UK individuals had invested an estimated £8.15m in the two mini-bond products, which were unregulated in nature and thus sold to sophisticated investors, high-net-worth individuals and others in the non-retail investment market.
Separately, the investigation into the Providence collapse was reported to be taking place alongside one being carried out by the Jersey Financial Services Commission, which was looking into a Providence-owned Jersey entity known as Lumiere Wealth, the local agent for the Providence Investment funds.