A Canadian, possibly Iranian Canadian, pled guilty in New York today to conspiracy and securities fraud in connection with a scheme where fake securities of tech companies, such as Twitter and Uber, were sold to investors who suffered losses of US$18 million.
Fred Elm, whose real name is Frederic Elmaleh from Toronto, led an investment fund in Florida that sold units in shares of big tech companies such as Twitter, Alibaba, Square, Uber, Snapchat and others. Investors were guaranteed returns of 338% for holding shares in Twitter and 250% for holding shares in Square.
Only the fund did not hold those all those shares for investors, as represented. Investors lost millions of dollars when investor funds were used for the acquisition by Elmaleh of, among other things, fancy fast cars, such as a Bentley Continental GT and Maserati Gran Turismo, a 4,644 sq. ft. 5-bedroom Florida mansion with its own elevator, expensive watches and diamond jewelry. Elmaleh also bought a number of guns.
When investors sought the repayment of their investments, Elmaleh created fake financial documents, and doctored other documents to buy time and pacify investors, according to the pleadings.
On January 15, 2015, the SEC commenced an action in Florida for injunctive and other relief alleging that from 2013 to 2015, Elmaleh through several corporate entities he controlled, ran a Ponzi scheme selling fraudulent investments and that Elmaleh looted some of the proceeds from the Ponzi scheme.
Elmaleh fled to Canada in June 2017, and a few years later in November 2019, was located, arrested and extradited to the US. During the time he was in Canada, he appears to have moved into buying Bitcoin and Tron in Toronto.
US prosecutors sought repayment of over US$2 million from the 70 year old parents of Elmaleh in Toronto – at first for unjust enrichment because they received money from Elmaleh’s fund and provided no services – but later, they were alleged to have operated Ontario companies to front the movements of funds for their son. Over 20 people in Toronto were sued by the US government and funds were clawed back from them for unjust enrichment because payments were made by the firm and / or the fund and no services were rendered.
As part of his plea deal, Elmaleh agreed to pay back US$8.3 million and is expected to be sentenced to 17.5 years in federal prison. He is currently held at New York’s MCC. You can read more here.
Another Canadian who was part of the investment firm, Ahmed Naqvi, who also fled the US for Canada and who was also located, arrested and extradited, is expected to be sentenced in June 2020 in New York.