Man pleads guilty to dozens of fraud charges in Ponzi scheme
A St. Albert man who was facing 83 counts of fraud for running a Ponzi scheme has now pleaded guilty to 55 charges.
Wade Robert Closson entered 38 more guilty pleas to fraud over $5,000 on Wednesday afternoon in Edmonton Court of Queen’s Bench in front of Justice Paul Belzil. The guilty pleas follow a court appearance by Closson on Monday when he entered 17 guilty pleas to fraud over $5,000 related to the same incident.
The remaining charges were withdrawn.
Victims of the fraud included family members and life-long friends. Some people lost their retirement savings or college funds. Many victims lost more than $100,000. One couple lost nearly $650,000.
Closson, 47, was slated to begin a nine-week long trial on Monday for the 83 charges he was facing related to a Ponzi scheme that he ran between 2006 and 2013.
In an agreed statement of facts read in court on Wednesday the court heard that Closson operated two companies, Optam Holdings Inc. and Infinivest Mortgage Investment Corporation, which both went into bankruptcy in 2013. Closson would take the money invested in Infinivest to pay off the investors in Optam.
When Optam filed for bankruptcy it listed around $10 million in liabilities spread among 69 creditors. The largest creditor to Optam was Infinivest, which Optam owed $4 million.
Closson used the investors’ money to pay himself around $1.185 million during that period. He also used an unspecified amount of money to pay for his vehicle, credit cards and golf membership; to make mortgage payments for his mother and father-in-law; and to pay commission to friends and relatives for recruiting new investors. He used additional money to fund other companies, including an unprofitable investment into a company that operated a lumber mill in Nicaragua.
Damian Rogers, one of the specialized fraud Crown prosecutors on the case, said that this was the first full Ponzi scheme he has ever prosecuted.
Overall the 43 investors in Optam lost $3,425,154 and the 28 investors in Infinivest lost $2,418,167 for a grand total of $5,843,321 lost.
At first, some of the investors were seeing returns on their investments, spurring them to invest more money with Closson, the agreed statement of facts stated.
“A number of investors invested more than one time and often that was because they received what they believed to be investment returns but were in fact often money that was invested by new investors, so money was being recycled,” Rogers said.
On Wednesday the court heard that Closson began operating Optam in 2006 and Infinivest in 2005. Optam was marketed to investors as a business that offered mortgages or other loans to people who would not normally quality from regular financial institutions. Closson issued promissory notes to investors guaranteeing fixed income rates of 18 per cent and sometimes as high as 24 per cent.
Investors in Optam were led to believe that Closson made money by charging administration fees to borrowers up front.
Infinivest was marketed to investors as a company that could invest registered accounts such as RRSPs TFSAs, LIRAs and RESPs and in residential mortgages, similar to how Optam was operating. Infinivest investors were guaranteed an annual interest rate of 12 to 16 per cent.
Instead of investing the money, Closson used investments in Infinivest to pay back some investors in Optam.
Court records show Optam issued 82 mortgages between 2007 and 2009 and most of them were second or subsequent mortgages. In almost all of the cases the property value was not enough to reimburse the entire amount owed to Optam in the case of foreclosure.
Of the 82 mortgage loans made by Optam, 32 were foreclosed on by the primary lender which lead to a loss of $1.9 million to Optam.
Between November 2008 and 2009 Optam’s net operating loss was $755,467. The losses continued and between November 2011 and October 2012 the net operating loss peaked at just under $2 million.
According to the agreed statement of facts, Closson continued operating while losing money for so long because he was using new loans to pay back old loans. Most investors in Infinivest received no interest payments or a return of their money.
Rogers said that the impact on the victims was significant.
“Many people had stresses in their families, stresses in their marriages, delayed plans they had for their money, some of the victims were already retired and lost some of their retirement saving,” Rogers said.
Closson’s victims included his lifelong friends and his wife’s family members.
Many of the victims of the fraud lost over $100,000 with one couple suffering a loss of $649,353.14, which included money from a line of credit and their pension. Closson took $80,000 of that amount out of the couple’s bank accounts without their permission.
The Ponzi scheme spurred an investigation by the Alberta Securities Commission which fined Closson $1 million and banned him from trading in the province in 2015. So far Clossen has made no payments.
Closson is currently out on bail and has surrendered his passport.
He is slated to return to court April 18 for sentencing. The sentencing is anticipated to take the entire day as more than 20 victims are likely to submit victim impact statements.
Rogers said that fraud over $5,000 carries a maximum sentence of 14 years.
“We expect to be seeking a sentence that will be served in a penitentiary,” Rogers said.