A fraudulent investment operation where the scammer provides fake reports and generates returns for old investors through money paid by new investors, rather than through ligitimate business activities.
Rogue traders in the $200 million
Exential scam in Dubai have been
sentenced to more than 500 years
each in prison, The National can reveal.
Two of the main people at the centre of
the Dh734.6m Ponzi scheme, Sydney
Lemos and Ryan Fernandez, were on Sunday sentenced by a Dubai court to a year
in prison each for more than 500 criminal cases.
The two can appeal but neither is likely to be released because even a huge
reduction in their sentence would still result in a life term at Dubai Central Prison in Al Awir.
“This sentence far exceeds the lifetime of a person so it means that even if they do very
well in the correctional institution, they are unlikely to ever be released,” said Barney Almazar,
head of legal aid at the Philippine Embassy in the UAE, who stepped in to help some of those
“It sends a very strong message. Financial crime not only destroys the lives of those who
have paid out but often their extended family, too.”
Many investors were left destitute from the collapse of Exential in Media City, when
the Department of Economic Development moved in to shut down the operation in 2016.
Lemos and Fernandez were arrested later that year.
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Dubai courts were flooded with submissions against the company when word spread
that only those filing their own police reports were likely to have any funds returned.
It is unclear if the wider network behind the Exential scam will be brought before criminal
courts in the UAE, although global asset freezes are likely to continue.
“The known assets in Dubai would have been the first ones to be seized once the
court order had been executed,” Mr Almazar said.
“There have been two separate cases here, the civil and criminal case, and each
is different in nature.
“The criminal case is not just about the victims but the state and society in general.
As far as the victims are concerned, of course they want to recover their money.
“What has been proven now is criminal but those who have suffered are still waiting
for their money.”
On January 15, courts in the British Virgin Islands approved an application
by law firm Kobre and Kim for a liquidation order against FCI Markets, an offshore
brokerage linked to Exential.
A late application by a company director was rejected, allowing liquidators to
proceed with an extensive asset recovery.
Evidence was submitted to the Virgin Islands court by investigators employed
by UK law firm Carlton Huxley to prove FCI Market’s creditors were owed
considerable sums of money that the company was refusing to repay.
Exential's office in Dubai Media City closed after Department of Economic Development moved to shut it down in 2016.
The company directors were replaced by court-appointed liquidator Kalo Advisers in
the Virgin Islands to demand the disclosure and return of all assets held in its name.
Bill Ferguson, a lead investigator with Carlton Huxley, has spent months tracking
down assets owned by Exential and its partner companies, including FCI.
“We are now working to find out who the bad-faith investors were, who knew this
was a scam but encouraged others to get involved regardless,” Mr Ferguson told The National .
“Some have made as much as $2.5m (Dh9.1m), so this sentence sends a message
that the courts will deliver harsh penalties to those found to be compliant. A friend,
an insider or family member may have gone on to recruit other investors in this case.”
Law-enforcement consultants at Carlton Huxley have been liaising with lawyers
experienced in Bernard Madoff’s $64.8 billion Ponzi scheme, the largest in history,
with almost 5,000 clients.
“We know that, as in the Madoff case, the investors who are collecting funds from
those who got in late are sharing in the proceeds of crime,” Mr Ferguson said.
“Those who made money from those at the back end are going to have their property taken away.”
BACKGROUND: No end in sight for the cabin crew and church-goers who lost everything
Carlton Huxley has so far managed to recover about $6m.
FCI Markets was an offshore registered broker and sponsored an Indian football club in Goa.
Searches for assets have taken place in the UAE, India, Australia, America, Canada and the
British Virgin Islands. About 25 bank accounts have been frozen and emptied.
One of the investors, a Filipino cabin crew member who spent close to Dh50,000 in
legal fees and six months in the civil courts pursuing his claim, was awarded a
Dh1m judgment by a Dubai court last year.
He is yet to receive any money because court-appointed marshals have yet to
recover any assets registered in the names of Exential in the UAE.
“I’ve been told they have no money left in any of their accounts here to repay me or
any of the other investors, despite making their judgment that Exential should pay me Dh1m,”
the airline worker said.
“Some investors want to get their money back but are not prepared to do anything about it.
Others have just given up. I had 10 accounts so it was about Dh700,000 that I was owed in
my original deposits and the returns that were promised.
“I’ve had nothing repaid to now, so I don’t want to give others false hope.”