Ponzi scheme ‘mastermind’ receives record sentence

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The man described as the ‘mastermind’ behind more than a dozen unregistered offshore managed investment funds, including a $30 million Ponzi scheme, was today ordered to pay a record penalty of $500,000, and was permanently banned from managing companies and providing financial services.

The penalty order of $500,000 is the largest awarded in ASIC’s history.

David Hobbs of Nelson, New Zealand, was one of 13 people, including his wife, Jacqueline Hobbs, who operated the unlicensed funds, which targeted Australian investors and self-managed superannuation funds.

More than $55 million was invested in 14 individual investment funds in countries including New Zealand, the United States, Hong Kong, Vanuatu, the Bahamas, Anguilla, and the Turks and Caicos Islands.

In a decision in November 2012, the Supreme Court of NSW found that together the funds were one large scheme and that Mr Hobbs either ‘personally chose’ or ‘implicitly approved’ the other individuals who operated the scheme with him.

At the Supreme Court of NSW, Justice Julie Ward today imposed the following penalties:
 

Name

Disqualification / Banning from financial services

Disqualification / Banning from managing corporations

Pecuniary penalty

David Hobbs

Permanent

Permanent

$500,000

David Collard (of Peakhurst)

Permanent

20 years

$150,000

Jacqueline Hobbs (of Nelson, New Zealand)

8 years

6 years

$20,000

Huimin (Nancy) Wu (of Strathfield)

8 years

4 years

Not applicable

In handing down her decision today, Justice Ward said the Hobbs scheme could be characterised as "one presented to unsophisticated investors as a ‘get rich quick’ scheme with no risk of loss of capital and a huge upside on the profits by reason of their investment".

She found Mr Hobbs’ conduct, in directing the payment of moneys out of investment schemes for his own personal benefit, as well as the giving by him of directions as to the payment of returns at a fixed percentage irrespective of the existence of profits (as in a Ponzi scheme), was serious and reflected a disregard for the interests of investors. Justice Ward said this, along with other factors such as the fact superannuation money was targeted, justified the imposition of significant penalties.

Justice Ward also found Mr Hobbs ‘deliberately sought to put in place and have implemented a structure that was intended to avoid regulatory supervision (and hence would deprive investors of that safeguard)’.

ASIC Commissioner Greg Tanzer condemned Mr Hobbs’ illegal behaviour.

"The whole scheme was designed to avoid compliance with Australian financial services laws," Mr Tanzer said.

"Mr Hobbs’ conduct involved a gross breach of investors’ trust. His actions were very serious and have left his victims in difficult financial positions."

More stories:

Ponzi charges: Unregistered managed investment fund operators to face court

Ponzi scheme operators pay the price for greed