Ex-directors of gold investment firm get jail for fraudulent multimillion-dollar buyback scheme

SINGAPORE: Two former directors of a company that sold gold bars in a buyback arrangement which turned out to be a multimillion-dollar Ponzi scheme were sentenced to jail on Monday (Sep 12).

Iseli Rudolf James Maitland, 63, and How Soo Feng, 48, were each given three years and 10 months' jail for fraudulent trading.

They were found guilty of a charge each of being a party to a business for the fraudulent purpose of selling gold bars under a scheme promising returns.

The company, The Gold Label, ran a gold buyback business between 2009 and 2011. The firm sold gold bars to its customers at a premium of more than 20 per cent above prevailing gold market prices in contracts lasting three or six months.

In exchange, customers were promised guaranteed returns as high as 24 per cent per annum. At the end of the contract period, customers could sell the gold bars back to The Gold Label at the same price that they had bought the gold bars.

In theory, this allowed customers to recoup their initial investment amount in full while making guaranteed returns, creating a semblance of risk-free investment with attractive returns.

During its operations, The Gold Label drew more than 2,000 customers and accumulated sales of about S$150 million.

However, the company had no profit-generating business, nor any sustainable means to honour the payment and buyback obligations owed to its customers. Instead, it relied entirely on new sales proceeds from subsequent customers to pay obligations owed to earlier customers.

In October 2010, within a year of starting its sale of gold bars, the company filed to wind up, and had a total liability of S$85.3 million at the time.

By then, its payout and buyback obligations to its customers had amounted to more than S$85 million.

Both Maitland and How had contested the charges. At trial, they argued that the company had a formula which could generate sufficient profits for the firm to honour its obligations.

However, the court found that there was no such formula and that the pair knew this from the start.

"The timing of the winding up seems to indicate that their decision was not borne out of benevolence to save their clients, but desperation to cover up the Ponzi scheme that was soon to be exposed," said the judge.

Maitland was allowed to defer his jail term to Sep 29.

For fraudulent trading under the Companies Act, the pair could have been jailed for up to seven years, fined up to S$15,000, or both.

A third former director, Wong Kwan Sing, had been sentenced to two years and 10 months jail in January. He was nabbed after absconding to Malaysia.