Scammer admits role in $8.3m fraud

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Jimmie Kevin McNicholl was a director of Arena Capital, which purported to run a foreign exchange scheme called BlackfortFX.

Hearing the investment doubling his money was a scam was an awful "kick in the guts", says a Christchurch tradesman sucked in by the rort.

Jimmie McNicholl, 56, a cleaner, appeared in the Christchurch District Court on Thursday to admit his part in the scam in which about 900 people invested $8.3 million in a fake foreign exchange scheme in 2014 and 2015.  

The scheme was run from Auckland by McNicholl and his fraudster mate Lance Jack Ryan (aka Lance Jared Thompson) through their company Arena Capital trading as BlackfortFX.

McNicholl on Thursday pleaded guilty to a charge of obtaining registration as a Financial Service Provider (FSP) by deception. Investors say they felt their investment was safe because BlackfortFX was registered on the Financial Service Providers' Register. 

McNicholl signed a letter seeking FSP registration, saying Ryan was no longer involved after the Financial Market Authority became concerned about Ryan's fraud background.

Ryan earlier admitted charges of theft by a person in a special relationship, forgery, altering a document, and false accounting.

Both men will be sentenced on June 20.

The tradesman said the scheme did seem too good to be be true, but he was promised a refund if the investment went "bung" and couldn't stand the thought of being left out if it worked.

"The wheels were starting to wobble and the friend who got me into it rang me up and told me we had lost everything. It was a scam.

"I felt kicked in the guts. We had all these dreams, everybody did, and you're so let down, you're so disappointed."

The man said he and his wife originally invested about $6000 but were able to withdraw $30,000 from their account as the amounts doubled. He had been forced to pay the money back by Arena Capital's liquidators.

One of his friends was so badly hit, he had had to sell his house.

The scheme started in May 2014 until it was closed a year later by the Financial Markets Authority. By then the 900 investors recruited all over the South Island had ploughed $8.3m into the scheme.

Investors initially saw their investments double, even triple. They withdrew money without problem because the operators were using the money provided by new investors to pay the "profits" on the earlier investments. The Serious Fraud Office would call it a Ponzi arrangement.

It was entirely fictitious. No foreign exchange was traded. No traders or foreign offices existed. Transactions had occurred but they were mainly McNicholl and Ryan buying cars, property and luxury items.

McNicholl used at least $767,838 of Arena's funds for his own benefit. He put a $350,000 deposit on a $3.5m property in Christchurch and bought a $111,000 car.

About $1.4m was taken by Ryan, who paid money into a family trust and bought a $1m property in Auckland. 

McNicholl was remanded for a pre-sentence report that will cover his suitability for a home detention sentence, though he was told that was not an indication of the likely sentence.

Accountancy firm KordaMetha has been sorting out the mess since being appointed receivers and liquidators of Arena Capital. It has sold assets and clawed back $843,000 of the $2.48m, 96 investors received in addition to the money they put in. 

It has so far paid back 39 cents to each investor and creditor.