Feds accuse man of defrauding 40,000 investors in 6 continents of $70 million
EAST ST. LOUIS, Ill. – EAST ST. LOUIS, Ill. (AP) — The U.S. government has accused a former Canadian resident possibly living in the Philippines of bilking some 40,000 investors spanning six continents of $70 million in an Internet-based Ponzi scheme.
A 10-count federal complaint filed Friday charges Nicholas Smirnow, 53, with conspiracy and fraud counts in the alleged scheme the federal investigators say covered two years until 2009 and included victims in every U.S. state except Maine and Vermont.
The office of the U.S. attorney for southern Illinois said in a statement that Smirnow, formerly of Baysville, Ontario, has been living in the Philippines. It did not indicate Smirnow's nationality, if he was still believed to be in the Philippines or if he was in custody.
A. Courtney Cox, the U.S. attorney for southern Illinois, declined to provide more details, simply describing the case as "massive."
"This is a case of national importance, there's no question about that," Cox told The Associated Press.
Messages left with Interpol, the Paris-based international police intelligence-sharing association, seeking information about Smirnow's whereabouts were not immediately returned.
Authorities say Smirnow's "Pathway-2-Prosperity" lured investors with what the complaint termed the hallmark of a high-yield investment scheme — claims of low- or no-risk investment plans, in this case supposedly yielding annual returns of anywhere from 546 to 17,000 percent. Investors were offered their choice of seven-, 15-, 30- and 60-day plans.
Prosecutors allege that Smirnow operated in the Philippines and Canada through a Netherlands-based Web site and a company incorporated in the Caribbean's Turks and Caicos Islands.
According to the complaint, some of the earliest investors made substantial returns but most investors lost everything.
The U.S. government's list of countries where investors supposedly got swindled ran the gamut, from China and the United Kingdom to the Balkans, Central America and Iceland.
As early as October 2007, bloggers posted their suspicions about "Pathway-2-Prosperity."
In August 2008, North Dakota's securities chief, Karen Tyler, warned of Smirnow's alleged operation, saying it had "all the earmarks of a classic Ponzi scheme with money from later investors used to pay unrealistically high returns to early investor/promoters."
Friday's complaint includes four counts apiece of wire and mail fraud, each punishable by up to 20 years in prison and $250,000 in fines. The single counts of securities fraud and conspiracy to defraud carry a possible five years in prison and $250,000 in fines.
The case has been assigned to Bruce Reppert, an assistant U.S. attorney in southern Illinois that Cox said had expertise in prosecuting such cases. Smirnow's alleged swindle also claimed victims in half of the 38 counties making up Cox's turf.