FLORIDA — AGAIN: James Clements and Zeina Smidi Of Plantation Ran $30 Million Ponzi Scheme, SEC Says; Firm Claimed ‘Protected Jurisdiction’ Offshore; Defendants Already Face $50 Million Judgment From Class-Action Lawsuit
Two Florida residents have been accused by the SEC of operating a $30 million Ponzi and promissory-notes scheme that purported to trade foreign currency amid claims their domestic company was morphing into an “offshore” firm that would operate in a “protected jurisdiction.” The defendants in the case already face a judgment of $50 million from a class-action lawsuit filed against them by investors they ripped off, according to court filings.
Charged by the SEC were James Clements, 45, and Zeina Smidi, 27, of Plantation. Also charged were their companies: MRT LLC, MRT Holdings LTD and Maximum Return Transaction LLC. (Collectively MRT.) The SEC said MRT Holdings was formed in the Republic of Seychelles, an island nation in the Indian Ocean.
The SEC case also references an alleged claim by MRT in 2007 that it was “shifting” from MRT LLC into MRT Holdings to become an “offshore entity.” In April 2007, according to a company note to an investor the SEC quoted to a federal judge, Smidi said MRT would operate from Belize, a country in Central America.
“[W]e have chosen Belize because this allows us to offer our very lucrative products and manager program to you,” Smidi allegedly wrote. “After two years of legal research, we have found that transitioning offshore is the best way to keep our program compliant.”
By June 2007 — after it had slashed its payout rate — Clements told MRT’s pitchmen that the company was switching away from foreign currency, the SEC charged.
Clements and Smidi “claimed in a letter to investors they wanted MRT’s money working with the best Swiss banks and advisors, and were searching for a high-yielding product that also offered a high level of security,” the SEC said.
MRT traded very little Forex, and the trading that did occur resulted in losses, the SEC said. Instead, the company concentrated on keeping its Florida-based Ponzi scheme afloat, while investing “approximately $550,000 in a now-defunct currency trading firm that never returned MRT’s funds,” the SEC charged.
As part of the scheme, MRT used “certain investors who agreed to be ‘account managers’ to solicit hundreds of investors through informal gatherings and word of mouth,” the SEC said.
“During the early fall of 2007, MRT stopped answering investor phone calls, fulfilling redemption requests or responding to emails,” the SEC said.
Read the SEC complaint.