Canadian Accused of $2 Million Ponzi Scheme as New Legislation Takes Effect Imposing Tougher Penalties for Financial Crimes

A Toronto man was recently arrested and charged with operating a Ponzi scheme that allegedly defrauded victims out of over $2 million.  Andre Lewis, 47, of Mississauga, Ontario, was charged with twelve counts of fraud over $5,000 in connection with at least twelve victims whose collective loss is estimated at over $2.3 million. Authorities have stated that they believe there are more victims.  The arrest comes on the eve of the introduction of new penalties for individuals convicted of financial crimes, including Ponzi schemes.  

Authorities alleged that Lewis operated LexxCo Corporation ("LexxCo") out of the East Mall in Toronto.  LexxCo solicited potential investors through advertisements in local papers that promised a 10% to 12% return on investments that would be made in real estate and small business loans.  However, instead of making investments, police allege that Lewis instead used funds from new investors to make interest payments to existing investors in typical Ponzi scheme fashion.  Originally scheduled to appear in court today, authorities requested the postponement of the hearing while they worked to uncover the depths of the fraud and possibly add further charges.  One news report stated that the amount of potential victims could reach 40.

Overshadowing Lewis' arrest is the enactment of Bill C-21, titled "The Standing Up For Victims of White Collar Crime Act" (the "Bill") that officially took effect today.  The Bill targets those convicted of financial crimes, imposing mandatory minimum sentences of two years for fraud over $1 million, along with the addition of aggravating factors that courts may now consider in deciding to toughen sentences.  These aggravating factors include:

• If the fraud had a significant impact on the victim, given the victim's particular circumstances, including his/her age, health and financial situation; 
• The offender's failure to comply with applicable licensing rules or professional standards; and;
• The magnitude, complexity, and duration of the fraud and the degree of planning that went into it.

Additionally, the legislation requires judges to consider the imposition of restitution orders, and allows the court the authority to enjoin the offender from taking employment or volunteer positions in which they would assume control over other's money.  

In comparison to its American counterparts, the Bill is similar on several levels, but one distinguishing feature is the imposition of mandatory minimums in the context of financial fraud.  While wire fraud and mail fraud, two common charges often found in criminal indictments of Ponzi schemers, each carry hefty potential punishments of up to twenty years in prison, the application of federal sentencing guidelines often significantly reduces an offender's sentence.  Judges are also free to sentence an offender outside of federal sentencing guidelines. In the context of restitution, U.S. courts often impose restitution orders against offenders, which stems from several federal victims' rights statutes, including the Mandatory Victim Restitution Act, codified at 18 U.S.C. 3663A, and the Victim and Witness Protection Act of 1982, codified at 18 U.S.C. 3663.  Additionally, parallel civil proceedings often initiated by the Securities and Exchange Commission or Commodity Futures Trading Commission often impose similar restitution orders.

A full copy of the Canadian bill is here.