Canadian Regulators Levy Charges Against Washington Woman Accused Of $135 Million Ponzi Scheme
Canadian securities regulators became the latest to bring charges against a Washington woman accused of orchestrating a massive $135 million payday loan Ponzi scheme. Doris Nelson, a Canadian citizen, faces charges of fraud, illegal distribution of securities, and making false statements after the British Columbia Securities Commission initiated civil enforcement proceedings against her with the filing of a Notice of Hearing. Nelson is currently under house arrest in Colbert, Washington after she was civilly and criminally charged by US authorities in late 2011. The hearing, which Nelson or her counsel is required to attend, has been set for February 19, 2013.
This marks the third set of charges against Nelson, who is accused of using numerous businesses to operate a payday/short-term lending business known as the Little Loan Shoppe ("LLS"). LLS was originally based in British Columbia, but moved operations in 2001 to Spokane, Washington. According to authorities, she began the scheme in the late-1990s or 2000 by soliciting potential investors to finance her payday loan business by promising annual returns ranging from 40%-60%. Investors were told that the operation was wildly successful, and received post-dated interest checks at the time of their investment.
However, the scheme was nothing more than an elaborate Ponzi scheme, with Nelson using incoming investor funds to satisfy principal and interest payments. Nelson also diverted investor funds to sustain her lavish lifestyle, including spending nearly $500,000 at various Vegas casinos, buying $50,000 of artwork from an at-sea auction, and buying nearly $500,000 on high-end clothing from retailers such as Nordstrom.
As all Ponzi schemes do, LLS began encountering financial difficulties that eventually led to its demise. Nelson first tried to offer new investors a reduced 10% return, and was later forced to declare bankruptcy in 2009. Of the $135 million raised by the scheme, Nelson paid out approximately $118 million to investors, $2.2 million in commissions, and $17 million in operating costs and other expenses.
A copy of the Indictment is here.