By NEIL HARTNELL
Tribune Business Editor
A Bahamian financial institution is awaiting a $77m recovery after falling victim to an alleged fraud involving an investment fund whose “chairman” is a Freeport accountant.
Mosaic Financial and its investors are awaiting a significant payout that depends on courts approving an agreement between US financial regulators and the Income Collecting 1-3 Months T-Bills Mutual Fund’s liquidators.
The $111.591m in total financial penalties sought by the Securities & Exchange Commission (SEC) will “be deemed satisfied” if the fund’s liquidators return $76.945m to Caves Village-based Mosaic Financial, and its clients, “no later than 20 days” after a final judgment is entered by the southern New York federal court or by some other agreed deadline.
Should such “a timely distribution” not occur by this deadline, then the full financial penalty - $106.53m in disgorgement, and $5.061m in pre-judgment interest - will be enforced by the SEC. Tribune Business understands that Mosaic Financial’s regulator, the Securities Commission of The Bahamas, was last week formally informed of the situation and its present status.
Mosaic Financial, which used to be known as Old Fort Financial, and its clients are alleged to have fallen victim to a fraud perpetrated by the Income Collecting 1-3 Months T-Bills Mutual Fund’s after becoming its largest investor. Their recovery, though, if the full $77m is realised could be significant.
Court filings by the SEC allege that the Bahamian financial services provider and its investors, between March 2019 and February 2021, pumped a total $191m into the Income Collecting fund which was supposed to be invested primarily in US Treasury debt securities and other relatively safe, liquid investments.
However, the Income Collecting fund’s two principals, Israeli citizen, Ofer Abarbanel, and American, Victor Chilelli, have been accused by the SEC of misappropriating the monies invested by Mosaic Financial and its clients through instead diverting them via “unauthorised”, unsecured transactions into “nominee shell companies” that the duo controlled.
Some $106m invested by Mosaic Financial and its clients was still retained by the Income Collecting Fund when it was placed into voluntary liquidation in June 2021, the other $85m having already been redeemed. By that time, Abarbanel and Chilelli had been repeatedly stalling for more than a month on the Bahamian financial provider’s request for the return of the remaining $106m.
Mosaic Financial’s Nassau managing director, Robert Jensen, and Shameka Fernander, its chief executive, were both said to be travelling on business in Asia and unable for comment when Tribune Business tried to contact them on the matter. Mr Wizman and his fellow EY liquidator, Keiran Hutchison, also did not respond to this newspaper’s questions before press time.
However, a further Bahamian connection is provided by the Income Collecting fund’s chairman. Multiple court documents name him as Boisy Roberts, a Freeport-based accountant and partner at Independent Solutions Bahamas, which the fund’s offering prospectus describes as a firm that “specialises in financial reporting and improved business performance”.
Mr Roberts, who signed the resolution placing the Income Collecting Fund into then-voluntary liquidation in June 2021, has not been charged by either the SEC or the US federal authorities who have brought criminal proceedings against Aberbanel.
However, the SEC has alleged that Mr Roberts’ actions enabled Aberbanel to perpetrate the fraud. “During all relevant times, the Fund’s director and chairman of the Board, Boisy Roberts, who oversaw the appointment of the joint voluntary liquidators, also signed numerous documents on behalf of the fund that the SEC alleges caused or contributed to the ability of the fund to engage in its fraudulent course of operations,” the US capital markets regulator claimed.
These documents included “a Board resolution signed by Mr Roberts giving Mr Abarbanel authority to ‘represent the Fund in all matters’”, and “a lending agreement between the fund” and one of Aberbanel’s shell companies that was signed by Mr Roberts.
When contacted by Tribune Business, Mr Roberts, a former income audit supervisor at the Grand Lucayan resort, initially denied his role with the fund, asserting: “I wasn’t the chairman.” However, this is contradicted by multiple documents filed with the southern New York federal court and obtained by Tribune Business.
Besides the Income Collecting fund’s offering prospectus, which describes him as “director, CIO (chief investment officer), general manager and chairman”, of the fund, the June 22, 2021, resolution agreeing to wind-up the fund is signed by Mr Roberts in his capacity as “director and chairman of the Board of Directors of the company”.
When this contradiction was pointed out to Mr Roberts, he told this newspaper he would have to call back and ended the conversation. Mr Roberts did call back, but asked Tribune Business to produce a judgment that does not exist because the case against the Income Collecting fund has not yet reached that stage.
He declined to comment further, even though he said “of course, of course” when it was pointed out that the situation may not reflect well upon him without a further explanation of his actions. “I’m going to take your phone number now so that when I’m able to make a comment I can give you a call,” Mr Roberts said before ending the conversation.
The SEC, in its court filings, described Mr Roberts and the other Income Collecting fund directors as “nominees” who merely did Aberbanel’s bidding. “Abarbanel arranged for nominee personnel in The Bahamas and British Virgin Islands (BVI) to serve as directors of the Income Collecting Fund, leaving Abarbanel free to control the activities of the Income Collecting fund without meaningful hindrance or oversight,” it claimed.
“Abarbanel controlled all aspects of the Income Collecting fund. A March 2020 letter signed by the fund’s director and chairman (Mr Roberts) describes a motion by the Income Collecting fund’s Board ‘authorising Ofer Abarbanel to represent the fund in all matters, and that Interactive Brokers LLC is allowed to disclos[e] all fund information to Mr Ofer Abarbanel’.”
The SEC alleged that Aberbanel and the fund “immediately transferred at least $104m worth of the investment made” by Mosaic Financial and its clients into the nominee shell entities he controlled - transactions that were not permitted by the Bahamian financial services provider, and which were not secured by any form of collateral.
Once he became aware in February 2021 of the SEC’s probe into himself and the Income Collecting Fund, Aberbanel allegedly forced all investors to redeem their funds with the exception of Mosaic Financial and its clients.
The SEC documents, which refer to them as ‘Investor Group A’, allege: “On or around May 21, 2021, ‘Investor Group A’ independently learned of the SEC’s investigation and requested a full redemption of its shares in the Income Collecting fund pursuant to the prospectus’ redemption terms.
“At the time ‘Investor Group A’ requested a full redemption, its total investment in the Income Collecting Fund was approximately $106m.” However, this was not honoured, and Mosaic Financial and its clients were repeatedly stonewalled in efforts to recover their funds by Aberbanel insisting on anti-money laundering “protocols”.
At one point, the Israeli even offered to set up a new investment vehicle domiciled in The Bahamas “under which ‘Investor Group A’ could redeem its shares in the Income Collecting fund and immediately reinvest its funds with Abarbanel in a different investment vehicle, rather than obtaining a full return of its investment in cash”.
The SEC documents went to great lengths not to mention Mosaic Financial by name, even extending to the point of redacting the e-mail addresses for Ms Fernander, the Nassau-based chief executive, and fellow executive, Cira Davis, in correspondence where they were demanding that the Income Collecting fund return monies the SEC said were “unlawfully withheld”.
However, Mosaic Financial’s identity and involvement is confirmed by court documents filed in the Cayman Islands, which describe it as the Income Collecting fund’s “only shareholder” that is “registered with the Securities Commission of The Bahamas”. The Securities Commission said it was aware of the Income Collecting fund court case but did not comment further.