Thirty-seven investors have lost about $680,000 in a cold calling and website investment scam, according to an Australian Securities and Investments Commission investigation into Gold Coast-based financial services business West Trade.
ASIC obtained court orders against the operators of the business in the Queensland Supreme Court on Wednesday, preventing them from continuing to trade and ordering them to pay ASIC’s costs.
Queensland Police say five people have so far been arrested in relation to the matter.
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Queensland Supreme Court Chief Justice Paul de Jersey found the West Trade Group, West Trade Cars, and West Two – and directors Tiffany O’Donnell, Russell Lewis and John Pitcher – had contravened the Corporations Act by operating a financial services business without holding an Australian financial services licence.
Chief Justice de Jersey also ordered the three West Trade companies be wound up.
ASIC’s investigations indicate $790,000 was deposited by investors into West Trade company bank accounts between mid-September and late-December 2011.
During this time, approximately $680,000 was withdrawn by the directors.
Chief Justice de Jersey ordered the remaining $110,000 be frozen.
In a statement yesterday, ASIC detailed its allegations against West Trade and its directors.
These include allegations that the companies “used cold calling and a website to induce investors to deposit funds into a number of bank accounts held in the names of West Trade Group, West Trade Cars and West Two with the promise that the funds would be used to buy shares on behalf of the investors and generate returns well above markets.”
“ASIC further alleged that O’Donnell, Lewis and Pitcher withdrew the money from company bank accounts in cash,” the statement said.
“ASIC’s inquiries to date have not been able to substantiate that shares were purchased by West Trade Group, West Trade Cars and West Two on behalf of investors.”
The scam is the latest in a string of similar frauds detected by ASIC, including the liquidation in April of Queensland financial services company Your Trading Room, which had raised about $10 million from thousands of investors around the world.
ASIC also urged consumers to be alert to investment fraud, saying it has seen an increase in cold-calling activity Australia-wide, with several companies having been caught out in Queensland in particular over the past six months.
It advised consumers to visit its MoneySmart website to avoid getting caught by scams.
William Fletcher and Katherine Barnet of Bentleys Corporate Recovery have been appointed liquidators of the West Trade companies.
Bentleys declined to comment when contacted by SmartCompany this morning.