URGENT >> BULLETIN >> MOVING: SEC: Las Vegas-Based Ponzi Scheme Targeted Japanese Investors, Gathered At Least $800 Million, Planned To Have New Marks Prop Up The Massive Swindle — And Started In 1998

URGENT >> BULLETIN >> MOVING: (SECOND UPDATE 4:28 P.M. EDT (U.S.A.) The SEC says Edwin Fujinaga and his company MRI International Inc. were operating a Ponzi scheme from 1998 onward that gathered at least $800 million and targeted Japanese and other investors.

After MRI received a letter in March 2013 from the SEC instructing it not to destroy evidence, the SEC said, “a truck from a “document shredding company . . . picked up boxes of documents from MRI.”

An MRI executive assistant “made several telephone calls to prevent the pickup,” the SEC charged, alleging that “Fujinaga called her and said, ‘Why are you concerned about this?'”

“MRI fired the executive assistant because of her efforts to prevent the document destruction,” the SEC charged.

Fujinaga is 66. He resides in Las Vegas, the SEC said. Part of the scam featured “tours” of MRI’s offices in Las Vegas. The alleged scam is evoking images of Bernard Madoff’s colossal Ponzi scheme, in the sense it appears to have gone undetected for years.

At the same time, the alleged Fujinaga/MRI fraud is reminiscent of the epic Trevor Cook Ponzi scheme in Minnesota, in the sense that investors appear to have been lulled into a false sense of security because the company had a physical presence. It is somewhat common for fraudsters to tout a brick-and-mortar presence as “proof” no fraud scheme is occurring, even though case after case has demonstrated that the frauds may be buried deep inside an enterprise that at first glance appears to be legitimate.

MRI investors “were told that their money would be used to buy accounts from U.S. medical providers with outstanding balances to collect from insurance companies,” the SEC said. “Fujinaga and MRI falsely represented that they purchased the accounts at a discount so they could recover the full amount and turn a profit for investors. They purchased no such accounts in reality, and merely used investor money to pay the principal and interest due to earlier investors in typical Ponzi fashion.”

Similar to other Ponzi schemers whose operations are on the verge of collapse, Fujinaga appeared in 2012 to be preparing to double-down on his fraud, the SEC complaint suggests.

In a memo, the SEC charged, Fujinaga “proposed to resolve the delinquencies by doubling the amount of money raised from new investors.”

The SEC alleged that Fujinaga wrote: “I propose that we reinstate our consultants to fund raise for MRI to secure a larger base of consultants soliciting funds and possibly double the amount off funds raised on a monthly basis.”

Cooperation between the United States and Japan was instrumental in exposing the massive international swindle, the SEC said, noting that the “Financial Services Agency of Japan (JFSA) and the Japanese Securities and Exchange Surveillance Commission (SESC)” exchanged “documents and other evidence critical to the case.”

“Cross-border cooperation can successfully halt fraudsters who attempt to use international boundaries to avoid prosecution,” said Gerald W. Hodgkins, associate director in the SEC’s Division of Enforcement. “The close coordination between the SEC and Japanese regulators was critical to freezing Fujinaga’s assets and foiling his scheme.”

From a statement by the SEC (italics added):

According to the SEC’s complaint, the Ponzi scheme began in October 1998. Fujinaga, who lives in Las Vegas, operated from there but also had a sales office in Tokyo. MRI and Fujinaga hosted Japanese investors in the U.S. for solicitation presentations and tours of MRI’s Las Vegas offices. They told investors they could invest in either U.S. dollars or Japanese yen, and promised returns ranging from 6 to 10.32 percent depending on the size and duration of the investment. Fujinaga and MRI falsely represented that they used investor money solely and exclusively to buy medical accounts receivable. Besides misappropriating money between investors, Fujinaga illicitly transferred investor money to MRI’s operating accounts, where it was used to pay for general operating expenses instead of medical accounts. He also transferred money to other entities he owned that were not in the business of collecting medical account receivables. Investor funds also were siphoned to another company owned by Fujinaga called The Factoring Company, which bought Fujinaga’s cars and paid his bills.

Here is a section from the SEC’s complaint, which was filed under seal two weeks ago (italics added):

As all Ponzi schemes eventually do, the fraudulent enterprise perpetrated by Fujinaga and MRI collapsed. Since at least 2011, MRI has been in default on the payments it is obligated to pay investors. More than 8,000 people invested in MRI and, as of 2012, MRI’s investments totaled approximately $813 million. Notwithstanding MRI’s defaults to investors, this is an ongoing Ponzi scheme, in which Fujinaga and MRI have planned to make up their losses by enlisting new investors for the same treatment suffered by existing investors.

Investors in places other than Japan also were targeted, the SEC said. Those countries included Canada, Malaysia and New Zealand.