Three BC residents fined $700,000 for role in gold mining Ponzi scheme

The BC Securities Commission (BCSC) has handed out C$956,000 (roughly $700,000) in penalties to three local residents for their involvement in what it calls “an elaborate fraud” that promised investors large returns on non-existent gold mining operations in Africa and Brazil.

In a ruling issued on March 2, 2023, a BCSC panel ordered Sabrina Ling Huei Wei to pay a C$500,000 administrative penalty, plus a C$90,000 fine, representing the amount she obtained from the scheme. Justin Colin Villarin was ordered to pay a C$200,000 penalty plus the C$15,718 he obtained from the scheme, and James Bernard Law was issued a C$150,000 penalty.

The BCSC also banned the trio from participating in BC’s capital market for varying amounts of time: Wei’s ban is permanent, while Villarin was banned for 25 years and Law for 20 years.

The panel previously found that all three solicited investors, organized events and sold membership units to two US-based companies between 2014 and 2015. Investors were promised “extraordinarily high, no-risk returns” on supposedly lucrative gold mining operations in Mali and Brazil held by these entities.

“In reality, none of the investments were used for gold mining, DFRF received no proceeds from gold mining, and DFRF’s only source of money was investors,” the BCSC investigation revealed.

The scheme raised over $15 million from more than 1,400 investors, according to the US Securities and Exchange Commission (SEC). The BCSC found that 137 BC residents or people connected to the province lost a total of C$1.5 million.

The fraud, described by the SEC as a Ponzi and pyramid scheme, was orchestrated out of the US by Daniel Fernandes Rojo Filho, a Brazilian national who was living in Florida at the time of the scheme, along with other associates, according to BCSC findings.

“None of the funds raised by investors were used for gold mining, and bank records show no proof that DFRF had other legitimate business activities. Filho used more than $6 million of investors’ money for personal expenses and luxury cars,” the BCSC stated.

In 2019, in civil actions brought by the SEC, federal courts entered final judgments against Filho and several others – including Heriberto C. Perez Valdes, a former Florida resident – for fraud and selling securities without being registered. Filho was ordered to pay more than $11 million, and Valdes was ordered to pay $1.2 million.

The enforcement action began in 2015 when BCSC investigators – acting on a tip – posed as investors to attend a presentation for DFRF at a downtown Vancouver hotel. Attendees were told to “expect a monthly return of up to 15% on their membership in interest, and that their principal was guaranteed by insurance,” the investigators noted.

Several days after investigators witnessed the event, the Commission issued an investor alert about DFRF, warning that several claims it was making were “characteristic of investment fraud.”

In October 2022, following several days of hearings, a BCSC panel ruled that Wei, Villarin and Law chose to “enable” Filho’s deceitful acts, and knew – or should have known – that Filho’s claims, and theirs, were fraudulent.

Although they became increasingly aware of red flags surrounding DFRF, including the promise of unreasonably high returns, the lack of details about its finances or mines, and the BCSC’s investor alert, Wei, Law and Villarin continued to promote it to unwitting investors, the BCSC ruled.

Prior to the ruling against the trio, a panel found on April 20, 2021, two Lower Mainland-based individuals were also involved in the gold mining scheme, defrauding 52 B.C. investors for $331,400 in total proceeds.