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Thursday
Sep262013

SEC Halts $800 Million Ponzi Scheme Targeting Japanese Investors

The Securities and Exchange Commission ("Commission") announced the filing of an emergency action freezing the assets of a Nevada company suspected of perpetrating an $800 million Ponzi scheme directed at Japanese investors.  Edwin Fujinaga, who resides in Las Vegas, Nevada, and his company, MRI International ("MRI"), were charged with violations of the antifraud provisions of federal securities laws. The Commission is seeking injunctive relief, disgorgement of ill-gotten gains, and civil monetary penalties.

Fujinaga formed MRI in 1998, touting the company as engaged in the business of purchasing accounts from U.S. medical advisors with outstanding balances to collect from insurance companies.  Potential investors were told that Fujinaga and MRI were able to purchase these accounts at a discount, which would then yield a profit once the full amount was collected from the insurance company.  MRI primarily targeted investors living in Japan, and often hosted these investors in the United States for presentations and tours of MRI's office in Las Vegas.  Investors were provided promotional materials extolling the investments, including representations about the safety of the investor's principal and the use of investor funds, and were promised annual returns of up to 10.32% annually.  An investment was memorialized by a "certificate of investment," which was obtained after an investor either wired money or sent a check to one of MRI's accounts at Wells Fargo Bank in Las Vegas.

However, in reality, MRI used investor funds for a variety of unauthorized purposes, including the payment of principal and interest to earlier investors - a hallmark of a Ponzi scheme.  Indeed, between January 2009 and March 2013 alone, over $600 million was used to pay claims for principal or interest by existing investors.  Fujinaga also used investor funds to pay business expenses, to siphon funds to other businesses he controlled, and to support Fujinaga's luxury lifestyle through the payment of his credit card bills, alimony and child support (totaling $25,000 per month), the purchase of luxury cars, and the purchase of homes in Las Vegas, Beverly Hills, and Hawaii.  By 2011, MRI began defaulting on payments, and the Commission estimates that at least 8,000 people invested in MRI.

After Fujinaga and MRI received an inquiry from the Commission in March 2013, he allegedly hired a shredding company to destroy key documents.  He later fired an executive assistant who questioned his actions.  Fujinaga also failed to appear for a scheduled deposition, citing fatigue and illness, and MRI never produced documents requested in an SEC subpoena.

A copy of the Commission's complaint is here

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