A Finland man accused of operating the largest Ponzi scheme in the country's history was sentenced to serve four years in prison. Hannu Kailajärvi had faced charges of aggravated fraud and collection crimes after allegedly masterminding a foreign currency trading operation. The company, which did business as WinCapita in Finland, may have raised over 100 million euros from investors, according to authorities. In addition, Kailajärvi's girlfriend was found to be an accomplice to the crime, and received a 1-year prison sentence.
According to authorities, Kailajärvi originally began the operation under the name "WinClub" in 2005. However, when a news report in 2007 hinted at a police investigation of WinClub, Kailajärvi changed the company's name to WinCapita. Presenting itself as a foreign-exchange investment club that was closed to the public and open only through invitation, potential investors were told that an initial investment of several thousand euros could lead to investment returns of up to 400%. To demonstrate the legitimacy of the operation, investors were shown "signal clock" software which purported to act as a buy/sell indicator for foreign currency. A purported screen capture from the software is here:
WinCapita solicited new investment primarily through holding presentation meetings, at which current members could bring family and friends. In total, WinCapita is alleged to have raised approximately 100 million euros, which at today's currency exchange rates, is roughly $140 million. Authorities estimate total losses from the scheme as at least 37 million euros, or approximately $52 million.
Along with Kailajärvi and his girlfriend, at least three other individuals still at large are accused of playing a role in the scheme. Now that Kailajärvi's trial has concluded, authorities will now hold a separate proceeding to determine compensation to the victims. Additionally, authorities have also indicated their intention to bring criminal charges against those suspected of promoting the clubs.
The sentence serves to illustrate the disparities between criminal penalties for financial fraud across the world. A four-year sentence for losses estimated as exceeding $50 million would certainly be decried as lenient in the United States, which has among the toughest criminal penalties for financial fraud. This is due to the ability to charge those accused of financial fraud with mail and wire fraud, which each carry maximum prison sentences of twenty years. In addition, Canada recently enacted Bill C-21, which imposes mandatory minimum sentences of two years for fraud over $1 million, along with the addition of aggravating factors that courts may now consider in deciding to enhance sentences.