Five Canadian nationals have been charged with operating a massive Ponzi scheme through a now-bankrupt short-term lender and financier. Founder David Burns Holden, 52, his wife Rosa Holden, 57, and executives Anthony Consentino, Andrew Gaudet, and Edmond Chin Ho were charged with money laundering, fraud, and an offense of criminal organization. David and Rosa Holden also face three bankruptcy and insolvency act charges. Each are scheduled to appear in court on March 2, 2015.
Holden founded and operated Seaquest Corp. and Seaquest Capital Corp. (collectively, "Seaquest"), which told prospective investors that they could realize lucrative returns of up to 36% annually through profitable short-term secured loans carrying high rates of interest to borrowers that could not qualify for traditional bank financing. Operating under a slogan "Managing to Outperform," the companies touted Holden's experience in the financial industry, including studies at the prestigious Richard Ivey School of Business. In total, hundreds invested at least $92 million with Seaquest.
However, Seaquest declared an intent to file bankruptcy in late 2011, indicating that its liabilities outstripped its assets by at least $50 million. After efforts failed to secure a viable restructuring plan, the company was declared bankrupt in late 2011. At that time, the Canadian government began investigating the circumstances behind Seaquest's demise. It was discovered that Holden had previously served time in prison not once, but twice, for fraud-related offenses, including a six-year stint in 2000 for investment fraud.
A chief restructuring officer appointed over Seaquest issued a dim view of the company in November 2011:
The investment portfolio is comprised of a large number of highly speculative and illiquid loans and shareholdings, the majority of which consist of loans and advances to non‐arm’s length companies, indirect subsidiaries and affiliated companies. Most of the loans are unsecured. The few secured loans are to companies that are themselves underperforming, inactive or insolvent. None of the portfolio investments is being serviced at the present time. In summary, there is little or no prospect for meaningful recovery in the short term, or over the long term of the investment portfolio, without additional funding.
Additionally, it was observed that "Seaquest appears to have incurred substantial operating losses that have been funded, at least in part, by portfolio investors." Ultimately, it was determined that Seaquest owed dozens of creditors more than $75 million.
A three-year investigation by the Royal Canadian Mounted Police culminated in the charges that Seaquest was operating a massive Ponzi scheme that ultimately collapsed over mounting liabilities.
The chief restructuring officer's November 2011 summary of Seaquest is below: