Banking & finance

Court finds operators of fake Grenada bank guilty

  • 24 October 2007

Found guilty of defrauding over $170 million from thousands of investors, four operators of the fictitious First International Bank of Grenada, are now facing jail time and millions of dollars in fines.

The phoney bank, which collapsed in 2000, duped investors around the world. Using counterfeit documents and promising returns as high as 300%, the fake bank was founded on a falsehood, claiming that it assets were backed by a 10,000-carat ruby appraised at $20 million. In fact, the ruby was owned by a California man who had never heard of the bank or its officers.

Those found guilty include four bank officers one of whom was sentenced to eight years in jail and ordered to pay over $32 million in restitution. The remaining three must pay more than $26 million in restitution in addition to prison sentences.

The banks founder former mortgage banker Gilbert Ziegler died in 2005 while awaiting trial.

A FIB spokesman stated: “The First International Bank of Grenada is a classic example of a large scale Ponzi scheme. In the Grenada case, fake high returns were simulated by using money scammed from unsuspecting original investors. Our counsel to our members is to exercise caution and conduct due diligence when presented with offers of short-term, very high return investments. There is almost always a catch. In this case, we are pleased to see that the architects of this scam have been brought to justice.”

Unfortunately, for those stung by the First International Bank of Grenada, there is little likelihood of reclaiming any of their lost funds. The court found that most of the $170 million invested in First International Bank of Grenada has disappeared. Approximately one third went back to investors as phoney interest payments, a large amount was squandered on lavish expenses, and much was lost when the defendants were, in turn, scammed by other con men.

Chances of recouping funds from the perpetrators are very slim, particularly given the fact that while awaiting sentencing one of them was living on social security and another working in a grocery store.

Their scheme, which took investigators eight years to unravel and a court three years to hear, included not only the First International Bank of Grenada, but also a series of banks that included Fidelity International Bank and 13 subsidiary banks.

Court proceedings discovered that the banks assets included fraudulent financial instruments, purporting to be from legitimate financial institutions such as the Bank of China, Union Bank of Switzerland, and Dai-Ichi Kangyo Bank worth more than US$10 billion, said prosecutors.

He added, “A fraud of this scale inevitably involves large volumes of fraudulent documents and a spider web of fake banks used to confuse investors and prevent discovery of criminal activity.”