International authorities are participating in investigations into Miami-based Providence Financial Investments and its affiliates, which took in the life savings of hundreds of U.S. investors in an investment scheme involving Brazilian “factoring.” The company filed for U.S. bankruptcy protection last week following actions by the U.S. Securities and Exchange Commission to shut it down.
On Monday, the Royal Court of Guernsey ordered the appointment of “administrative managers” for Providence Investment Funds and its manager company, Providence Investment Management International Limited. Guernsey, a resort area and financial center, is one of the British Channel Islands where Providence operations were based and where it was actively soliciting investors until late July.
The court was acting on the “urgent” request of the Guernsey Financial Services Commission, Guernsey’s regulatory body, and followed the fund’s suspension and resignations of Providence’s directors there on Aug. 4 and 5, less than a week after the company’s U.S. Miami-based unit declared bankruptcy. Providence’s Miami-based CEO Antonio Buzaneli announced the opening of its “European headquarters” in Guernsey in 2014.
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“The Administration Managers are undertaking an immediate and urgent review of the records of the fund and manager and the position of monies lent to the Providence Group’s factoring company, Providence Fomento. This includes a review being undertaken in Brazil of the records of Providence Fomento,” said Simon Gaudion, the Guernsey Financial Services Commission’s director of enforcement, in a statement. He also said the commission has been working with the SEC and other regulators overseas.
While few details were disclosed, the Guernsey announcement opens another window into a widening international scheme. The SEC alleges that Providence Financial and Providence Fund raised more than $64 million from more than 400 investors throughout the United States, including dozens from Puerto Rico, through the unregistered sale of promissory notes that touted annual returns of 12 percent to 13 percent.
In a federal court filing in the U.S., the SEC said Providence had been selling an “ongoing fraudulent and unregistered securities offering.” The securities had not been registered with the SEC and brokers selling them were unregistered, the agency said. Providence hasn’t accounted for the money it has collected and was in a poor financial condition that wasn’t disclosed to its investors, the filing said, all the while continuing to solicit the nest eggs of people around the country since about 2011. The SEC also said Providence Financial paid their brokers a 6 percent annual commission not disclosed to investors.
Maria Yip and Thomas De Araujo of Miami-based Yip Associates have been retained as trustees, according to the U.S. bankruptcy filing, filed in the U.S. Southern District of Florida on July 28.
The Guernsey news may not be the last. Providence Financial said it had 24 affiliated offices around the world, from Shanghai to Sao Paulo.
Nancy Dahlberg: 305-376-3595, @ndahlberg.