Earlier today, ASIC announced that the former director of Reiwa-Capital, Russell Sandiford, has been sentenced to two years and eight months’ imprisonment, to be served by way of an Intensive Correction Order (ICO).
The sentence is a result of his dishonest use of investor funds. On 6 September, Mr. Sandiford pled guilty to two counts of dishonest conduct in connection with a financial product, contrary to s1041G of the Corporations Act.
Now let’s actually look closer into the dishonest conduct. From January 2020 to June 2022, Mr. Sandiford was found to have contacted individuals using email addresses he held from his previous employment as a market trader and analyst at a brokerage firm. He proceeded to invite the recipients of his emails to partake in one of two funds:
- A ‘Hedge Fund’ that, for a nominal one-off fee, offered a split of profits from a trading account operated by Mr. Sandiford, trading in foreign exchange products and commodities.
- An ‘Income Fund’ where investors paid a capital investment amount on the basis that it would be paid into a large pool of funds to be used to trade FX products and commodities for the investors’ profit.
During this two-and-a-half-year period, 74 clients paid AUD 440,909 to Mr. Sandiford for investing or trading via these funds. He was found to have used these funds for gambling, personal entertainment, and other purposes. Only AUD 6,316 was returned to investors.
Given Mr. Sandiford’s issues with alcohol, cocaine use, and gambling, the court noted his crimes were motivated by greed at the time of the offending. However, as Mr. Sandiford entered rehab after being charged, the court found that he could serve his sentence under a home detention order.
If you are an investor, this case serves as a crucial reminder to be vigilant when considering investment opportunities. Always conduct thorough due diligence, ensure that the individuals and firms you are dealing with are properly licensed, and avoid offers that seem too good to be true. The misuse of investor funds, as seen in this case, underscores the importance of verifying the legitimacy of the funds and the credentials of those managing them.
