Toronto Police worked with law enforcement and government agencies in Canada and the United States to shut down a pyramid scheme that allegedly took more than US$93 million from thousands of victims around the world.
Christopher George Smith and Rajiv Dixit, of Toronto and Vancouver, pleaded guilty on April 27 and were given two-year conditional sentences with strict conditions, a prohibition from involvement in multi-level marketing schemes and a $4 million fine. Both men are 45.
Launched in January 2013, the investigation resulted in the arrest of people in December 2015 who were jointly charged with offences related to the operation of the pyramid scheme.
Smith and Dixit admitted to realising a net gain of almost US$50 million, much of which was restrained in civil action.
Toronto Police is part of the Toronto Strategic Partnership against Cross Border Fraud. Other members are the Royal Mounted Police, the Competition Bureau of Canada, the Ontario Ministry of Government & Consumer Services, the Ontario Ministry of Finance, the United States Federal Trade Commission and the United States Postal Inspection Service.
The Financial Transactions & Reports Analysis Centre of Canada also provided investigative assistance.
“This matter first came to the attention of the Competition Bureau who informed the Partnership. The case was taken on as a project with full participation from all members,” said Detective Sergeant Ian Nichol of TPS Financial Crimes.
Nichol said this investigation was unique.
“It was almost a fraud within a pyramid scheme to begin with, in the sense that people who initially bought into it knew they were investing in a pyramid,” he said. “What they didn’t know was that that there were only certain people who were getting paid out. Eventually, the scheme evolved when they realized there was enforcement activity occurring and they began to make it appear as though they were a legitimate investment product. At that point, people who were buying into it thought they were buying into a syndicated banner ad scheme where they would get paid based on the number of people who got re-routed to different websites. But it was all a big façade and there was nothing real to it.”
Pyramid schemes, noted Nichol, are fairly common and warned that people should do further research before investing.
“The common thread in a pyramid scheme is that the sole source of revenue is simply bringing on other members to pay into the scheme, so those who joined before them can get paid,” he said. “The scheme eventually collapses and most participants will lose their entire investment.”
Support that included additional staffing, affiants, computer forensics, forensic accounting, research, investigation outside of Canada, technological support, file management and funding was provided by the entire membership.
Nichol said the project was very demanding on resources during both the investigation and court processes.
“The Partnership paved the way to obtaining resources and support in a timely efficient manner, that would have otherwise been difficult to obtain,” he added.