SEC Freezes Assets in Ponzi Scheme Targeting Investors in Japan
The Securities and Exchange Commission today announced an emergency action to freeze the assets of a Las Vegas-based firm and its sole owner charged with perpetrating a Ponzi scheme against thousands of investors living primarily in Japan.
The SEC alleges that Edwin Fujinaga and his company MRI International raised more than $800 million from investors who were told that their money would be used to buy accounts from U.S. medical providers with outstanding balances to collect from insurance companies. Fujinaga and MRI falsely represented that they purchased the accounts at a discount so they could recover the full amount and turn a profit for investors. They purchased no such accounts in reality, and merely used investor money to pay the principal and interest due to earlier investors in typical Ponzi fashion. Investor funds also were used to buy luxury cars and pay Fujinaga’s credit card bills, alimony, and child support.
“Fujinaga deceived and exploited his Japanese investors into believing that they were buying safe investments with a steady return,” said George S. Canellos, Co-Director of the SEC’s Division of Enforcement. “Instead, Fujinaga operated a Ponzi scheme on an enormous scale that financed his own extravagant lifestyle.”
The SEC’s complaint was filed under seal in U.S. District Court for the District of Nevada two weeks ago and unsealed yesterday by the court. The Honorable James C. Mahan granted the SEC’s request for a temporary restraining order, asset freeze, and other emergency relief against MRI, Fujinaga, and CSA Service Center LLC, which is a company controlled by Fujinaga that is the nominal owner of homes that he occupies in Las Vegas, Beverly Hills, and Hawaii. CSA Service Center is named as a relief defendant in the SEC’s complaint for the purposes of recovering any ill-gotten assets from the fraud that may be in its possession.
The SEC closely coordinated its investigation with the Financial Services Agency of Japan (JFSA) and the Japanese Securities and Exchange Surveillance Commission (SESC), exchanging documents and other evidence critical to the case.
“Cross-border cooperation can successfully halt fraudsters who attempt to use international boundaries to avoid prosecution,” said Gerald W. Hodgkins, Associate Director in the SEC’s Division of Enforcement. “The close coordination between the SEC and Japanese regulators was critical to freezing Fujinaga’s assets and foiling his scheme.”
According to the SEC’s complaint, the Ponzi scheme began in October 1998. Fujinaga, who lives in Las Vegas, operated from there but also had a sales office in Tokyo. MRI and Fujinaga hosted Japanese investors in the U.S. for solicitation presentations and tours of MRI’s Las Vegas offices. They told investors they could invest in either U.S. dollars or Japanese yen, and promised returns ranging from 6 to 10.32 percent depending on the size and duration of the investment. Fujinaga and MRI falsely represented that they used investor money solely and exclusively to buy medical accounts receivable. Besides misappropriating money between investors, Fujinaga illicitly transferred investor money to MRI’s operating accounts, where it was used to pay for general operating expenses instead of medical accounts. He also transferred money to other entities he owned that were not in the business of collecting medical account receivables. Investor funds also were siphoned to another company owned by Fujinaga called The Factoring Company, which bought Fujinaga’s cars and paid his bills.
The SEC’s complaint charges Fujinaga and MRI with violations of the antifraud provisions of the federal securities laws, and the SEC seeks disgorgement of ill-gotten gains, financial penalties, permanent injunctions, and other emergency relief.
The SEC’s investigation, which is continuing, has been conducted by Danette R. Edwards and Thomas C. Swiers and supervised by Gregory G. Faragasso. The JFSA’s Yuichiro Enomoto, who was detailed to the SEC, provided valuable assistance. The SEC’s litigation is being led by Richard E. Simpson and Robert I. Dodge. The SEC appreciates the assistance of the JFSA, SESC, and the State of Nevada Division of Mortgage Lending.