Two alleged fraudsters who hid in Canada, returned to the US to face US$17 million securities fraud litigation

By Christine Duhaime | February 3rd, 2020

For a few years, Canada was harboring two alleged fraudsters who were wanted in the US, and no one seemed to know much about it except US law enforcement – one was returned two weeks ago and the other was extradited from Canada in November.

The first, Ahmed Naqvi, who appears to be Canadian, fled to Toronto in 2015, after being charged by the SEC in Florida, and later charged criminally, with securities and wire fraud in New York. The second, Frederic Elmaleh, fled to Canada from Florida in 2017. He was charged with Naqvi. He also appears to be Canadian with US citizenship, but it is unclear.

Both men allegedly solicited over US$17 million from over 50 investors in Canada, the US and Saudi Arabia for fictitious sales of well-known public companies. Through Elm Tree Investment Advisors, which they allegedly controlled and operated in Florida, they allegedly sold units in their own investment fund that investors were told held shares of big tech companies such as Twitter, Alibaba, Square, Uber, Snapchat and others. Investors were guaranteed returns of 338% for holding shares in Twitter and 250% for holding shares in Square.

Allegedly, none of the funds yielded anywhere close to those returns and in fact they lost millions. The government alleges that the firm acted as a Ponzi scheme – money from new investors was used to pay back earlier ones.

Investors lost millions, in part because, as the AG for the SDNY alleges, Elmaleh used investor funds for fancy fast cars, such as a Bentley Continental GT and Maserati Gran Turismo, a 4,644 sq. ft. 5-bedroom Florida mansion with its own elevator, expensive watches and diamond jewelry.

When investors turned on the heat to be repaid, Elmaleh and Naqvi allegedly started to create fake financial documents, and allegedly to doctor other documents, to buy more time. They also allegedly made oral and written representations to investors to keep buying more time, telling them that their investments were generating positive returns when in fact, some of those investor funds were allegedly parked in real estate.

Naqvi then high-tailed it up to Canada where he was traced living in the Toronto area and Elmaleh followed two years later.

After Elmaleh was first arrested in 2015, a stash of weapons was located in his mansion, including:

  • AR-15 Bushmaster assault rifle with ammo;
  • Glock gun case with an empty 15 round magazine and 1 box of Luger ammo;
  • Blazing Brass ammo; and
  • Smith & Wesson 500 magnum revolver with 1 box of ammo.

Why a Canadian fund manager needed an assault rifle and a hand gun at his mansion, is unknown.

Elmaleh has numerous connections to Ontario, beyond his family. According to Court filings in the SEC matter, while the fund was operating, Elmaleh sent millions of dollars to people he knew in Toronto, often in the tens of thousands each, for purposes of which are not known. During the financial investigation, more ties to Canada were discovered, including to two Ontario companies in Toronto, one operated by Elmaleh’s father, which was alleged to have acted partly as a cover for the fund’s operations, and to have been unjustly enriched thereby.

Elmaleh’s 70-year-old parents threw in the towel after a few years of defending claims involving their son and informed the presiding Judge in the civil action that they could no longer afford fees to defend themselves. Ultimately, they were ordered to pay US$2 million, plus interest.

Both Elmaleh and Naqvi are now in jail in Manhattan pending a trial.

After Elmaleh fled to Canada, he made numerous posts on social media about Bitcoin and China-based Tron, including that he was a Bitcoin investor, suggesting that maybe there is a treasure trove of Bitcoin and Tron parked in a Toronto digital currency exchange – perhaps the one digital currency exchange in Toronto that provides a mixing and tumbling service for digital currencies to assist its users be anonymous to avoid the rule of law.

He also posted a photo of Santorini on a social media platform with the caption that [one should] “die with memories, not dreams.”

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