Sutherland Shire Mayor Carmelo Pesce is among 780 investors caught up in the nation’s biggest fake investment scheme.
News Limited is reporting that Mr Pesce has lost close to a million dollars in a massive Ponzi scheme that has fleeced $209 million from investors.
Another victim was a priest from the Sutherland Shire who lost $50,000 in retirement savings from his “St Francis self-managed super fund”.
Mr Pesce describes himself as a cautious investor and the recommendation to invest in the Courtenay House foreign exchange investment scheme came from a school friend who could demonstrate that it had paid regular returns for a number of years.
So Mr Pesce took the plunge into the Courtenay House scheme, with $975,000 from the Pesce Family Trust.
He soon began receiving monthly interest returns of 1.5 per cent, 4 per cent and 7.5 per cent, depending on the various scale of risk associated with each “special” investment.
“What returns I got I kept pumping back in,” he told the Daily Telegraph.
But the house of cards came crashing down after the Australian Securities and Investments Commission began investigating the Courtenay House companies.
In May liquidator Said Jahani was appointed and soon broke the news to a packed creditors meeting in July that the Courtenay House funds were a massive Ponzi scheme.
He revealed there was a constant churn of new investor funds coming into the scheme which was used to pay existing investor’s interest and capital returns.
“I have lost a million dollars,” Mr Pesce said, adding that his brother also lost at least $250,000.
The Ponzi scheme operated undetected for years from a Bondi Junction office.
Among the hundreds duped creditors are doctors, business owners and war veterans who fell for a scheme so convincing that one syndicate plunged $14.8 million into it alone.
Among the investors, most of them too embarrassed to be named, is a war widow who invested and lost her husband’s entire pension payout.
Others have been forced to sell their houses and lost businesses to cover their debts.
The scheme — operating as Courtenay House and Courtenay House Capital Trading Group — promised “mum and dad” investors bumper returns of up to 25 per cent.
They believed their money would be invested in the foreign currency exchange markets.
“The companies were operating a Ponzi scheme,’’ liquidator of the two companies, Grant Thornton’s Said Jahani, told News Limited.
‘‘This is based on interviews with the director, Tony Iervasi, and initial forensic accounting investigations.”
In a hallmark sign of a Ponzi scheme, almost 90 per cent of the $209 million of investors’ money in the Courtenay House companies was used to pay their own monthly interest and capital returns.
A tiny fraction of the money — just 1 per cent, and no more than $50,000 at any time — was invested in foreign currency exchange markets.
ASIC’s investigation is ongoing.