Former director pleads guilty to hedge fund con

The former director of Reiwa-Capital is facing possible jail time and a hefty fine after he convinced people to hand over more than $400,000 for the purpose of investing before spending it all elsewhere and paying back just 1% of the total to investors.

Russell Sandiford has pleaded guilty to two counts of dishonest conduct in relation to a financial product or service. He first appeared in court on the charges in March 2023, representing himself and notifying the court he wanted to enter a guilty plea as soon as possible.

An ASIC investigation found that between January 2020 and June 2022 he obtained at least $440,000 from 79 clients, primarily contacting them via email addresses he had obtained when employed as a trader and analyst elsewhere. His previous employers include Silverstone Proprietary Trading, ACY Securities, AxiTrader and City Index.

Despite not having a licence to provide financial product advice, Sandiford told prospective investors that they could invest it in either a 'hedge fund' or an 'income fund'.

Investing in the hedge fund, for a nominal one-off fee clients were told they'd receive a split of profits from Sandiford investing in foreign exchange products and commodities. Meanwhile, the income fund offered an option under which investors would pay a capital investment amount on the basis it would be paid into a larger pool and used to invest in foreign exchange products and commodities to produce a return.

However, no such products existed, and Sandiford simply deposited the money into bank accounts held in his own name. It was then used to fund personal expenses and for other purposes unrelated to trading.

Of the $440,909 he obtained, just $6316 was ever returned to investors - just 1.4%.

Sandiford will appear in court again on March 15, at which time a sentencing hearing will be set. The maximum penalty for Sandiford's offences is 15 years in prison or the greater of $945,000 or a fine three times the total value of the benefits, or both.

This article first appeared on Financial Standard

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