COOKS OFFSHORE BANK UNDER FRAUD INVESTIGATION

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Failed to account for investors’ $15 million
By Rachel Reeves
RAROTONGA, Cook Islands (Cook Islands News, Oct. 23, 2010) – New
scrutiny is on the disgraced Wall Street Banking Corporation (WSBC)
which was kicked out of the Cook Islands last year after a long legal
wrangle with government authorities.

[PIR editor’s note: Wall Street Banking Corporation is an offshore banking entity in Cook Islands.]

Wall Street Derivatives (WSD) Global Markets Ltd, a stock exchange-accredited futures and options company, is coming under fire for allegedly failing to account for a reported NZ$20 million [US$15.3 million] in funds received.

WSD was the outsourced margin trader for Wall Street Banking Corporation (WSBC), which until last year was licensed to do business here in the Cook Islands.

New Zealand’s Serious Fraud Office (SFO) suspects that some of WSBC’s clients’ investments "appear to have been transferred to WSD entities".

"Concerns have been raised over the legitimacy of some of these transfers," SFO chief executive Adam Feeley said in a statement.

The SFO this week procured warrants to search the Mount Eden offices of WSD Global Markets Ltd and a Glendowie home owned by one of its directors.

An SFO statement says that a former representative of one of the firms being investigated charged that the WSD was "nothing more than a Ponzi scheme".

For four years, WSCB waged a legal battle against the Cook Islands Financial Supervisory Commission (FSC), which initially refused to grant the company a banking license and then later moved to revoke it.

In 2008, the FSC placed WSBC under statutory management and in December of last year, effectively exiled it from the Cook Islands.

(The company’s banking license has not yet been formally revoked, as its court-appointed company manager has not applied for it to be dissolved.)

The WSD was until recently controlled by former WSBC director Riaz Patel, who in the 1990s was the director of an Australian company that came under fire for money laundering.

WSD was reportedly operating in New Zealand, Australia, Kenya, India, Thailand, United Arab Emirates and the United States; the Thai Securities and Exchange Commission terminated its futures trading license in June.

FSC commissioner John Hobbs told CI News that under the terms of the Consent Order granted by the court in July of last year, he cannot discuss the details surrounding the WSBC’s departure from the Cook Islands until the company’s banking license has been formally revoked.

"WSBC remains under the management of a court-appointed manager in New Zealand, who was granted the power to do such things as may be necessary for the winding up of the affairs of the company and distribution of its assets, he said in an email. Until such time as the process of winding up is completed and the Court Appointed Manager applies for the dissolution of the company and its removal from the company register, the FSC cannot consider the formal revocation of the international banking license of WSBC."

He added that at this stage, the FSC is not responsible for the actions of WSD, and that its move to banish WSBC is reflective of its refusal to tolerate non-compliant financial institutions.

"Any action taken against the WSD Global Markets Ltd, WSD Financial (NZ) Ltd, WSD Financial Group Ltd or other members of the WSD Group falls outside the regulatory responsibility of the FSC, Hobbs said. Whilst the FSC will obviously co-operate with any inquiry from the SFO as far as permissible under the law, it has no jurisdiction over the actions of these companies in New Zealand."

SFO investigations into the WSD Group are ongoing.

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