Arif Bhalwani, a Ponzi schemer, and the Count

We discovered another instance in which Arif Bhalwani was dragged into the aftermath of fraud

This is another story from Arif Bhalwani’s career prior to Third Eye Capital. You can read our previous story to get a sense of why Third Eye is important. Remember the “Prime Bank” deceptions? These are con artists who promise unrealistic guaranteed returns while claiming to have access to very exclusive, hush-hush deals offered by major banks.

Randall Treadwell was one such con artist, who raised $65 million from 1,700 investors with the help of at least three associates. The SEC filed a complaint against Randall in federal court in October 2004. In Orlando, he is currently serving a 25-year prison sentence.

Randy’s story was featured in an episode of the CNBC series American Greed, which focuses on financial crime. His three main associates were also imprisoned. They operated through various vehicles, the most important of which was Learn Waterhouse Inc. Learn Waterhouse was given receivership (just like when the OSC asked an Ontario court to put Bridging Finance into receivership with accounting firm PwC).

The receiver went to great lengths to document what happened to the funds. According to early receiver reports, bank records show $1.5 million in total transfers to Arif’s Pinnacle Merchant Capital. This is not the same as Pinnacle Credit and Commerce International, which was featured in the previous post.

Whether right or wrong, the receiver characterised the alleged transfers as a “possible investment” by Learn Waterhouse. Even if Pinnacle or any other entity associated with Arif received money from a Ponzi scheme (directly or indirectly), this does not necessarily imply any wrongdoing by Pinnacle & Co. Ponzi schemes can conduct both legitimate and illegitimate transactions.

They may have accomplices, unwitting counterparties, or total bystanders. Receivers are serious professionals, but they are dropped into complex situations and must uncover the truth in fog. They frequently issue multiple reports in succession, reflecting their iterative attempts to get to the bottom of things. Even when they are under court supervision, they, like everyone else, can make mistakes.

While our post focuses on issues involving Arif Bhalwani, this was only a small subset of the issues investigated by the receiver. Keep those qualifiers in mind. Here’s a report from an early receiver that mentions Pinnacle.

The Count and the Ponzi schemer, Arif Bhalwani

Arif, through a different entity called Tamarind Global Assets, was also accused by the receiver, along with “Knight Crest” and “Gagnon & Gagnon,” of being involved in another set of transfers totaling $2.32 million. Tamarind, through a law firm, was one alleged recipient of those funds.

According to some old SEC investment disclosures, Tamarind is an entity formed in the British Virgin Islands that appears to be controlled by Arif Bhalwani. The receiver became operational in November 2004. Up until the receiver’s sixth update in June 2006 (20 months after the initial SEC action), it was unclear why Pinnacle and Tamarind appeared to have received money from the scheme. Here are some excerpts mentioning Pinnacle and Tamarind Global.

Some documents are missing from the docket, which we attribute to poor archival practises at the start of the digital era. In any case, the receiver’s findings may be preliminary and inconclusive. The receiver, in particular, may be completely incorrect in characterising one transfer as a “possible investment.” As a result, we had to turn to Arif for answers. Here is the statement issued on Arif’s behalf by his current lawyer:

Pinnacle provided services in the ordinary course of business to a company that appears to have done business with Learn Waterhouse or parties related to it more than 20 years ago. Pinnacle fulfilled its obligations and was compensated by the company via its legal counsel. Pinnacle had no knowledge of Learn Waterhouse or its activities, including any improper activity on its part, when it contracted with the company and received the fee.

The receiver for Learn Waterhouse contacted Pinnacle several years after services were provided and the fee was paid, seeking to recover funds that were allegedly part of a fraud committed by Learn Waterhouse. Pinnacle’s counsel communicated with the receiver on its behalf. The receiver accepted that any claim relating to the fee was barred by statute and did not pursue any further recovery from Pinnacle.

Mr. Bhalwani and Pinnacle were unaware of Learn Waterhouse’s alleged improper conduct until after Pinnacle had provided services and the fee had been paid. In relation to Learn Waterhouse, neither Pinnacle nor Mr. Bhalwani were under investigation or accused of wrongdoing.

If you’re unfamiliar with the term “statute-barred,” it refers to a legal action that cannot be pursued due to the passage of time. Legislation in various areas of the law establishes such deadlines. For example, after three years, your tax filings are generally immune from reassessment by Revenue Canada.

We immediately followed up on Arif’s statement with more questions, but as of publication, we had not received any responses. The nature of the services provided, the name of the company with which Pinnacle did business, Tamarind’s specific role (if any), and so on are all obvious questions.

Based on the receiver’s preliminary findings, our best guess is that the services provided by Pinnacle and/or Tamarind were related to loan origination fees for a $100 million line of credit. However, as in our previous story, the client was unable to close the loan due to a failure to produce the collateral.

Given the scarcity of information, Arif’s summary of the overall situation should serve as a starting point for clients who want to dig deeper. The receiver, unlike Arif, does not have firsthand knowledge.

Following the seventh report, the receiver appears to have made no updates to Lean Waterhouse’s list of alleged transactions, which included the alleged Pinnacle and Tamarind transactions. In addition, the first receiver died in the middle of the assignment and was replaced by a new one.

On the Ontario Business Registry, Pinnacle Merchant Capital Ltd is still listed. Until 2014, it was registered with the OSC as an exempt market dealer. It’s worth noting how young Arif was when he was orchestrating these deals.

When we first mentioned this incident on the phone on August 8th, Arif said it was related to the issue raised in our previous story. In other words, he claimed that both this and the previous story are aspects of the same incident. He mentioned a now-deceased barrister intermediary who could be the link between the two transactions.

That could explain why someone is unlucky enough to be dragged into the aftermath of fraud twice. In other words, Arif’s misfortune may have stemmed from dealing with a single intermediary who was involved in both cases. As they say, we couldn’t confirm or clarify this angle with Arif as of press time.

Although this should be clear from Arif’s statement, we reiterate (as we did in the previous story) that we have no evidence that Arif or his affiliates were criminally investigated. And there is no evidence that he was knowingly dealing with con artists.

The schemers claimed to want to help the little guy (instead of making billions on Wall Street). Minimum monthly returns were clearly a key component of the enticement. Making monthly returns has a magical quality to it!

We’re still piecing together Arif’s early life before founding Third Eye. Pinnacle is mostly described as an investor in various Arif bios and promotional literature that we can find. It should now be clear that Pinnacle also had some service business related to credit facility origination.

Another fascinating fact about Pinnacle Merchant Capital. Between 2000 and 2012, Pinnacle appears to have had a “Principal and Partner” by the name of The Honourable Colonel Stuart W. Ross on LinkedIn. He defines himself as a “international humanitarian, philanthropist, and civil society advisor.” He founded and serves as Vice Chairman of G.R.E.A.T. (the Global Resource Epicentre Against Human Trafficking).

I quickly investigated some of his claims, and they appear to be true. His Colonel title, for example, is a Kentucky tradition. Does that sound familiar? Colonel Sanders, the founder of Kentucky Fried Chicken, is the most well-known Kentucky Colonel.

It’s a bit of a joke that the Governor of Kentucky has granted as many as 16,500 colonelships per year. While researching this, I discovered that Colonel Sanders spent the last 15 years of his life in retirement in Mississauga.

If you think The Colonel is the most intriguing character we discovered during our research, that’s because we haven’t told you about the Right Honourable D.D., Ph.D., FWCI, Count David Gagnon.

According to the receiver, Count Gagnon is the Chief Economist of Knight Crest, one of the parties allegedly involved in an escrow arrangement with Learn Waterhouse. Because of the following line in one of the early receiver reports, we had to look up Count Gagnon and his Knight Crest entity (probably registered in the Bahamas):

Bart & Schwartz claimed it served as an escrow agent for a transaction involving Learn Waterhouse, Gagnon & Gagnon, Knight Crest, and Tamarind Global Assets Ltd. Learn Waterhouse was supposed to use a $100 million line of credit set up by Knight Crest at Citibank. The funds were released in accordance with the escrow instructions.

Even though Bart & Schwartz was a law firm, the line above comes with all of the caveats we’ve previously mentioned about the reliability of receiver reports. Count Gagnon is also a Metropolitan Archbishop of the Old Catholic Church Arcis Dei and an Ambassador for L’Assemblée Citoyenne Européenne in the United States. He is the WORLD Humanity Commission’s Secretary-General. He introduces himself on his website, “Cooking with the Count,” as follows:

I am Count David J. Gagnon, Count of Sementra de la antiqua Capadocia Del Bizancio, and a respected member of several Royal houses and other numerous titles across Europe.

I don’t like naming names, but I did speak with the Count as part of my research. He claimed he had no recollection of Learn Waterhouse, Arif Bhalwani, Pinnacle, or Tamarind Global. He also denies ever having been contacted by a receiver. In fact, as the excerpt below shows, the receiver report mentions interacting with David Gagnon.

Personally, this was the first time I had spoken with a member of European royalty. Is it really true? I’m a humble blogger from the colonies one day, and the next thing you know, I’m speaking with European royalty! Meghan Markle, eat your heart out.

Leave a Reply

Your email address will not be published.