Ontario man’s fraud charge dropped while he was allegedly running $10M Ponzi scheme: lawsuits

A Thornhill, Ont., man solicited at least $3.5 million for an alleged Ponzi scheme while facing a criminal fraud charge for a prior alleged investment scam, according to lawsuits and records reviewed by CBC Toronto.

Seyed Mohammedali Nojoumi, who goes by Ali Nojoumi, was charged with fraud by Toronto police in February 2019. Nearly three years later, the Crown prosecutor agreed to withdraw the charge if Nojoumi paid back the alleged victim in the case, according to emails filed in Ontario’s Superior Court of Justice.

So Nojoumi did.

But investor lawsuits now allege Nojoumi likely used their money to pay that restitution. And after the criminal charge was dropped in early 2022, they allege Nojoumi went on to defraud another $6.5 million from investors in the Greater Toronto Area’s Persian community — bringing the total claimed in the lawsuits to $10 million.

“Because no conviction was registered, it gave the opportunity for Nojoumi to perpetrate a whole new round of a similar type of fraud with a whole other group of victims,” said Norman Groot, a Toronto fraud-recovery lawyer who represents most of the investors.

Nojoumi declined an interview request for this story through his lawyer, Gary Caplan, whose office is in Vaughan, Ont., because the lawsuits are before the court. But in his statements of defence for the lawsuits, Nojoumi denies all of the allegations made against him — including that he engaged in a fraudulent scheme. Instead, his statements of defence say the funds were loans that aren’t yet due to be repaid.

Groot also represented the investor from the earlier case involving Nojoumi’s criminal fraud charge. “Both our client and our office raised concerns with the Crown as to the source of funds for this quasi-restitution payment,” he said.

Emails between Groot, his previous client and the assistant Crown attorney illustrate their concerns about the legitimacy of the $360,000 US restitution paid through two cheques issued by an unknown man and a company called Smart Prime Group.

In an email response to the alleged victim reviewed by CBC Toronto, the prosecutor wrote, “Defense told me this morning that he spoke to his client and that all money being provided to you for restitution is ‘legitimate.’

“I hope that allays your concerns, and that we can move on with this matter. I don’t plan to make further inquiries of defense on this issue.”

CBC Toronto contacted Ontario’s Ministry of the Attorney General for comment on the case and asked what steps Crown lawyers take to verify the source of funds used to pay restitution.

In an email statement, a ministry spokesperson said it would be inappropriate to comment, “as this relates to matters currently before the court.”

More fraud cases end with charges withdrawn

Last year, a CBC Toronto investigation examined how Ontario’s enforcement systems are handling a skyrocketing number of fraud cases and whether they’re helping victims. The four-part series, The Cost of Fraud, discovered an overloaded justice system that is reluctant to prosecute fraud and failing to deter fraudsters.

Numbers from Statistics Canada show the majority of fraud cases in Ontario have ended with a decision to stay or withdraw the charges since 2020.

All of the investors CBC spoke to are part of the GTA’s Persian community — as is Nojoumi — and thought their investments would be managed by Nojoumi through his purported investment company, Smart Prime Group (which made one of the restitution payments in the criminal case).

They say they made their investments based on a combination of trust in Nojoumi and friends who were already receiving returns, in what appeared to be a sophisticated foreign exchange investment operation — and the belief that alleged frauds like this couldn’t happen in Canada.

“I want to stop him to not do [this] to other people,” said Maryam Alavinasab, who is suing for the $1.1 million she invested. “He’s still in [the] Persian community, he still walks with confidence, and I’m pretty sure that he’s still trying to convince people to invest with him.”

During a presentation at Smart Prime’s office in Toronto, Alavinasab’s lawsuit alleges, she was told the company was 12 years old, licensed to trade in securities, had more than 80 investors and managed over $50 million US in assets.

“They convince us as newcomers that it’s a safe place to invest,” she told CBC Toronto. “We didn’t think that such a big office with lots of people coming, going and working at that place it’s kind of a scam or fraud. Nobody at that time complained ‘give me my money back.'”

Alavinasab’s lawsuit and the five others that were filed allege Nojoumi was promising a “guaranteed” return on investment paid to investors at a rate of two per cent a month. They were also provided with an account login for Smart Prime’s website that allowed them to check the status of their investments.

“They thought they were investing their money on a licensed foreign exchange sort of operation,” Groot said.

“As it turns out, that wasn’t happening … the data that they were being provided, their investment return information, was all false.”

Nojoumi argues loans aren’t overdue

Nojoumi’s statements of defence generally claim that any person who “chose to engage the software platform created by Smart Prime Group Ltd. knew or ought to have known they were investing in foreign security trading.”

“Each of them was a sophisticated and knowledgeable investor, who, at all material times, assumed the financial and legal risks attendant upon trading,” reads the statement of defence.

But the court filings go on to state that the funds of the plaintiffs in these lawsuits were actually loans intended to assist Smart Prime Group in financing software applications and that the loans are not due to be returned until later this year. The statements of defence do not address the monthly return payments.

Once investors stopped getting their monthly payments, things started to unravel, according to their lawsuits.

Alavinasab and others learned about Nojoumi’s now withdrawn fraud charge and that he and Smart Prime were never registered with security regulators. The Smart Prime website was deactivated in the spring of 2023, according to the court filings.

“I lost my husband’s trust,” Alavinasab said. “This money belongs to my kids. I try, I work hard to save them.”

Without the investment money, she said, she has to sell her house and figure out another way to pay for her daughter’s university education next year.

Investors took out loans

Other investors, such as Nargass Razi and Mina Amini, didn’t have the savings to invest with Nojoumi. But they said they were convinced to take out loans so they could benefit from what they were told were guaranteed monthly returns of two per cent.

“I was on one income, and it was hard for me to manage my mortgage and the monthly other expenses that I have, and I thought in this way it can help,” said Razi, who took out a $175,000 second mortgage to invest.

But now she said the situation has left her working from “morning till night.”

“I have to pay double interest on my mortgage,” Razi said. Nojoumi is “happily enjoying his life … and now I don’t get that opportunity to spend my life with my son as much as I used to.”

Mina Amini and her husband are out $310,000 from their investment, most of which came from a loan. They invested the $230,000 loan 10 days before Nojoumi made his second restitution payment for his criminal case in December 2021, according to court records.

“Everyday I called Ali Nojoumi, ‘we need this money,’ but they didn’t care,” Amini said.

Alavinasab, Razi, Amini and other investors say that in addition to their lawsuits, they’ve reported Nojoumi to the Ontario Securities Commission (OSC). In December 2023, the OSC issued a public warning that Smart Prime was not registered to trade in securities in Ontario.

CBC Toronto contacted the OSC, but a spokesperson said the regulator doesn’t confirm or comment on the existence of complaints or investigations in order to protect the integrity of its investigations.

In the meantime, investors hope that by speaking out, they can protect others in their community and encourage the justice system to take action.

“Even if I cannot get my money back, when I see that he’s punished, it [will] calm me down and I can sleep,” Alavinasab said.