Chief executive Antonio Buzaneli and Jose Ordonez were taken into custody in Miami, Florida on 17 November.
They have been charged with defrauding investors between 2010 and 2016, by falsely stating that their funds would be used “for the sole purpose” of making loans to a Brazilian subsidiary of Providence.
A third defendant, Julio Riviera, pleaded guilty to conspiracy on 9 November.
The company filed for Chapter 7 bankruptcy protection in the US on 28 July 2016 after the Securities and Exchange Commission (SEC) moved to shut it down the previous month. The US regulator called the investment scheme an “ongoing fraudulent and unregistered securities offering”.
The scam
The company claimed to loan money to small and medium-sized businesses in Brazil at a discounted rate. The company stated in its marketing material that it made a 48% annual return on money invested in the Latin American country.
Around $64m was raised from US investors via a network of unlicensed brokers who sold promissory notes bearing annual interest rates of between 12-24%.
However, a significant proportion of the money was instead used to pay purported profits to other investors and make commission payments to brokers.
Money was also diverted into companies controlled by Buzaneli and Ordonez; including an import/export company, a travel company, a credit restoration service, a catering company and a food truck operated by Buzenali’s wife.
It was confirmed earlier this year that it is highly unlikely that investors will get their money back.
International reach
According to court documents, Buzaneli and Ordonez also opened Providence offices and affiliates around the world, including in London, Hong Kong, Taipei, Shanghai, Singapore, Vancouver, and Panama.
In about 2011, they opened Providence-affiliated entities in Guernsey and Hong Kong, through which they raised approximately $85m from offshore investors by again claiming to use investors’ money to invest in Brazilian factoring.
In reality, much of the money was transferred to other Providence-controlled entities around the world, as well as to the bank accounts controlled by Buzaneli and Ordonez.
Channel Islands connection
Administrators were appointed to Guernsey-based Providence Investment Funds and its manager Providence Investment Management International Ltd (Pimil) in August 2016 after all directors of both companies resigned within a week.
The financial services regulator on Jersey has launched its own investigation into the sale of Providence Investment Funds to clients of now-defunct Jersey-based IFA firm Lumiere Wealth, which was majority owned by Providence.
The Jersey, Guernsey and US financial services regulators confirmed in September 2016 that they had joined forces and were working together against Providence.
Lumiere Wealth chief executive Chris Byrne, who was arrested in October 2016, is due to stand trial in the summer of 2018.
