News Release

Vancouver - A British Columbia Securities Commission panel has ordered three men to pay $12.7 million into the courts for operating a fraudulent Ponzi scheme that bilked 89 B.C. investors out of millions of dollars. The panel also permanently banned the men from the public markets and ordered them to pay $4 million in administrative penalties.

On Feb. 20, 2008, the commission panel found that two Abbotsford men - Malcolm Cameron Boyd Stevenson and Daniel Eric Byer - and Preston Pinkett II, a resident of Virgina, violated securities laws and perpetrated a fraud through an investment vehicle called International Fiduciary Corp SA (IFC).

 The men ran the IFC scheme between April 2004 and November 2006, promising investors a return of 6 per cent per month, telling them this was possible through IFC's "asset growth program" that purportedly bought securities called "1st Tier medium term bank notes" at a discount and then sold them for a profit.  The men told investors that their money was not at risk - it would be in their control at all times in a U.S. bank account and could be withdrawn on short notice.

In fact, the asset growth program did not exist.  The investors' money, once invested, was not under their control.  Instead, Stevenson, Pinkett and Byer used the money to enrich themselves and to keep the scheme going.

The program turned out to be a Ponzi scheme that took over $23.3 million from B.C. investors, who received payments of only about $10.3 million in return.

"Ponzi schemes are a particularly sinister form of fraud because those lucky enough to get in at the beginning do in fact earn the promised returns, and lend the credibility to the scheme that it needs in order to lure investors," the panel said. "The asset growth program, which was the purported source of the astronomical returns they promised to investors, was a fairy tale . . . the only reason the respondents made any payments to IFC investors was because they had to in order to make the scheme work."

Stevenson and Byer solicited individuals to invest in the IFC scheme.  They met with prospective investors, explained how the IFC investment worked, and provided documentation that described the investment.

Pinkett opened bank accounts at United Bank in Arlington, Virginia, worked with Byer to facilitate the deposit of the investors' funds in those accounts, and made the fraudulent transfers of investors' money.

Stevenson and Pinkett decided each month how much to pay themselves and Byer from the scheme.

The panel chose to apply recent legislative changes to the Securities Act sanction provisions. The changes, which came into effect in 2006 and 2007, increased the maximum administrative penalties for contraventions of the Act, and added new powers for issuing administrative orders, including disgorgement orders.

The evidence showed that Pinkett distributed a total of about $5.5 million to Stevenson, $4.8 million to himself, and $2.4 million to Byer. In these circumstances, the panel deemed it appropriate to order the disgorgement of those funds into the courts where investors may have a chance to recover money.

The panel also ordered Pinkett to pay $1 million, and Stevenson and Byer to pay $1.5 million, in administrative penalties. In addition, the panel permanently banned all three men from trading securities or exchange contracts and from being a manager or consultant in connection to the securities market. They are also prohibited from being a director or officer of any issuer, registrant or investment fund manager, being a registrant, investment fund manager or promoter, and from engaging in investor relations activities.

The only IFC assets its receiver has located so far are a little over $8 million in IFC bank accounts.  These funds, net of competing claims and the receiver's fees, will have to be shared by all of the investors who may have claims.  This suggests that any recovery from IFC will fall far short of any meaningful repayment of the investors' principal.

The B.C. Securities Commission is the independent provincial government agency responsible for regulating trading in securities within the province. You may view the decision on our website www.bcsc.bc.ca by typing in the search box, Daniel Eric Byer, Malcolm Cameron Boyd Stevenson or Preston Pinkett II, or 2008 BCSECCOM 107. If you have questions, contact Ken Gracey, Media Relations, 604-899-6577.

Learn how to avoid investment fraud at the BCSC's investor education website: www.investright.org.