By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Two purported Nassau residents are alleged to be principals in a $125m fraud that involves high-end Paradise Island real estate and a $3.5m Bahamian investment fund.

Michael Stewart, 56, and Bryant Sewall, 52, have been accused by the Securities & Exchange Commission (SEC) of playing key roles in a “Ponzi-like” scheme that has “misappropriated” between $35m to $41m of investor monies to finance their personal expenses and lavish lifestyles.

The two, both US citizens, were said by the SEC to “claim to reside in Nassau, The Bahamas”, where many of the corporate entities involved in the Mediatrix Capital structure are domiciled.

It is also where two of the seven properties allegedly purchased with a combined $14m of diverted investor monies are said to be located. Jeffrey Felder, the SECs senior attorney, alleged that the Mediatrix Capital principals have invested more than $3m in acquiring two high-end Paradise Island properties.

The first purchase, 15 Mira Mar Villas, was set in motion when Stewart wired $119,250 to an unnamed Bahamian law firm on November 16, 2017, which was acting as an escrow agent. It was described as the first of six instalments, and five matching payments were made by February 5, 2018. The “final” $168,158 disbursement was made on March 5, taking the price to almost $900,000.

“I have reviewed multiple documents confirming that Mira Mar Villas No.15 is an address that belongs to Stewart,” Mr Felder alleged. “These documents include information submitted to the New Zealand Companies Office (a subdivision of the Government of New Zealand) on February 28, 2019, by Stewart’s colleague, identifying Mira Mar Villas No.15 as Stewart’s address, and a utility bill from The Bahamas Telecommunications Company for service provided to Stewart at Mira Mar Villas No.15, dated September 28, 2018.”

The SEC alleged that Sewall, too, has taken up residence on Paradise Island - this time at 704 Ocean Place Condominiums - and again using monies obtained from Mediatrix investors. It added that five wire transfers totalling $2.198m were made to acquire the property over a year-long period from January 1, 2018, to January 8, 2019.

The funds purportedly came from accounts with Mediatrix’s brokers, and Mr Felder alleged: “The wire transfers contained notations indicating they were for the purchase of the property, and that the property was being purchased for Sewall.

“All but one of the wire transfers was sent to a law firm that acted as an escrow agent for the transaction. That law firm issued a letter, dated February 5, 2019, stating that the property was recently purchased by defendant DCC Islands Foundation, which the letter states is owned by Bryant and Hanna Sewall. The letter further states that they intend to use the property as their residence in The Bahamas.”

The SEC’s this week announced it had managed to obtain “a temporary restraining order and asset freeze” over both Mediatrix, Stewart, Sewall and their partner, Michael Young, in a bid to prevent investors suffering further harm in a scheme that seems to be centred on The Bahamas.

Mediatrix and one of its brokers is domiciled in this nation, together with several entities alleged to have facilitated the purported fraud by acting as conduits for funds sucked from the scheme. They include the Mediatrix Capital Fund, a Bahamian-domiciled IBC alleged to be “registered with the Securities Commission of The Bahamas as a Bahamian Professional Fund”.

Said to contain around $3.5m in assets as at April 2019 from five to six investors, “all but one of which is a US investor, the investment fund’s accounts are alleged to be geld by Ansbacher (Bahamas). There is nothing to suggest the Bahamian bank has done anything wrong in relation to the Mediatrix affair.

Other Bahamian entities mentioned by the SEC include the DCC Islands Foundation and The 1989 Foundation, both of which are alleged to hold real estate and other assets owned by Stewart and Sewall that have been funded with investor monies.

The extent of the ties to The Bahamas is again likely to raise questions about this nation’s vulnerability to being exploited by expatriates with allegedly dubious intentions.

“The SEC brings this emergency enforcement action to halt a fraudulent, ongoing international trading programme that has placed at risk more than $125m of investors’ funds,” its lawsuit in the Colorado federal court alleges.

“From March 2016 to the present, Young, Stewart and Sewall, through Mediatrix Capital [and its brokers], raised more than $125m from investors in unregistered securities offerings by representing to investors that their money would be pooled and invested using defendants’ allegedly highly profitable algorithmic trading strategy.

“Defendants falsely claimed to investors that from December 2013 through at least March 2019, their trading strategy had never had an unprofitable month and had returned more than 1,600 percent,” the SEC continued.

“Defendants further claimed that their highly successful trading strategy had enabled Mediatrix Capital to accumulate assets under management of $225m as of the end of 2018. None of this was true.

“In reality, since mid-2016, defendants have misappropriated more than $35m of investors’ money by transferring it out of the entity defendants’ bank and brokerage accounts rather than using the money for trading. Defendants used investors’ money to purchase luxury properties and vehicles, and diverted more than $5m of additional investors’ funds for other improper expenditures to perpetuate the fraud.

“Even when defendants used the remaining portion of investors’ money for trading, defendants’ trading consistently lost money – losing more than $18m from its trading in 2018 alone,” the lawsuit added. “Because of defendants’ massive misappropriation and trading losses, Mediatrix Capital’s assets under management are nowhere close to the amounts represented by defendants.

“For example, at year-end 2018, defendants represented that Mediatrix Capital had $225m under management, when in reality, the firm had approximately $35.3m in assets under management (less than 16 percent of the amount claimed).”