Iron ore and fraud

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Photo by Matt Popovich

A Malaysian citizen is facing up to forty years in prison after pleading guilty last month in Miami, Florida, on two counts of fraud in an alleged scheme to cheat investors and US government agencies out of millions of dollars. A bankrupt iron ore mine in northern Chile lies at the heart of the plot.

Starting in 2010, Navin Xavier told investors that his company Essex Holdings was a global resources company with interests in sugar trading and iron ore mining in the Atacama Desert. But after raising US$29M from 100 investors in Europe and North America, promising rates of returns of 8%-25%, he stopped paying back on promissory notes sometime in 2014. Xavier now admits that he was operating a Ponzi scheme, paying returns to early investors with contributions from latecomers.

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The second fraud charge relates to a plot to cheat the state government of South Carolina out of subsidies out of US$1.2M to help finance the construction of a diapers factory in a depressed part of the state.

Xavier used fraudulent bank statements to show payments by Essex Holdings for services related to the project which allowed the South Carolina Coordinating Council for Economic Development to authorize the payment.

Some of the money raised in both plots went into his own accounts which he used in part to purchase luxury items for himself and his wife. Under the plea bargain entered last month, Xavier will have to pay a fine of at least US$250,000 and give back a 2014 Range Rover, two Tag Heuer watches and a diamond platinum wedding ring estimated to be worth US$60,000 as well as industrial property in Marion, South Carolina, the site of purported diapers’ plant.

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