Mining Technologies Inc. v. Zia Shlaimoun, Infinafund Limited et al. 2013 ONSC 7280 (CanLII)
On May 27, 2010, Mining Technologies Inc. (“MTI”) transferred $2M USD into Infinafund Limited’s bank account at a bank in England. MTI made this investment on the belief that it was a short term bond transaction. Later, when MTI inquired about the investment no information was received from Infinafund’s operating mind Zia Shlaimoun. MTI then retained Investigation Counsel PC to make inquiries. Investigation Counsel retained counsel in England and investigators in various jurisdictions. Upon making two separate ex parte tracing (Norwich) applications in England, it was determined that the bond transaction was fraudulent, that there were other victims of a similar fraud located in other jurisdictions, and that MTI’s $2M USD had been transferred to Switzerland without their knowledge or consent. What follows is a brief summary of the investigation and litigation process that resulted in the recovery of MTI’s $2M, as well as the $2.5M of investigation and legal costs that MTI incurred.
In December 2010, MTI commenced a proceeding by application in England for production of copies of bank statements of Infinafund Limited, a UK company with bank accounts in England. Norwich orders were granted on December 31, 2010, and again in April 2011, by the English Courts, which identified where MTI’s funds had been transferred and the individuals involved. Simultaneously, investigators for Investigation Counsel PC acquired information on the individuals involved.
On May 19, 2011, Investigation Counsel brought an action in Ontario on behalf of MTI alleging fraud, conversion, misrepresentation, conspiracy, breach of trust, breach of fiduciary duty, unjust enrichment, negligence and breach of contract against Krako Inc., Krako International Services Inc., Krake International Holdings Inc., Nikolas Korakianitis, Infinafund Limited, Infinafund Ltd., Infinafund AG, Infinafund Holdings AG, Zia Shlaimoun, Stacey Dawes, Aelite Financial Services LLC, Bunny Williamson, Lantierst Ltd., Frontier Horizon Inc., and Doe Defendants for the loss of MTI’s $2M USD deposit in May 2010. The action was not served. Rather, an ex parte motion for pre-trial relief asset freezing and tracing was sought
On May 27, 2011, Justice O’Connor of the Ontario Superior Court of Justice granted an ex parte order in the form of a Mareva Injunction having world wide effect restraining the Defendants from dissipating their assets. Justice O’Connor also issued ancillary asset reporting and tracing (Norwich) relief. After this order was issued and served, the defendants retained counsel, interim orders were made continuing the Mareva injunction, and monthly motions were heard for the following two years until an interlocutory order was made that the Mareva injunction would remain in place until trial. Simultaneously, MTI’s funds were traced through Switzerland, Belize and into the United States, and an action was commenced in California against a company that Zia Shlaimoun controlled operating as Versailles Investments Limited. MTI obtained orders effectively freezing the assets of Versailles Investments Limited in California pending trial.
On February 22, 2012, Justice Lemon of the Ontario Superior Court of Justice determined that Ontario had jurisdiction over Infinafund in England and Shlaimoun in California and dismissed their motion to stay the action based on lack of jurisdiction (Mining Technologies v. Krako Inc., 2012 ONSC 2239). The appeal of Justice Lemmon’s decision was dismissed. Prior to this motion, the English Courts dismissed a motion by Infinafund and Shlaimoun to set aside the tracing (Norwich) orders. Of note was that the English banks froze the Infinafund and Shlaimoun accounts based on a Mareva by Letter. Meanwhile in California, MTI continued to pursue discovery of Shlaimoun and his company Versailles Investments Limited.
On April 29, 2013, Justice Ricchetti of the Ontario Superior Court of Justice granted partial summary judgment against Infinafund and Shlaimoun for fraud, conversion, and breach of fiduciary duty (Mining Technologies International, Inc. v. Krako Inc, 2013 ONSC 7280). The partial summary judgment was for MTI’s $2M, a liquidated amount, costs and interest. The issues of special and punitive damages, as well as actions against the other defendants, were left for another day. Prior to this motion, MTI obtained default judgment against Stacey Dawes, the banker in England, who facilitated the fraud for Shlaimoun, and against Frontier Horizon Inc., who facilitated the fraud for Shlaimoun in California. An appeal by Shlaimoun of Justice Ricchetti’s judgment in fraud never took place as the Court of Appeal issued an order for security for costs against Shlaimoun prior to allowing him to perfect his appeal.
On November 25, 2013, Zia Shlaimoun paid MTI the $2M judgment issued by Justice Ricchetti as well as an additional $2.5M for MTI’s worldwide investigative and litigation costs. This settlement was made on the eve of MTI’s trial in California against Shlaimoun’s company Versailles Investment Limited. MTI intended to have its Ontario judgment relied upon by the Courts in California. For Shlaimoun, the risk of other investors coming forward with actions, the prejudicial judicial findings in Ontario, England and California resulted in the pressure point necessary for him to transfer back to MTI his ill gotten gains.
On August 28, 2014, Justice Barnes of the Ontario Superior Court of Justice set aside the Mareva injunction as against Shlaimoun and Infinafund, and dismissed the rest of the action as against them on a without costs basis. MTI’s action for its special and punitive damages remains active against the other defendants, including but not limited to Nikolas Korakianitis and his foreign registered Krako companies.
In this case, MTI did not make a criminal complaint in any of the jurisdictions where Shlaimoun resided or the money was transferred, as recovery was its primary goal, there is no limitation period on making a criminal complaint, and MTI did not want to have Shlaimoun using their money to fund his criminal defence lawyers. It was bad enough that Shlaimoun was using his assets to fund his civil defence lawyers.
This case demonstrates that if a fraud victim has the resolve to pursue a fraudster, resolve which includes the passage of time and the cost of investigation and litigation, recoveries for serious frauds are possible. This case also demonstrates that effective investigation and litigation are often required to bring the pressure to persuade someone bent on living off illicit gains that it is in their best interest to return the money under dispute.
Finally, this case demonstrates that pre-trial asset tracing (Norwich orders), asset freezing remedies (Mareva injunctions), and asset reporting orders are often necessary as part of a fraud recovery strategy. Some jurists and lawyers believe that any pre-judgment remedy offends the common law’s presumption against interfering with assets in a defendant’s control before judgment. However, as demonstrated here, “draconian measures are required to deal with draconian conduct,” and if a Court wishes the public to see that its processes are not impotent pieces of paper, such orders should be granted in circumstances that justify them.