The chief executive officer of Next Level Investments, a company that operated in Kingston for about a year, took in millions of dollars from local hopefuls but paid no dividends to more than 75 per cent of its known investors, has now admitted to fraud.
Christopher Uitvlugt, 28, pleaded guilty Friday in Kingston’s Superior Court of Justice to a single count of fraud over $5,000.
His lawyer, Clyde Smith, and Crown prosecutor Alexander Hrybinsky will make their respective sentencing recommendations at the end of March to Superior Court Justice Gary Tranmer.
Previous court proceedings have been told that Uitvlugt returned to Kingston from the oilfields in late 2015 and for a time worked as a server at East Side Mario’s.
In the early months of 2016, however, he started a business, Next Level Investments — renamed Next Level Capital Group in December 2016 — which he initially operated out of his home on Fisher Crescent.
Justice Tranmer was told the enterprise was registered as a business with the Ontario government in April that year. But it was never licensed as an investment business or authorized under the Ontario Securities Act to sell investments to the public.
Hrybinsky said Next Level offered its clients “the opportunity to make up to a 550 per cent rate of return on a three-month investment.”
The premise, he told the judge, was that investors’ money would be put into the Foreign Exchange (FOREX) market by Uitvlugt and 50 per cent of the resulting profits would be returned to the investor while 50 per cent was retained by Next Level.
In the early days, he said, Uitvlugt brought in his friend and roommate, Ken McGuire, as a sales representative, although neither man had any financial or investment sector experience or training and McGuire wasn’t registered with or licensed through the Ontario Securities Commission.
Yet by the end of 2016, Next Level was able to move out of Uitvlugt’s house and into commercial offices on Princess Street. Hrybinsky said the business had also expanded to include an administrative staff and several more unlicensed sales representatives. McGuire by then was listed as sales manager, and at his sentencing in March for his involvement in the operation, McGuire was described as the face and voice of company
Justice Tranmer was told Next Level’s website, during the time the company was in business, offered prospective clients a range of investing services, including “expert analysis” and “strategic planning” and “risk management.” Yet “not one individual employed at [Next level] had any education or licensing in the financial and investment sector,” according to Hrybinsky.
He told the judge that police investigators were able to identify about $4.8 million in investment money placed in Next Level accounts. But a review of Uitvlugt’s FOREX trading accounts revealed that only a small portion of that money, $24,000, was ever used in trading, and the trades he did make resulted in a net loss of about $5,000. “He actually lost money on more trades than he made money.”
What Next Level actually was, Justice Tranmer was told, was a Ponzi scheme that used money from new investors to pay earlier investors, giving the appearance of profits where none actually existed.
Hrybinsky said it’s the nature of such schemes “that everything appears to be functioning normally and successfully until the amounts demanded by early investors supersedes what is being brought in by new investors and the house of cards ultimately falls.”
The business’s financial accounts showed “a clear stream of investor money” entering those accounts, “in amounts approaching $1 million some months,” according to the Crown prosecutor. And he said they also show the same money being directed to pay pre-existing investors.
Justice Tranmer was told that a forensic accountant was engaged by police as part of their investigation. The resulting report, Hrybinsky told him, concluded that more than $4.8 million was deposited into Next Level’s business accounts over time and between $4.35 million and $4.84 million of that was investors’ money.
The forensic accountant was able to identify transactions involving 874 investors, he said, and found evidence of payments of between $2.66 million and $3.23 million that were made to some of them.
Some of the early investors, Hrybinsky told the judge, actually did appear to make profits on their investment. But he said the source of those profits was the investment money of subsequent investors, not FOREX trading.
The same forensic accountant’s report, he said, identified 678 later investors, representing approximately $3.5 million in investment money, who received no payments from those bank accounts.
Varying amounts of investment money, Hrybinsky told the judge, was used to pay for Uitvlugt’s Lamborghini and Audi, as well as business expenses such as the purchase of the 1309 Princess St. property that became company headquarters.
Justice Tranmer was told the bank records don’t reflect the full scope of Next Level’s dealings, however. Hrybinsky said witness reports and a photograph stored on Uitvlugt’s computer suggest that substantial amounts of cash were also received from investors.
Cash transactions, Hrybinsky said, can’t be quantified since they’re not reflected in the bank records.
He suggested some measure of their size can be inferred, however, from what happened the day of Uitvlugt’s arrest, March 14, 2017.
Shortly before he turned himself in to police, Justice Tranmer was told, he called one of Next Level’s investors from his home and had the man come over and pick up a bag of cash., at least some of it intended for the mother of his children.
Hrybinsky said police later recovered a total of $136,925 from one of Uitvlugt’s associates and his children’s mother. But 68 empty envelopes found scattered around an open safe in Uitvlugt’s home following his arrest — each with an investor’s name and amount written on it — suggest they should have contained $196,000.
To date, Hrybinsky told the judge, police have “applied for and restrained” more than $1.6 million in money and property from Next Level, all of it currently considered proceeds of crime.