Two Israeli-Canadian brothers and two Irish men were behind an “enormous fraud” in which a Dublin-registered company was used to cheat investors out of some €4 million in an electronic trading scam, the High Court has heard.
David and Jonathan Cartu acted as shadow directors of the Irish company, Greymountain Management Ltd, of Foley Street in Dublin, before it was wound up owing millions to investors worldwide, the court was told.
The Cartus, along with Greymountain’s Dublin-based directors, Ryan Coates and Liam Grainger, are being sued by Florida-based investor William Thomas Powers as the lead case among more than 30 cases in which investors are suing over more than $4 million in losses. Mr Powers allegedly lost some $132,000.
The court was told the liquidator of Greymountain was represented but was not participating in the case. Mr Grainger, who denies the claims, appeared in person.
The Cartu brothers, who are based in Israel, and Mr Coates were not represented and did not appear in court. However, in previous interactions with the case, all defendants denied they were involved in any scam.
The investors, who come from the US, Canada, Singapore, the UAE and the UK, claim they were induced by the defendants to open accounts for trading in “binary options” — a form of gambling on futures — with false claims that they would earn significant profits. However, it is claimed there were no legitimate trades carried out as the software system was rigged to ensure they lost their money.
It is also claimed the defendants misrepresented the location, qualifications and identity of brokers and advisers with whom the investors interacted.
Opening the case on Tuesday, Marcus Dowling SC, for Mr Powers, said the individual defendants were “participants in an enormous fraud” in which some $150 million went through company accounts as part of a “unified fraudulent enterprise”.
Greymountain was set up to enable payments to be made by credit card and it played a key role because it had contracts with credit card providers, he said.
While the Central Bank was alerted to Greymountain’s fraudulent activity in 2016, David Cartu instructed his solicitor to lie to the regulator about what was going on, counsel said.
Greymountain received the money from the victims in the case, and the defendants, using a number of other entities, invoiced Greymountain for certain services.
Among those companies was Glenridge Capital, which was controlled by David Cortu. Mr Powers paid his money to Glenridge following conversations with people described as brokers for binary options, counsel said.
Also known as “all or nothing options”, binary options involve betting on the future value of assets and commodities. If the price goes above a certain level, the investor wins, but if it drops below, the investor loses.
Glenridge, along with “various players in the scheme” who performed a number of functions, including making software for the scheme and people who made phone calls, were all part of a fraudulent enterprise to take the victims’ money with “no possibility of people ever making a gain”, counsel said.
Certain individuals Glenridge engaged with were involved in various “Cartu brands” in the US and are now in prison, including one woman serving a 20-year sentence, counsel said.
There were also a number of individuals in Ireland who were “enablers” and assisted in ensuring the business could continue through other corporate vehicles after Greymountain was shut down in 2017, he said. Greymoutain itself was set up in 2015 after a similar payment-processing operator in the UK was closed down, he said.
The Cartus “did just enough” to keep the payments “under the radar” so that credit card companies would not block the payments, he said.
Mr Coates and Mr Grainger “abrogated their responsibility” as the Irish directors of Greymountain, he said. Mr Grainger, who is a “professional company director” holding directorships in 500 other companies, and Mr Coates, at one point handed a power of attorney to the Cartus to sign documents.
The case continues before Mr Justice Michael Twomey.
