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Edith Pardo, 68, of Bloomfield was arrested Friday by the FBI for her alleged role in the scam that U.S. Attorney Craig Carpenito said was orchestrated by Boaz Manor, 46, of Toronto.
A federal grand jury indicted both on wire and securities fraud and conspiracy charges, Carpenito said.
Pardo had an initial appearance scheduled Friday in U.S. District Court in Newark. Manor, meanwhile, remained a fugitive for the second time in his professional career.
“Bo” Manor became notorious in Canada for operating a bogus $730 million hedge fund that collapsed in 2005 amid allegations of offshore accounts and missing diamonds and investments.
He remained a fugitive for two years before returning to the country, serving four years in prison and being banned from the province’s capital markets.
Manor resurfaced in the U.S. with dyed-red hair, a beard – and a new name, “Shaun MacDonald,” authorities said.
He founded CG Blockchain Inc., and began creating a product called ComplianceGuard, which was “purportedly designed to provide hedge funds with a blockchain-based auditing tool,” Carpenito said.
Employees and investors weren’t immediately aware of Manor’s past, the U.S. attorney noted.
Pardo played a key role, the grand jury indictment returned in U.S. District Court in Newark alleges.
After securing initial seed money in CG Blockchain from a close family member, Manor recruited Pardo to act as a conduit, thereby hiding its source, the government charges.
Pardo, in turn, posed as an “independently wealthy investor who provided millions of dollars in seed money to CG Blockchain,” Carpenito said.
She and Manor told investors that 20 hedge funds were using ComplianceGuard and were each paying CG Blockchain a $1 million annual fee, the U.S. attorney said.
It was all a lie, he said.
In 2017, CG Blockchain launched an “Initial Coin Offering” (ICO), and began marketing its new product – “Blockchain Terminal” – to potential investors.
CG Blockchain described Blockchain Terminal as a computer terminal that allowed hedge funds and financial institutions to trade and manage cryptocurrency – what one report described as a “cryptotwist on the Bloomberg Terminal.”
Manor “actively marketed the token to investors, while failing to disclose his true identity or his role at CG Blockchain,” Carpenito said.
He and Pardo “also misrepresented to ICO investors that the Blockchain Terminal had ‘actual clients’ and was ‘installed at 20 hedge funds’,” he said.
A year later, CG Blockchain publicly announced that it had raised $30 million from its ICO.
Then it all came apart.
A group of employees, many of them in Hong Kong, reportedly started backgrounding Manor after they stopped getting full pay.
They found photos of Manor, some on Facebook, and learned of his crimes in Canada.
Confronted by an investor, Manor “admitted that he had hidden his real identity and criminal past because disclosure of that information would have resulted in ‘the company being destroyed’,” Carpenito said.
“People don’t have to disclose any kind of embarrassing or painful situations that they’ve encountered in the past, so long as it does not relate to their current job,” Manor said in a YouTube video. “I’m in a profession right now as a product designer, and as a management consultant in a minor role. Product design is my major focus — that doesn’t require me talking about my past.”
In addition to the federal indictment, the U.S. Securities and Exchange Commission (SEC) on Friday filed a civil complaint against Manor and Pardo, he said.
Carpenito credited special agents of the FBI with the investigation leading to the charges. He also thanked the SEC for the assistance provided by its Enforcement Division. Handling the case for the government are Assistant U.S. Attorneys Vijay Dewan and Catherine R. Murphy of Carpenito’s Economic Crimes Unit.
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