Prison sentence for Malta Falcon Funds fraudster in Sweden

A Swedish court has sentenced two men to six years, nine months in prison for having defrauded a Maltese pension scheme that lost millions in Swedish savers’ money.

Max Serwin, who operated in Malta under the alias of Emil Amir Ingmanson, and co-conspirator Afram Georgo, misappropriated the savings in Falcon Funds to turn them into suspicious ‘loans’ to other Swedish companies.

The Falcon fiasco cost Bank of Valletta in Malta €26.5 million in a settlement with the Swedish pensions authority, which held it liable for the pension as one of the guarantors of the fund.

Over €247 million was lost in 20,000 savers’ monies, resulting in the shuttering of Temple Asset Management in Malta, the financial services firm tasked with taking investment decisions for Falcon Funds. Additionally, Temple director Anthony Farrell faced criminal action in Sweden; a two-year MFSA ban on holding approved positions was administered to Falcon directors Tonio Fenech, the former Nationalist finance minister, and Ian Zammit and Joseph Xuereb; and further court action in Malta from BOV against a host of entities involved in siphoning off cash from the pension fund.

In the Stockholm court, the Swedish prosecutor accused Serwin of funnelling the Falcon savings into large investments in a worthless e-commerce company called Werel for 5,000 times the original value. Werel then issued new shares to Serwin at inflated values.

The prosecutors called it a “well-planned and systematic attack on the Swedish pension system” and are holding Serwin responsible for the return of millions in stolen cash.

Serwin, who lived in a luxury Sliema apartment, was the original promoter of Falcon Funds when it was set up in Malta with €247 million in Swedish savers’ money. It was supposed to invest the cash in blue-chip investments.

Although he was never its founder-shareholder, Serwin did have a formal role in setting up Falcon Funds, having attended 13 board meetings with its directors. He also set up Falcon Asset Management, with a view to take control of the pension’s investment decisions despite the glaring conflict of interest.

Financial services rules required that all investment decisions be vested in a firm independent of the fund’s directors, which in this case was Temple Asset Management. But in an investigation by auditors KPMG, Serwin was found to have been “very much involved in the fund’s operation, and that he effectively took decisions related to investments, which should have been Temple’s responsibility.”

Serwin’s role was so overbearing that Falcon’s original investment managers Calamatta & Cuschieri resigned their role. “At one point ‘Ingmanson’ wanted them to invest in Formula 1 just so that he could get the free F1 race tickets that investors get.”

When the MFSA finally put KPMG as controller of the shuttered fund, the audit firm found that Temple had invested the cash in the ETIs (exchange traded instruments) marketed by another Malta firm, Argentarius, which is run by Austrian national Andreas Woelfl. ETIs are used to create a chain of companies where the money invested in one, ‘runs down’ to the ultimate beneficiary. “It looks like these ETIs were designed in such a way so as to make the initial investment appear liquid enough to merit the pension fund’s interest, despite the fact that ultimately the beneficial company at the bottom of the chain is illiquid.”

It was in this manner that the worthless Werel in Sweden managed to get some €60 million in cash from Falcon Funds, through investments made in Boardwalk Real Estate ETI, Nordic Power ETIC, LX Viceroy Industries, LX Median Trust, and Reditum. “The investments in the top companies hid the level to which the fund was exposed to Werel, which was hidden under a number of investments… it is clear that Temple did not follow the rules imposed by Falcon Funds, by investing significant amounts, indirectly, in Werel,” KPMG said in its report.

“Effectively, Temple would invest some €20 million in two ETIs… for shares whose net asset value was €2.6 million. But the significant investment does not reflect the value of the Werel shares, so we cannot explain this high premium.”

The MFSA fined Temple a total of €612,000 for breaches 23 different standard licence conditions and had its licence suspended.