Alberto Chang Rajii, The Chilean ‘Madoff’
On April 12, 2016, a Chilean businessman wanted for an investigation into one of the biggest financial frauds in Chile, was identified by a Chilean camera crew in Malta in the reception of a hotel in Valletta. Alberto Chang Rajii (“Chang”), founder of the Arcano Group had left Chile on March 12, 2016 on a flight to the United States. In mid-April 2016, Chang’s bank accounts in Chile were frozen and the Chilean prosecutors delivered the search warrant that would later become an international arrest warrant.
Previously, an anonymous complaint against the Arcano Group had been sent to the Chilean Office of the Prosecutor in Las Condes in December 2015 and he has since been under investigation. He has been living in Malta, having successfully avoided extradition to Chile, where he is wanted to face charges of investment fraud running into millions through a Ponzi scheme run by his company.
“Alberto Chang-Rajii is the tech guru who allegedly wowed Miami with an elaborate backstory that turned out to be totally made up. Maltese authorities previously said that Mr. Chang-Raji tried to buy citizenship on the island through a program that encourages investors to pour money into the island, but reports read that the authorities denied his efforts.
Chang-Rajii allegedly raised millions from Miami investors with a tale of leaving Chile for Stanford University in the mid-1990s, where he said he met Larry Page and Sergey Brin and became an early Google investor. He became a board member at Endeavor Miami and regularly spoke at tech conferences and universities.
But later, the Miami New Times reported that his Stanford tale was bogus, as journalists back in Chile raised questions about whether his business was legit. As Chilean investigators closed in, Chang-Rajii abruptly fled to Malta and essentially disappeared.”
Chang’s company Onix went into compulsory liquidation in May 2016 after it defaulted on its liabilities to a Chilean creditor, with the Santiago court appointing Carlos Parada Abate as its liquidator. The company had over US$120 million in liabilities to over 1,000 creditors at the time of its liquidation.
Parada’s US counsel is Sequor Law partner Edward Davis from Miami. After an Australian court had become the latest to recognize Chilean liquidation proceedings in January 2018 Davis stated, “We are very happy to have obtained…additional recognition for Mr. Parada in Australia which will allow him to secure real estate, bank accounts and artwork that are believed to be worth more than AU$5 million [US$4 million] in value.”
Chang’s alleged personal spending on properties in Australia, the British Virgin Islands, Miami and London had instigated the global round of recognition proceedings for his Chilean liquidation.
Mr. Parada’s counsel then retained Lindquist in order to establish the flow of funds, the quantum of their source and use and to identify assets.
Lindquist’s ‘Approach’ was driven by the finding of bank transfers as the primary way that Chang moved funds on a daily basis from their initial source to their ultimate use to fulfil a particular need in order to maintain the Ponzi fraud. There were a few thousand of these bank transfers. From Lindquist’s perspective, all related-party bank transfers were meaningless until such funds were either paid to a third party, retained by Chang for personal benefit or were in the ‘unknown’ category.
After a study of several personal and corporate bank accounts of Chang at various financial institutions in eight countries during the years 2009 to 2016, Lindquist determined that the total amount obtained was some $201 million that was traced to Chang’s personal benefit, assets and the unknown category. Counsel has recovered the assets on behalf of the victims.
The Chang Difference from Madoff
Lindquist had also been retained on the Bernie Madoff case and offers the ‘Chang Difference’. Chang promised payments of interest in cash to his investors and these payments required cash with regularity, usually every month. Banco Santander provided “giros” for each bank account and the “giros” present a list of investors with the same names, same sequence of names, amounts and pay dates that was repeated on a monthly basis. Consequently, there was constant pressure on Chang to enhance his ‘image of success’ in order to secure new cash in a timely fashion to repay the promised obligations to the past investors. Madoff took a different approach. Madoff fabricated false trading documents and account statements that reported profits and sufficient returns on investment that caused the investors to keep their funds with Madoff. Hence Madoff did not have this type of ‘cash’ pressure. Madoff was still exposed to his investors but only when a bear market appeared that would encourage investor redemptions.