The decision by the courts to close down Turks and Caicos Bank (TCI Bank) means that funds from investors in the foreign currency trading outfit Olint are entombed in that bankrupt entity and now subject to the process of liquidation, adding further drama to this protracted affair.

A press release from the Turks and Caicos Islands Financial Services Commission (FSC) read: “The Financial Services Commission (FSC) was forced to take this action after the bank suffered a number of significant withdrawals of funds which left the bank unable to operate normally and meet its obligations on a timely basis. The FSC asked the Court to intervene only once it became clear that the Board of TCI Bank was unable to obtain the additional financial support necessary for the bank to continue to trade. In these sad circumstances, the only solution was to seek a liquidation in order to safeguard the remaining assets and to ensure their fair distribution to creditors.”

Sources close to Olint which ceased operations in the summer of 2008, told Caribbean Business Report that of the US$10 million deposited in TCI Bank Olint had US$7.5 million; TCI FX Traders, US$1.2 million, with the liquidator claiming the rest for his services.

Earlier this year the liquidator, Joseph Connolly of PriceWaterhouseCoopers (TCI), told Olint creditors at a meeting held at the Conference Centre in Kingston, Jamaica that he had only identified US$10 million in liquid assets.

“We’ve identified US$6 million in Turks and Caicos, US$4 million in the United States and we have additional amounts of approximately US$2 million which we think we can recover, and of course, we are still working on the records to see what else is available,” he told club members at the time.

In a report published last year, Connolly concluded that Olint was an unregulated financial organisation (UFO) founded and operated by its lead principal David Smith and that like Allen Stanford and Bernie Madoff its investment practices suggested it was a Ponzi scheme which, for all intents and purposes, did not engage in foreign currency trading.

“The pattern of receipts and payments indicates that the main function of the Hallmark/Olint account was to collect money from members (US$220 million) and then meet redemption requests from members (US$156 million).

“We can find no evidence in our analysis of the source and application of funds of any trading profits being received in the bank account to meet these redemption requests,” read Connolly’s report.

He further added that 6,000 people had invested US$220 million in Olint and that 376 people had claimed around US$67 million.

However, sources close to Olint point to a number of what they described as egregious occurrences that need examination and call in to question how natural justice should be applied.

One of the sources, speaking under condition of anonymity, said: “TCI Bank is currently in receivership and it is now clear that it had a liquidity problem and many non-performing loans. In 2008 David Smith said he had made a request to withdraw US$10 million from TCI Bank in order to make good on payments to club members. This move resulted in a Suspicious Activity Report (SAR) to the police concerning Smith rather than the guy receiving his funds. The question now is whether TCI Bank had a liquidity/solvency issue in 2008 and who knew about it?”

CBR fielded a number of questions to Connolly in the Turks & Caicos, including whether his company had provided auditing services for TCI Bank. However, at the time of going to press he had not responded.

Addressing the decision to wrap up the bank, chairman of TCI’s FSC, Sandy Lightbourne said: “It is extremely sad that we had to take the serious step and seek to close down TCI Bank, the country’s only indigenous bank. The bank’s position as a new and stand-alone operation has left it very vulnerable to the current economic downturn. The FSC had been working closely with the bank’s current board and management to find a solution to the difficulties, and some progress was being made. But regrettably the bank suffered a growing loss of confidence on the part of some of its important depositors. While efforts were made to find new investors, regrettably none was forthcoming in the time available.

“The FSC took the difficult decision to petition the court to close the bank so that its remaining assets could be preserved. Obviously, we must await the conclusions of the provisional liquidators’ work; but I am afraid that depositors must expect that they might not be able to recover all of their savings.”

The directors of TCI FX declared that they had agreed to voluntarily liquidate that company with the funds intact, but Connolly did not use the money from that account at TCI Bank to pay out creditors.

A Preliminary Inquiry on criminal charges made against Smith is scheduled to be heard next Tuesday, more than a year after he was initially charged. The prosecution has postponed the case a number of times as it seeks to make a rock solid case against Smith on a number of accounts of fraud.

Back in 2008, Smith said: “I have not appropriated members funds for my own purposes nor have I engaged in criminal activity. However, I need around nine months to pay back Olint members. The funds remain intact.”

Speaking with Caribbean Business Report, the vice-chairman of the Association of Concerned Olint Members (ACOM), Horatio Williams said: “We have good reason to believe that once David Smith is exonerated by the courts, funds will be made available to club members. We do not believe that they were illegally appropriated or that he partook in any chicanery. It is interesting to note that a year and three months after Smith was arrested and charged this case has still not been brought to court. First it was August, then October, now it is May. We eagerly await the court’s decision.”

A supporter of Smith, speaking from Turks and Caicos this week, added: “It was said that David was trafficking girls from Russia, flying them in on his jet for high-ranking members of the previous administration. That was not the case. Then you have a doctor who had US$750,000 in Olint and got back US$1.05 million, writing to the Obama administration telling it not to give aid to Jamaica because of Olint’s activities and people connected to it. Then you have the retailer who, every opportunity he gets bad mouths David, yet he had money in Olint and flew to Bahamas where David settled with him. The smell of mendacity is pungent and many people have already painted stripes on the guy. If David says the funds are available he should be given the opportunity to make things right with Olint members in a lawful manner.”

US Virgin Islands attorney Maximillian Fargas said: “With the British Government going into the country to redress cases of corruption and the mismanagement of the country, British legal luminaries should take some time to re-evaluate the entire case.”