FMA Imposes Permanent Stop Order on Validus International LLC

The Financial Markets Authority (FMA) has taken decisive action against Validus International LLC (Validus), Validus-FZCO, and associated individuals, issuing a permanent stop order to safeguard investors from potential harm. The FMA, exercising its authority under the Financial Markets Conduct Act 2013 (the Act), made this order following an interim stop order imposed on Validus and its associates in February 2023.

The permanent stop order prohibits Validus, Validus-FZCO, and associated persons from engaging in activities that could lead to the repetition of unlawful behavior causing significant financial harm.

Specifically, the order restricts them from making offers of Validus Financial Products, distributing any restricted communication related to Validus Financial Products, and accepting further applications, contributions, investments, or deposits in relation to these products. It is important to note that associated persons include anyone promoting Validus Financial Products in New Zealand.

The term Validus Financial Products refers to the Validus Pool Products, which were promoted during an event at Mt Smart Stadium on November 19, 2022 (Seminar), as well as any other financial products utilized to promote the purchase of Validus educational packages, regardless of their actual existence or issuance.

In response to the interim stop order, Validus sent a letter to the FMA acknowledging the removal of the Validus Pool promoted at the Seminar and stating that Validus is not a financial product and should not be engaged with any expected returns. The FMA accepted these statements as true and consequently determined that the information presented at the Seminar was false, misleading, or likely to mislead, as it referred to financial products that either did not exist or significantly deviated from the descriptions provided.

Paul Gregory, Executive Director of Response and Enforcement at the FMA, expressed concern for Seminar attendees who were induced to purchase educational packages based on false or misleading representations. These individuals will not receive the promised 2-3% return on their investment or be able to withdraw their funds, potentially resulting in substantial financial harm.

During the Seminar, Dr. Parwiz Daud, Chief Network Officer of Validus, and key speaker Souai Tito informed attendees that purchasing educational packages would lead to rewards, as their team of experts traded their funds in various markets, including forex, stocks, gaming, crypto, NFTs, and staking. They claimed attendees would receive weekly loyalty points equivalent to 2-3% of their investment over a period of 60 weeks, ultimately resulting in a 350% return.

Materials distributed at the Seminar, included in the Stop Order, are classified as “restricted communication” pertaining to the offer or intended offer of financial products, specifically Validus Pool Products.

Mr. Gregory emphasized that Validus made false or misleading representations, creating the impression of an unregulated offer of financial products. In response, the FMA deemed the stop order the most appropriate and effective measure to protect the public and communities targeted by Validus. He urged individuals to avoid engaging with the company and its offers, highlighting the availability of well-regulated products with safeguards and monitoring by the FMA.

The permanent stop order, effective from May 2, 2023, will remain in force until the FMA modifies, suspends, or revokes it.

Validus's appeal dismissed in the High Court

Following the issuance of the stop order, Validus appealed the decision and sought interim relief to prevent the publication of the order during the appeal process. The FMA agreed not to publish the order without requiring a court order. Although non-publication did not affect the order's status, it remained in force throughout this period.

The appeal was heard on June 21, 2023, at the Auckland High Court. After careful consideration, the court has now delivered its verdict, dismissing Validus's appeal. As a result, the FMA's permanent stop order against Validus can now be made public and will continue to be enforced.

Validus based its appeal on three main points. Firstly, the company argued that it was denied its right to be heard and that natural justice was not followed. However, Justice Jagose determined that Validus had been given ample opportunity to present its case and found no errors of law on the part of the FMA in this regard.

Secondly, Validus contended that the stop order should only apply to existing financial products, and since no such products were in existence, they could not be accused of making false or misleading offers. The Judge disagreed with this interpretation, stating that the reference to “intended offers” could extend to financial products that were not yet in existence. He emphasized that the statutory language did not mandate the existence of the financial products at the time of the offer or intended offer. Excluding outright scams that invite participation in non-existent financial products would not align with the FMA's enforcement function and the purposes of the Act.

Lastly, Validus argued that the FMA must provide evidence that they would break the law in the future for the stop order to be issued. The Judge ruled that since Validus had acknowledged past breaches of the law, the FMA was justified in issuing the stop order based on Section 462 of the Act. The Act allows the FMA to issue stop orders based on reasons such as past contraventions, likely future contraventions, or the imminent danger of substantial damage caused by any contravention. In this case, the FMA relied on Validus's past breaches as sufficient grounds for the order.

The Judge's decision upheld the FMA's authority to issue the stop order against Validus, ensuring the protection of investors and the prevention of potential harm caused by misleading representations and unlawful practices.

The FMA encourages the public and the communities targeted by Validus to steer clear of the company and its offers. The FMA emphasizes that regulated products with appropriate safeguards and monitoring are available, providing a safer investment environment for individuals.

With the court's ruling, the FMA will now publish the permanent stop order, reinforcing its commitment to safeguarding the interests of investors and maintaining the integrity of the financial markets.

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