Investors sue over Northstar failure
A Japanese couple who invested $200,000 through a Bermuda investment vehicle now fear they will never get a penny back.
Is it true, they ask, that a billionaire investor was allowed to raid funds from a Bermuda segregated accounts company? They expected such a company would give them an added layer of security.
They want to know who in Bermuda is responsible for the hundreds of millions of dollars that are missing from Northstar Financial Services (Bermuda) Ltd, an investment vehicle marketed to a large number of international investors.
It all went so wrong, the Bermuda Supreme Court in March issued a winding-up order, sending Northstar into liquidation.
The case involves the now convicted fraudster Greg Lindberg, who is serving a seven-year prison sentence on an unrelated matter.
Lindberg is serving time for conspiracy to commit wire fraud and trying to bribe the North Carolina Insurance Commissioner.
The FBI and federal investigators were last summer still trying to get to the bottom of how Lindberg used money from his companies to invest in others.
Things only started going downhill for one of those companies, Northstar Financial Services (Bermuda) Ltd, after he was involved in its purchase.
A still-shocked Rikan Nishiyama, from Yokosuka, Japan, had a lot of questions when she recently spoke to The Royal Gazette.
A family friend, Hawaiian Glenn Shiroma, joined the call from his home on Oahu in Hawaii as a Japanese/English translator.
Also on the Zoom interview was Mrs Nishiyama’s American lawyer, Kirk Smith, from his Houston law office at Shepherd Smith Edwards & Kantas.
“Why,” Mrs Nishiyama asked, “are the Bermuda authorities not partially or fully responsible for their actions in granting a licence to Lindberg to own the company?”
She wants to know who allowed Greg Lindberg to take over the company and why he is not personally responsible for the millions of dollars he is alleged to have removed from the company.
She also claimed that the brokers who led her to the investment are “100 per cent responsible” for the losses. Brokerage firms are obligated to investigate and understand the investments they recommend.
Refusing to wait for a payout from Northstar’s Bermuda liquidators, the Nishiyamas are among many aggrieved international investors using American lawyers to chase down brokers who convinced them of the supposedly safe Bermuda investment.
It had to be safe, they are arguing in a FINRA (Financial Industry Regulatory Authority) arbitration, because it was paying less than two per cent interest. For that level of return, they say, no one would invest in a risky venture.
Mrs Nishiyama and her husband are not the only victims of Northstar.
The case involves nearly 1,800 investors and hundreds of millions of dollars of missing money. The company was at one point estimated to have incurred a deficit exceeding $260 million. And by September 2020 it was reporting just $8 million in assets.
The Bermuda Supreme Court has already considered a report from the joint provisional liquidators of Northstar, Rachelle Frisby and John Johnston of Deloitte Ltd, who have been on the case since September 2020 — before the winding-up order was given.
The report detailed that there were 1,230 fixed-account holders with potential claims with a value of $305,576,351 and 603 variable-account holders with potential claims with a value of $121,249,243.
There were 1,773 actual policies issued by Northstar, a company registered since 2008 as a segregated accounts company under the Segregated Accounts Companies Act 2000.
Before the liquidation, its business involved the sale and management of investment and annuity products.
The Nishiyamas are among the 35 clients represented in the Northstar matter by Mr Smith, the Houston lawyer.
His clients alone are collectively out of pocket by more than $10 million.
He is suspicious as to why so many clients were directed by American brokerage firms to invest in an offshore product when there were so many safe onshore investments.
Mr Smith’s law firm’s website includes a banner: “We Fight for Investors Cheated by Wall Street”. It has an entire section on Northstar.
It says: “Investors are claiming that stockbrokers and financial advisers may have misrepresented Northstar Financial Services (Bermuda) investments as low-risk, conservative, CD-like, and supposedly presenting no risk of loss of principal while guaranteeing monthly income.
“Since then, Northstar Financial Services (Bermuda) has filed for bankruptcy protection and investors will likely lose a significant chunk if not all of their principal.”
In the list of brokers, the firm names Bankoh Investment Services, a non-bank subsidiary of the Bank of Hawaii, the broker that directed the Nishiyamas to Northstar.
The couple invested the proceeds from the sale of their Hawaiian condo and said that they accepted the small investment return because of the near guarantee of safety.
As they pursue Bankoh Investment Services in American proceedings, they expect the Bermuda winding-up of Northstar to take even longer.