Blaksley, now 51 years old, started his investment business Hope Funds in 1989 while working for an insurance company. During the last decade the firm has raked in huge amounts of money from large business owners, low-wage workers and pensioners alike, on the premise of “mutual contracts.” Clients would, in theory, be returned their money with annual interest rates of up to 12.5 percent. The firm also sold land for “premium” development, like Verazul in the Pilar area.
Sounds great, right? The thing is none of the firm’s clients knew where their money was being invested; the contracts they signed did not specify. But Blaksley, who owns 97 percent of the company, had marketed himself well and people trusted him. He flashed his shares in lucrative businesses like the Hard Rock Café and was a proud sponsor of major international visits, such as Usain Bolt’s trip to Buenos Aires in 2014. He was the golden boy for Argentine investment, but his luck didn’t last.
A tax evasion and laundering complaint put forward by the AFIP, powered by PROCELAC, was Hope Funds’ first big knock in 2014. In a case that went to the federal court, the firm was accused of processing money from large investors who couldn’t account for their income. *A report from the AFIP revealed that out of Hope Funds’ 521 clients, only three had the economic capacity necessary to make an investment – this was consistent with what was entered for the company’s tax returns.
Infobae has reported that there were, for example, two contracts with the same client that involved US$ 19 million allegedly being paid in cash, which was at the very least an unusual occurrence.
Another blow to the company’s credibility came when the mayor of Pilar revoked the firm’s permission to start work on the real estate development project Verazul after a complaint was filed by environmentalists. The project ended before a single brick was laid.
The first signs of crisis within the company came in February last year when Hope Funds failed to pay sufficient social contributions to its employees, and the situation became even more obvious with the accumulation of a series of rejected checks that equated to 3.2 million pesos by November. The figure has since increased. Last December, according to data from the Banco Central, four different checks made out by Hope Funds, of 290 thousand pesos each, have bounced. The reason: lack of funds.
A case against the company returned to the federal court at the end of last year, following a change of judges, with an earlier judge being removed due to incompetence. Last November, represented by the practice Iezzi & Varone and lawyers Gonzalo Romero Victorica and Ezequiel Altinier, hundreds of clients who had saved their money with Hope Funds came forward to accuse Blaksley of not having returned their money – in many cases, not a single centavo was seen.
Small-scale creditors, including artists, notable personalities in the world of polo and even Blaksley’s own relatives, were the backbone of the Hope Funds scheme, each with US $5,000 to US $60,000 in signed contracts. Iezzi & Varone alone have received over a thousand requests from victims across the country and plan to call up 170 witnesses in court. It’s thought that the total number of people affected could grow to 10,000. Since the case surfaced, countless desperate stories have come to light of victims who had bought into the financial ‘hope’ offered by the company and consequently ended up cheated out of their money in what many are calling Argentina’s biggest Ponzi scheme yet.
But was it really a Ponzi scheme? It also seems pretty dodgy, but many financial experts are putting it down to a high degree of irresponsibility, excessive ambition and little experience in private banking. Rather than being a master of manipulation, it’s likely that Blaksley simply did not know, could not or did not want to gauge the risks of a business that, although having started well, ended up getting out of hand.
So what’s the situation now?
Blaksley’s company is still being investigated for scamming and laundering charges by Federal Judge Servini and is currently facing 29 petitions for bankruptcy in the commercial courts. But Argentina’s version of Bernie Madoff is not just sitting back and letting it happen: Hope Funds is looking to negotiate extrajudicial preventive agreements (APE) in order to silence its swindled investors, according to criminal lawyer Ramiro Rúa, who represents the company. But many of the victims have claimed that the terms of the agreement are not favorable – it’s pretty much ‘sign or nothing’ – and they are given a matter of days to make up their minds.
The APEs ensure that Hope Funds is protected and the clients cannot sue on commercial grounds now or at any point in the future. The agreements have a legal framework within Bankruptcy Law and, from what has been discerned so far, the documents that Blaksley’s company has delivered to its creditors omit a significant detail that the law itself makes clear. For a judge to accept it, according to article 73 of Law 24,522, the settlement must comprise “two-thirds of the liability,” in other words an absolute majority of creditors must take up Blaksley’s deal. This becomes tricky when it hasn’t even been established yet exactly how much money the company owes and to how many people, but estimates suggest hundreds of millions of dollars in total.
If the APE manages to pass the first stage of approval by a judge, the agreement will have to be published in a national newspaper and, at this point, if there are no objections, it becomes universal for all their creditors, whether they signed it or not. This would mean that Hope Funds would be out of trouble in the commercial courts at least.
Lawyer Victor Varone, who is representing many of Hope Funds’ victims, asserted: “We would like nothing more than for Enrique Blaksley and his thieves to honor their commitments and pay the victims, but unfortunately there are factors that don’t support the signing of the agreements. For example, we are questioning how they can guarantee that the agreement will be signed by most of their creditors if they don’t even know the number of creditors nor the amount owed by Hope Funds and all their satellite companies and ‘collateral businesses’.”
Where will the money come from to pay back their creditors? It doesn’t look like they have figured that out yet. According to La Nación last month, one of the last messages that Blaksley sent to his group of partners (via Whatsapp) stated: “This will be sorted out with money and the money will now come from sales.” That is to say, he was betting on new money entering the firm to pay off their restless clients. According to Infobae, some clients have, however, disclosed that the company claimed the money would come from Verazul. Which is a major problem seeing as the Verazul project is no longer going forward.
This Tuesday, lawyer Romero Victorica presented a document to Judge Servini asking for the “urgent adoption of measures.” So far, despite the case opening in November, there has been no raid on the company. The lawyer pointed out to the judge that there is a potential risk that Hope Funds could destroy essential evidence. He also affirmed the possibility that the businessman may be in Uruguay with a private plane available to him, which implies an obvious chance of flight. Blaksley’s lawyer, however, assured the court that his client is in Argentina.
Towards the end of his presentation, the lawyer said: “It’s now common knowledge in the City of Buenos Aires that Hope Funds have been trying to cash checks in cuevas [informal money exchange houses] to avoid court action, thus evading the various precautionary measures that were imposed on the group.”
Iezzi & Varone are confident that the document presented in court, which will be accompanied by more requirements, will have an effect. According to Infobae, sources close to the case say that AFIP will have also requested that precautionary measures are taken against Hope Funds.