Italy seeks Dubai man in US$36m fraud case
DUBAI // A local businessman is under investigation by Italian authorities in relation to a US$36 million fraud case in Milan.
Mahmood Riaz is the subject of an official inquiry, says the Guardia di Finanza, a law-enforcement agency that handles financial crimes.
His former business partner in Italy, Claudio di Fonzo, was recently arrested and charged with bankruptcy fraud.
An officer with the Guardia di Finanza said they did not know of Mr Riaz's whereabouts. "We are trying to find him," the officer said.
Mr Riaz, a Pakistani businessman, founded GTL Trading in Dubai. Through his lawyer in Italy, he declined to comment.
Reports on the case emerged late last year, when about 400 Italian investors who lost their life savings were searching for answers.
The investors had entrusted their money to Mr di Fonzo's company in Italy, Gforex, which is now bankrupt.
"I don't think I'm going to get my money back any more," said Rita La Rocca, 36, a mother in Sicily whose family lost more than €100,000 (Dh476,500).
"I think it's too long and too difficult. We're so far away."
A spokesman for Mr di Fonzo declined to comment this week.
Earlier, he said he sent the investors' money to a brokerage account he opened with Mr Riaz to trade on the foreign-exchange market.
Although GTL Trading is based in Dubai, Mr di Fonzo said he opened the account with a company Mr Riaz ran in Switzerland.
Mr di Fonzo claimed Mr Riaz siphoned money from the account and blocked his access to the trading platform.
Mr Riaz's lawyer in Italy, Matteo Cornali, denied the allegations, blaming the Gforex bankruptcy on mismanagement.
Mr Cornali said Mr Riaz worked closely with Gforex through a British Virgin Islands company called Global Tradewaves.
That company "did suffer market instabilities" in 2010, he said.
But at that point, Mr Riaz and Mr di Fonzo signed an agreement saying any money Global Tradewaves owed Gforex had been converted into a $20m (Dh73.4m) loan that was guaranteed by GTL Trading.
Mr Cornali said Global Tradewaves had repaid some money, but has been unable to repay the full amount because the agreement needed to be clarified.
The Guardia di Finanza announced Mr di Fonzo's arrest on September 25, calling the investigation "Operation Sender Box".
Investigators discovered an organised fraud in which more than $36m was collected from Italian clients, passed through foreign brokers and diverted, the Guardia di Finanza said.
In all, 36 people were cited "for various levels of improper exercise of financial activities" and six employees of two banks were reported for failing to observe due diligence.
Investigators also sequestered 522 asset-management contracts.
They asked for judicial assistance from the British Virgin Islands to confirm "the destination of illicit proceeds", the Guardia di Finanza said.
The case has been forwarded to the Milan prosecutor to launch an investigation.
"It's good news but I would like to have my money back, believe me," Ms La Rocca said. "I have family, I have two children. My husband works very hard."
Maria Bietolini, a communications consultant in Milan who lost €70,000, said she was cautiously optimistic.
"We are near but the problem is that everything is happening now in Italy," she said. "As you know, Riaz is not in Italy. Our money is not in Italy.
"So we need to have some pressure also on the international level to get more help from foreign institutions."
A woman who answered the phone at GTL Trading said Mr Riaz was out of the country.
Updated: October 9, 2012 04:00 AM