21

Mr Froggy and His Ill-gotten Millions: The Ponzi Frauds of Karl Suleman

The dot-com boom – and its subsequent dramatic bust – of the late 1990s and early 2000s was a strange time indeed. During those heady days, fortunes were earned virtually overnight – and often lost even quicker. At a time when the internet still seemed like something from the future to much of the Australian population, most investors had little idea what it was all about – but there were no end of regular folks willing to part with their cash in the pursuit of a quick and easy profit.

Of course, that also meant that there were no end of unscrupulous types eager to swindle everyday people, bamboozling them with talk of page imprints and brand growth, then quickly suggesting they could be part of this brave new world simply by handing over their hard-earned cash.

Of all those grifters, natural-born salesman Karl Suleman – founder of Karl Suleman Enterprises and Froggy.com – deserves special mention, not just for the amount he swindled, but for having the sheer audacity to blindly steal from his own people so blatantly. The majority of those Suleman rorted were fellow members of the tight-knit and hard-working Assyrian community who had migrated to Australia and lived mainly in and around the Fairfield district in Sydney’s west.

With rumours quickly spreading that Froggy had a potential worth of $300 million, Suleman had little trouble finding investors – after all, he went to church with these people, he knew their children, he ate with them regularly. Then he robbed them blind. And once he had a few of his peers involved, it was no problem to get the rest.

By the end of his epic con, Suleman owned four palatial homes, a dozen apartments, several racehorses, a $3 million luxury cruiser, several Ferraris and Lamborghinis – even a private jet. In 2001, Suleman attended a fundraising dinner for the Australian Labor Party, where he forked out $150,000 in cash without blinking for the chance to sit beside guest speaker Bill Clinton.

Obviously enjoying the company of US presidents, he then organised for Froggy to host a lavish Melbourne Cup lunch just so he could have his photo taken with George W Bush.

To secure this fast cash, Suleman used the oldest scam in the book and one of the most basic – a pyramid scheme or, as it become known, a Ponzi scheme, after Charles Ponzi, who became notorious for using it throughout the USA in the 1920s.

The idea of a Ponzi scheme is to spruik a fantastic investment to those who will listen and then offer them a huge rate of return. To that end, Suleman was telling potential investors about an impressive 17 per cent per month – or an obviously unbelievable 204 per cent per annum!

Once the fish have taken the bait, you pay that interest with money grifted from new investors. They tell all of their friends that it is fair dinkum and then they all get in on the act. Then you have a terrific time spending the millions.

Of course, once the new investors run out, the funds dry up. But by then the conmen will normally have lined their pockets substantially – helping themselves to millions and transferring those ill-gotten gains into property deeds.

From there, the best idea is to sign the real estate over to your wife, send as much cash as you can into offshore accounts, then just tell the taxman you’ve gone bankrupt. At worst, you’ll go to jail for a little while and live like the cat that got the cream once you get out.

Karl Suleman followed the blueprint to the letter – except he forgot about the last part and ended up with nothing. Still, he had a good run while it lasted. In just two years working his scam, Suleman conned more than $130 million from investors – and he did it all by word of mouth. All he had was a website, a few ideas and a good line of patter. He didn’t even have a prospectus to show potential investors where their money would be heading.

Of course, Suleman spent about half of that cash – and most of that money has now simply vanished without a trace.

The whole thing began in earnest in 1999 when Suleman formed the Froggy Group under the umbrella of Karl Suleman Enterprises. It consisted of a mobile phone resell business, a music company and two internet service providers (ISPs). Suleman would later confess that he didn’t even know what an ISP was.

At first, Suleman targeted relatives and friends that he knew had no knowledge of such matters to invest with him. They thought it sounded like he knew what he was on about – and more importantly, they trusted Suleman when he told them about the vast profits they were assured of. After all, an Assyrian ripping off another Assyrian for such a large amount of money was simply unheard of.

The news of potential easy money spread like wildfire among the community. Soon, local Assyrian organisations were supporting their countryman with his grand plan. Further support came when a bishop from a Catholic Assyrian church told his congregation that he was backing the young churchgoer. It seemed Suleman just had to sit back and admire the mountain of cash that was landing in his lap.

As word got out that Froggy could be worth as much as $300 million, Assyrian families in Fairfield started to borrow money to get involved. Many mortgaged their houses. There’s one report that a friend of Karl Suleman turned up at the Froggy office with $100,000 in cash in a plain brown paper bag. He handed it over and left without even getting a receipt.

With so much money on hand, Suleman figured he should play the part – he soon became the local face of dot-com businessman made good. The first thing on his list was to move from his Fairfield flat to a far more salubrious residence. He chose a mansion in exclusive Point Piper, where he soon set about ingratiating himself to Sydney’s eastern suburbs social elite.

With his staff basically only employed to write high-interest cheques for previous investors as their payments fell due, Karl Suleman did what every budding Bill Gates would do – he spent up big, adding to his property portfolio and filling his garage with luxury cars. And still the money rolled in.

Believing they could get an annual return of as much as 204 per cent, more than 2000 investors did anything they could to get on board Suleman’s money train. Their life savings combined between 1999 and 2001 until Karl Suleman Enterprises had reaped $138 million. Included in that sum were 15 people who invested a whopping $3 million between them. That earned them a fortnightly return of $140,000 – all funded from the pockets of Froggy’s most recent run of investors.

Of course, all these profits were built on a foundation of smoke and mirrors. The only real asset that Karl Suleman Enterprises had was a business responsible for collecting abandoned shopping trolleys. That venture brought in the grand total of $4000 a week in profit. You don’t need a business degree to realise something was about to give – big time.

Acting on a tip-off, the Australian Securities and Investments Commission (ASIC) raided Suleman’s premises in November 2001. Considering their target was a multimillion-dollar investment organisation, they were shocked to find almost no financial records. There was also a noticeable lack of cash receipt books and client contracts. The only information they could locate related to money being deposited in the bank, and the cheques being sent out. But after noting the massive withdrawals Suleman was making to fund his increasingly extravagant lifestyle, ASIC shut the business down. That, however, didn’t stop investors sending in money.

Considering how shonky the whole operation was, it’s not a major shock that Suleman didn’t hold an investment adviser’s licence. His investment scheme wasn’t even registered. ASIC froze Suleman and his wife’s assets and set about trying to return as much of Froggy’s investors’ money as they could.

With Karl Suleman Enterprises and the Froggy Group in liquidation, the financial forensics team soon realised that around $65 million of investors’ money remained unaccounted for. It was as if the vast sum had simply vanished – either gambled away, gifted to family or friends, donated or stolen.

During a court hearing in 2002, Suleman explained that he never kept a record of any transactions conducted by his companies. He said that once he had received a cheque for over $260,000 but couldn’t remember what he had done with the money. The court action followed an investigation by ASIC, where it was alleged that in December 2000 Suleman gave a false bank statement in a bid to raise finance to buy a Ferrari. And three times between March and October 2001, ASIC claims, Suleman supplied false bank statements to finance brokers to finance a new-model Ferrari and a $3.3 million yacht.

Suleman was officially declared bankrupt in May 2002. He was also barred from assuming the position of director of a company for the rest of his life. In September 2003, he was committed to stand trial on four counts of fraud. Suleman pleaded not guilty. Rather incredulously, he explained that his frivolous spending had actually been intended to better mankind. After all, his plan was to set up an exclusive sailing, flying and driving operation for the benefit of the rich and famous. Suleman is likely to never join the ranks of either again. Infamous, definitely.

The judge found him guilty and sentenced him to 21 months in jail with a minimum of one year. To the people he had fleeced it seemed like a very lean sentence. But there was more to come.

In August 2004, liquidators announced that investors could expect about 20 cents in the dollar back from the $138 million they had invested.

Two days before his release from Junee Prison in March 2005, Suleman, then 45 years old, was served with 26 new charges relating to his shopping trolley business and obtaining more than $3 million through false statements, and was granted strict bail conditions.

On 1 May 2006, Suleman pleaded guilty to 15 counts of making false statements after ASIC’s investigation found he induced 15 investors to enter into agreements and invest $3.185 million in KSE’s supermarket trolley collection business between April 2000 and July 2001. Suleman also pleaded guilty to 11 counts of using false documents that induced one investor to invest $1 million in the business.

In January 2007, he was sentenced to seven years and four months in jail with a non-parole period of five and a half years.

While it still seems as though he got off lightly, Suleman’s victims can take at least a small amount of solace in the fact that he wasn’t smart enough to transfer anything into his wife’s name or send any cash offshore. He has absolutely nothing left of their money.

Despised by his community in Sydney, he’ll be lucky if he can get a job driving a cab. And if he does and his passenger is one of the people he robbed and recognises him, let’s hope they dud him on the fare. That’s about all they’ll ever be able to get back from the man known forever as Mr Froggy.