Hunter Hanson is, depending on your perspective, a swindler who operated a sophisticated Ponzi scheme and money-laundering operation, or a well-meaning but inexperienced businessman who got in over his head.
Regardless of the characterization, Mr. Hanson has been convicted of defrauding about 60 farmers and grain companies in Canada and the United States. A judge in North Dakota earlier this month sentenced him to eight years in prison, levied a $200 fine, and ordered Mr. Hanson to pay a collective US$11.1-million in restitution to victims. Four western Canadian agriculture companies are on the list.
The cross-border case isn’t typical of modern-day Ponzi schemes. Mr. Hanson, who owned Midwest Grain Trading, struck deals in places like elevators in North Dakota rather than boardrooms in New York. He bought and sold physical commodities – bushels of grain – rather than trading intangible assets like bonds. But the consequences were the same: He promised his customers financial returns that would outpace market rates, but, eventually, couldn’t make good on his word.
Essentially, Mr. Hanson struck deals to buy grain from his victims above market rates, but after selling it, he failed to pay his customers the amount promised. He made some payments to existing customers with money obtained from selling new customers’ products, stalled, wrote cheques that bounced and shuffled money around bank accounts and businesses until it all collapsed, according to court documents. Mr. Hanson pleaded guilty and conceded he ran a Ponzi scheme, albeit with a caveat.
“A major misconception exists that Mr. Hanson is a mini-[Bernie] Madoff who has pocketed millions of dollars, stored those dollars in offshore accounts, and will walk away from prison a wealthy man – having chosen to swindle others," Lucas Wynne, Mr. Hanson’s lawyer, wrote in a sentencing request earlier this month. "The reality is that Hanson, who comes from a farming family, believed that Midwest Grain Trading would be a company that farmers could rely on to yield the profits they deserved for their crop.”
Mr. Hanson never intended to hurt customers, according to court documents filed in his defence. Instead, his plan was to buy grain at a premium and sell it after the commodities market rallied, leaving him able to pay his bills and pocket a little extra. The market, however, turned against him and he had to sell grain at a loss to keep the cash flowing.
Prosecutors, noting Mr. Hanson’s scam reached into the millions and involved scores of bank accounts and companies he controlled, didn’t buy this story.
“The nature of the defendant’s fraud scheme was disturbing,” prosecutors wrote in court documents. "In short, the defendant took advantage of and profited [at] the expense of hard-working farmers and grain-elevator employees.”
They point to Mr. Hanson’s dealings with Shafer Commodities Inc., which is based in Vancouver, as an example of his illicit activities. An employee in Shafer’s branch in Morden, Man., on Oct. 25, 2018, e-mailed Mr. Hanson to tell him the firm had yet to receive the money he owed. The bill was $77,300.17. Mr. Hanson e-mailed the company and said his bank gave him the wrong account number and that the money would be sent as soon as possible.
At the time, Midwest Grain Trading had about $94,000 in the bank, according to court documents. The next day, Midwest Grain Trading wrote more than $587,000 worth of cheques. On Nov. 1, 2018, its bank account was overdrawn to the tune of $460,733. Mr. Hanson, who was 21 years old then, never sent Shafer a wire transfer. In the end, Mr. Hanson failed to pay its total bill of $167,418.66, and now Shafer is on the list of restitution payees.
Mr. Hanson’s lawyer did not return a call seeking comment. Shafer did not comment.