Montreal family office conned by American She-Wolf

Montreal entrepreneur Ariel Shlien is the victim of a Ponzi scheme.

Please note that this post makes no allegation of wrongdoing in respect of anyone other than the “American She-Wolf”.

In 1985, at age 15, Ariel Shlien, along with his younger brother, started a business of making science shows for children in Montreal. Think of a live version of Bill Nye the Science Guy for birthday parties, camps, etc. At first, this was a slow burn, but in the mid-90s, Ariel hit on a franchising model and his business grew by leap and bounds, eventually expanding to 28 countries. As the brand grew, he deployed the standard Martha Stewart Living Omnimedia playbook of getting into books, merch and TV shows. He partnered with big institutions like NASA and Crayola. His other business successes include building and divesting Quebec's largest childcare service provider and various real estate projects. He's clearly a strong entrepreneur and builder in a down-to-Earth, socially beneficial, low capex business I totally respect. The business had been started with $300 in earnings from a paper delivery route spent on neon, helium and a laser.

Ariel Shlien the Special Purpose Vehicle Guy

Success brought Ariel millions and so a few years ago, he formed the requisite family office. But he went a step further: per Ariel's bio, he "is passionate about co-investing into innovative, niche and outperforming fund managers and does so on a regular basis with multiple large family offices who co-invest with him via his 1,000+ member Investment Club." That business is called SureFire Capital. Ariel pools money from his club members, structures it into a "feeder fund" and funnels it into unique funds he has identified. One such vehicle is called SureFire Dividend Capture LP. It would be fair to say that investors in that fund have been caught in a bit of a pickle.

Ariel's SureFire business consists mostly of international investors. Dividend Capture is not his only vehicle, he also has others called Digital Assets, Digital Arbitrage, Multi-Strategy, Credit and Muni Trading. How did Ariel become an international investment guru? I don't know the specifics, but I imagine he's been very successful at a lot of things and how hard can the investment game be? I sense he’s a smooth networker - YPO and all that stuff. In fact, I expect he would be mortified above all by my references to uber-dork Bill Nye.

The SureFire Capital Dividend Capture fund's sole investment (as per the feeder model) was a Philadelphia-based hedge fund called Broad Reach Capital LP. This fund claimed double-digit returns for three years in a row and had raised more than $100 million. Ariel & Co accumulated a US $46 million interest in this fund (including “gains”). In March 2019, he asked to redeem. Thus began a charade by Broad Reach making excuses for why the proceeds had to be delayed. Ariel's increasing alarm, as chronicled in the lawsuit is poignant.

Ariel needs some due diligence muscle. The lawsuit reveals that Ariel phoned an investor in the Ponzi fund who vouched for the strategy as part of his reference checking. But it turns out this investor was probably in cahoots with the Ponzi schemer. I have never understood this business of calling up a handful of references to check on someone. Who vouches for the vouchers? Osama bin Laden could provide you 2 references, what does that prove? I believe in far more robust, adversarial, due diligence steps. The most important of these is, of course, to look up the person's home on Google Street Views.

Here's the alleged Ponzi schemer, who has since been charged:

Be honest: you assumed all Ponzi schemers were male, didn’t you? OMG, you're so prejudiced. You can see the full presentation here: Would you have fallen for this? What were the best clues?

Ariel has faced adversity before: franchising Mad Science initially almost bankrupted the company. As a true entrepreneur, I am sure he is intent on making lemonade from lemons. He should read my story on Ron Mock, who went from a $250 million hedge fund blowup to managing $200 billion for Teachers in 20 years. When he was building Mad Science, Ariel's highest aspiration was to have a TV show. He was very protective of his brand and held out for the ideal partner. Eventually, he was able to secure a deal with none other than MGM Studios. One silver lining here is that this Ponzi adventure is also great movie material. Forget the Bill Nye schtick, I am talking a real Holywood-worthy production. It’s going to be called American She-Wolf.

Earlier this week, I gave Ariel the courtesy of advance notice that I was going to write about him. He had a very serene reaction about it, writing:

"Understood. At the very least, please mention we are thankful that to protect our investors, we took out theft and fraud coverage from Berkshire Hathaway for 100% of the invested capital."

!

Family officesKompromatTop postsMontreal