A Canadian woman is facing 110 charges in Washington State for allegedly soliciting $135 million from hundreds of investors on both sides of the border with a Ponzi scheme built around a payday loan business.

According to the B.C. Securities Commission (B.C.S.C.), Doris Elizabeth Nelson financed the growth of a number of businesses known as the Little Loan Shoppe by paying existing investors a commission to recruit new investors.

Nelson allegedly told the investors that because her business was so profitable, she could afford to issue promissory notes paying annual interest rates of up to 60 per cent, the B.C.S.C. alleged in statement issued on Monday.

"She also said that the investment was risk-free. In reality, her business was not profitable due to its high rate of customer loan defaults," said the statement.

In total, Nelson paid out $118 million to investors, including $2.2 million in commissions to recruiters, but about $17.4 million went to operating costs, personal withdrawals by Nelson and other unaccounted losses.

"Nelson was able to create the appearance of profitability, and to pay high rates of interest on the promissory notes, only because she used money obtained from later investors to make payments to earlier investors," the statement said.

Investigation launched in 2008

The commission alleges that after Nelson was notified in 2008 that her activities were under investigation, she reacted by emailing investors and coaching them to hide relevant information from investigators.

In 2009, Nelson ceased making payments to investors and two of her companies entered bankruptcy proceedings, and both the Washington State Department of Financial Institutions and the U.S. Securities and Exchange Commission started civil proceedings against her, according to the B.C.S.C.

Nelson is currently under house arrest in Colbert, Wash., awaiting trial in June in federal criminal court in Spokane, Wash., for 71 counts of wire fraud, 22 counts of mail fraud, and 17 counts of international money laundering, said the B.C.S.C. statement.

The B.C. Securities Commission has also charged her with fraud, illegal distribution of a security and for making false statements to the commission, and Nelson is facing a disciplinary hearing next month in Vancouver.