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London Capital & Finance ran a “Ponzi scheme” the place cash raised from UK retail traders was spent on diamond earrings, horses, shotguns and membership of Annabel’s nightclub, a court has been told.
The now-insolvent funding agency funnelled funds raised from 11,600 traders to people related with the “minibond” firm earlier than its failure, the High Court heard.
Proceedings started on Monday in a case introduced by LCF directors in opposition to the agency’s former chief government Michael Thomson, often called Andy, and others linked to one of many UK’s largest retail financial savings scandals of current years.
LCF raised about £237mn, promising returns of as a lot as 8 per cent by way of so-called minibonds. But it went into administration in 2019, triggering felony and regulatory probes, in addition to an inquiry into the Financial Conduct Authority’s supervision of the corporate.
Stephen Robins KC, representing the claimants, argued in written submissions that LCF had been “a Ponzi scheme from the outset” because it used “new investors’ monies to pay returns to existing investors”.
While LCF purported to make use of the funds to supply much-needed finance to small and medium-sized enterprises, “in reality most of the borrowers couldn’t really be said to be carrying on any business at all”, he mentioned.
The entities lent to weren’t impartial however have been related with folks behind LCF, he claimed. Proceeds have been allegedly spent on objects together with gold bullion, land in Jamaica, bronze statues, quad bikes and Porsches, in addition to used to cowl non-public college charges and donations to the Conservative celebration.
Victims included “retired people who had invested their life’s savings” in addition to “disabled people and incapacitated people who had no prospect of earning ever again”, the court was told.
Lawyers appearing for Thomson mentioned he denied “each and every claim against him”. In written submissions they mentioned that LCF “didn’t have interaction in any illegitimate enterprise actions . . . It carried on a reputable enterprise which concerned elevating cash by way of the issuance of bonds and the lending of these monies in bona fide transactions on business phrases.
“Save for LCF’s father or mother firm, London Financial Group Limited, none of LCF’s debtors have been related with or managed by LCF.”
At the beginning of the listening to on Monday, counsel on account of signify Thomson, led by Ian Mayes KC, left the courtroom. Mayes mentioned they have been withdrawing as a monetary freezing order on Thomson meant he was unable to cowl authorized charges.
Thomson was handed a 10-month jail sentence in May final 12 months, suspended for 2 years, for breaching a restraining order on his belongings obtained as a part of a probe by the Serious Fraud Office.
According to the claimants, about £58mn has been paid to bondholders by the Financial Services Compensation Scheme. An further £114mn was additionally paid as a part of a scheme funded by HM Treasury.
