Collapsed London Capital & Finance operated under a Ponzi scheme, court rules
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Individuals involved in the London Capital & Finance scandal are liable for damages after the High Court found that the bankrupt “mini-bond” provider had acted as a Ponzi scheme misrepresented itself in a “widespread, fundamental and systematic” manner.
The investment firm’s administrators have launched a civil case to try to recover money from former directors and others connected with LCF, which has raised around £237m from around £11,600. individual investors before the collapse in 2019.
Former chief executive Michael “Andy” Thomson and Spencer Golding, a shareholder in companies linked to LCF, were found liable on Thursday for breaching their duties as directors. The court found three other individuals – Paul Careless, John Russell-Murphy and Robert Sedgwick – had dishonestly “assisted” them.
The amount of compensation payable will be determined by the court later.
The judge, Mr Justice Miles, said LCF presented itself as a commercial lender to UK small and medium-sized companies when in reality “a significant proportion of the funds” had been “misappropriated”. ” and is used to pay people connected to the company. Claimants told the court that some of the proceeds were spent on inclusive items diamond earrings, horses and shotguns.
The court ruled that LCF was a Ponzi scheme in that it was “almost entirely dependent” on funds raised from new investors to pay existing investors, as “there was no source of revenue.” enter independently”.
The payments were made under “sales agreements” that purport not to be genuine commercial transactions, the judge said, but “artificial devices” used to “conceal payments” so that individuals can “use the money as they wish.”
Richard Slade and Partners, representing Thomson, said he was “surprised and disappointed by the terms of the judgment” and would not be commenting further.
An attorney representing Careless did not immediately respond to a request for comment. Golding, Russell-Murphy and Sedgwick are not represented by a lawyer.
Evelyn Partners administrator Finbarr O’Connell said he was “delighted” by the verdict. “Administrators will now be in a position where they can receive very significant amounts of money,” he said.
