Financial Conduct Authority  

FCA bans £14.5m Ponzi scheme adviser

FCA bans £14.5m Ponzi scheme adviser

A wealth manager sentenced to six years in prison for his part in running a £14.5m Ponzi scheme has been banned from regulated activity for life by the Financial Conduct Authority. 

In July 2018 Freddy David, of Hartfield Avenue, Elstree, Borehamwood, pleaded guilty to obtaining a money transfer by deception and fraud by abuse of position at Southwark Crown Court. David was also disqualified from being a director of a company for 10 years. 

Between 2005 and 2017, David ran a Ponzi scheme through wealth management company HBFS Financial Services Limited (HBFS), of which he was a managing director, which saw 55 victims defrauded out of more than £14.5m.

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The FCA has now issued David with a prohibition order, effective from May 15, 2019, stating the former adviser was not a "fit and proper person" to perform any regulated activity carried out by an "authorised person, exempt person or exempt professional firm". 

As part of the fraud David would convince victims, some of whom he knew personally as friends, that their funds were being held in a high interest bank account offering between 4 and 8 per cent interest annually.

Victims were told they could obtain interest each month and were advised their money was locked in for three months to five years, with large sums of money transferred into the HBFS business accounts under the impression it would be invested in high interest accounts.

But it was found large sums of money were being transferred into David's personal bank accounts for his own use as well as being used to pay other investors their "monthly interest".

The FCA stated many of the clients whom David offered the investment opportunity to were "elderly, vulnerable or suffering from illness and they were relying on the investment for care or security in their old age".

The regulator stated: "The authority considers that his convictions demonstrate a clear and serious lack of honesty and integrity such that he is not fit and proper to perform regulated activities.

"In reaching this conclusion, the authority has had regard to all relevant circumstances, including the relevance and materiality of the offences and the severity of the risk posed by Mr David to consumers and financial institutions and to confidence in the market generally." 

David used the majority of the £14.5m invested by victims to fund his gambling habit, with lesser amounts used for school fees, mortgage payments and holidays. 

In the years from 2005 to 2017, when the fraud took place, the regulator said David spent approximately £15m on gambling websites which provided returns of approximately £1.5m.

When David pleaded guilty in July 2018, he received discounted sentences of four and six years imprisonment respectively - to be served concurrently. Had he not pled guilty, David would have received sentences of six and nine years. 

In March 2019 the FCA issued David with a warning notice allowing him to make representations against the regulator's proposed prohibition order, but he did not dispute the order within the designated timeframe.