Directors of an unauthorised investment firm have been ordered by the High Court to distribute £3.4m to people who unwittingly invested in a ponzi scheme uncovered by the Financial Conduct Authority.
Samuel Golding, Shantelle Golding, Digital Wealth Limited and Outsourcing Express Limited were instructed on June 28 to pay back funds held by them to investors. The case had come to trial at the start of February and the FCA announced the judgement today (July 10).
According to the regulator, the schemes run by the company directors pretended to buy wholesale goods from China for onward sale and promised unrealistically high returns, in some cases up to 100 per cent of the amount invested.
But it turned out the schemes were in fact unauthorised collective investment schemes and operated illegal deposit-taking in contravention of the Financial Services & Markets Act 2000.
The FCA found "no significant trading was conducted, and the schemes relied on a continuous flow of new investors to fund existing investors’ returns".
Both defendants admitted to the court they were personally involved in the rule breaches.
Mark Steward, executive director of enforcement and market oversight at the FCA, said the regulator acted as soon as it became aware of the illegal scheme, "preventing further losses to future investors who would be unable to exit the scheme before it inevitably collapsed".
The schemes raised just over £15m from more than 1,000 individual accounts, with £9.25m paid out to investors as returns to keep operations afloat.
The defendants spent about £2.7m, including significant sums on travel, hotels and retail goods, the FCA said.
The court order compels Mr and Mrs Golding to pay all funds held by them to the FCA for distribution to affected investors, which will see the FCA will take control of approximately £3.4m.
The action will leave the pair with a total loss of at least £2.7m.
The FCA will write to all investors about what steps they need to take in the distribution process.
But anyone that has invested and not previously been in contact with the FCA, should contact the regulator immediately.
Mr Steward said: "The FCA again reminds consumers not to invest in schemes being offered by firms that are not authorised by the FCA and that look too good to be true, like these ones. In this case, we managed to save some money for investors: too often it is too late."
