The Court of Appeal has ruled against claimants who took the Sense Network to court over an alleged secret £12.8m "Ponzi scheme" run by one of its appointed representatives.
In a judgement handed down this morning (July 31) Lord Justice David Richards overruled the claimants' claim and said the network was not responsible for their losses.
He said: "It is accepted, at least for the purposes of this case, that the appellants have been the victims of a callous fraud.
"On any footing they have suffered severe losses. However, those losses are not in my view recoverable from Sense for the reasons given in this judgement and for the reasons given by the judge. I would accordingly dismiss this appeal."
The judgement comes after in November a court had already ruled in favour of Sense and against 95 claimants who were clients of an appointed representative of Sense.
The claimants sought to recover their losses from what the judge called a £12.8m "Ponzi" scheme being run by the appointed representative from its principal Sense, which it believed should be liable for the actions of its appointed representative.
When they lost their case in November the claimants escalated their claim to the Court of Appeal, but it was again overruled.
According to the facts included in today's judgement the appointed representative, without the knowledge of Sense, advised on and operated a scheme whereby clients would invest in what they understood to be short-term deposits carrying very high interest rates.
Apparently the appointed representative told clients their funds were invested under special deposit arrangements with a high street bank with which he said a close relationship allowed him access to "favourable arrangements" and high rates of return.
But in reality there were no special deposit arrangements with the bank and the appointed representative was operating a "dishonest Ponzi scheme", under which the deposits of the later clients were used to repay earlier deposits with interest.
When the Financial Conduct Authority intervened in 2014, there were 279 clients whose investments had not been repaid and who were owed £13.6m.
At the time the appointed representative had £379,000 in available funds.
rachel.addison@ft.com
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