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Millions of investor funds left minibonds ahead of collapse

Millions of investor funds left minibonds ahead of collapse

Almost £20m of bondholder funds were transferred to four men connected to London Capital & Finance in the lead up to the mini-bond provider's collapse, a High Court has heard. 

LCF collapsed into administration in January having raised in excess of £237m from more than 11,500 investors over the course of two years. 

In a High Court judgement published yesterday (December 10) administrators for the mini-bond provider told of how £19.9m of bondholder's money was transferred "either directly or indirectly" to four individuals connected to the company before its collapse. 

The details echoed previous warnings from administrators Smith & Williamson pointing to a number of "highly suspicious transactions" involving a small number of connected people which led to large sums of bondholder's money "ending up in their personal possession or control". 

The High Court heard this group of people included LCF managing director Andrew Thomson, Simon Hume-Kendall, Elten Barker and Spencer Golding.

Administrators claimed Mr Thomson received £1.7m, Mr Hume-Kendall and Mr Golding both received £8.3m and Mr Barker received £1.5m in a number of payments staggered across a period of five months. 

In its judgement the High Court ruled in favour of administrator Smith & Williamson and its request to remove Global Securities Trustees Limited as a trustee of LCF due to conflicts of interest with the company.

LCF allegedly signed clients up to fixed-rate Isas promising 8 per cent interest, with investors' capital then invested into mini-bonds used to issue loans to small businesses.

The court heard how these mini-bonds proved to be popular with investors, but LCF was only regulated in relation to their promotion and sale and not their issue. 

This has led to complications with investors seeking compensation from the Financial Services Compensation Scheme. 

The fallout that followed prompted the FCA to temporarily ban the marketing of mini-bonds to retail investors last month, without prior consultation. 

Thomas Donegan, partner at Shearman & Sterling, which is acting on behalf of LCF bondholders, said: "The creditors committee is delighted with this outcome and is pleased to have been able to support the administrators in the case.

"It is critically important that Global Security Trustees be taken out of the picture. The committee is also pleased that a new independent trustee will be brought on board and looks forward to working with them.

"Once the new trustee is in place, this will resolve a major impediment to distributions."

rachel.mortimer@ft.com 

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