13 individuals together with a former UK power minister are being sued for £178m in reference to an alleged fraud at London Capital & Finance, the place traders’ money is alleged to have been used to purchase horses, a helicopter and lifelong memberships to Annabel’s, the Mayfair personal members’ membership.
The directors of LCF, which went bankrupt in February 2019, have this week advised people linked to the collapsed funding agency that they’re the defendants in a lawsuit that can declare LCF’s objective was to defraud bondholders.
Directors at Smith & Williamson are attempting to recuperate cash for the 11,600 traders who invested £237m in LCF earlier than it failed in one of many UK’s largest alleged frauds towards retail traders.
The directors have claimed that LCF’s administrators induced hundreds of retail traders to purchase bonds within the group by purporting to spend money on a collection of firms and property offers. As a substitute, the directors have claimed, almost 60 per cent of the entire traders’ money — about £136m — was channelled to its executives both straight or through loans to firms they managed or have been linked to. The administrators have beforehand denied wrongdoing.
LCF was arrange in 2012 by Simon Hume-Kendall, a former chairman of the Tunbridge Wells Conservative get together. It grew quickly between 2016 and 2018 after it employed Surge Group, a Brighton-based advertising firm arrange by former police officer Paul Careless, to draw new traders, promoting 16,706 bonds.
The funding firm went bust in early 2019 after the Monetary Conduct Authority froze its financial institution accounts and stated its advertising of unregulated mini-bonds promising returns of as much as Eight per cent was deceptive.
Directors at Smith & Williamson stated that bondholders would get again only a quarter of the cash they invested.
The scandal sparked an investigation by the Severe Fraud Workplace, which is ongoing. It has since additionally led to a ban on the advertising of mini bonds to retail traders, prompted a government-backed overview into potential failings by the FCA, and sparked a regulatory investigation into three accounting companies that signed off LCF’s books: EY, PwC and Oliver Clive & Co.
The brand new lawsuit introduced by the directors alleges that 10 of the 13 particular person defendants “misappropriated” bondholders’ cash. They embody Mr Hume-Kendall and his spouse, Helen, who obtained not less than £24m of traders’ money, in accordance with the declare. An individual near the case stated about £250,000 was spent by the couple on memberships for Annabel’s. A lawyer for Mr and Mrs Hume-Kendall stated they “strongly deny any wrongdoing and can be vigorously defending the proceedings”.
Andy Thomson, chief govt of LCF, allegedly obtained £5.3m of bondholders’ money, the declare stated. A lawyer for Mr Thomson didn’t reply to a request for remark.
Spencer Golding, a major shareholder in LCF-linked firms, allegedly obtained the biggest chunk of bondholders’ money, the declare stated, at £42.8m.
Elten Barker, a director of London Oil & Fuel, which was LCF’s greatest borrower, allegedly obtained not less than £5m. A lawyer for Mr Barker stated he denied the allegations and “believes the directors and their attorneys have run out of cash they usually’re trying to pursue this declare to be able to allow them to run up additional charges”.
The directors declined to touch upon the declare.
In line with the lawsuit, the money was both paid on to the people by the agent accountable for gathering bondholders’ investments whereas “different sums have been paid to them not directly, via a fancy net of interconnected firms”.
Among the many substantial sums paid to Mr Golding “purportedly by means of consultancy charges” have been £1.2m to allow him to purchase a Eurocopter EC135 T2, and £384,000 to purchase a lorry.
A consultant for Mr Golding didn’t reply to a request for remark.
The lawsuit claims that the allegedly fraudulent nature of LCF’s enterprise was “hid” by a collection of loans that presupposed to be “bona fide arms size transactions”. As a substitute, the lawsuit claims, the majority of the loans have been made to firms both linked to or managed by the people.
LCF solely made two “real industrial transactions at arm’s size”, the declare stated, together with a mortgage to Goal-listed Impartial Oil & Fuel.
Mr Careless, whose firm Surge was accountable for advertising LCF’s bonds, can be a defendant. The lawsuit has alleged that Surge obtained £60.8m of bondholders’ cash whereas he “personally obtained” not less than £8.5m. Surge stated: “At no time did [Surge] contact shopper funds. Surge and Paul Careless strongly deny the allegations and this motion can be defended vigorously.”
5 of the 13 particular person defendants are accused of failing to take enough steps to find the alleged fraud of their position as administrators of LCF-linked firms. They embody Charles Hendry, a Conservative politician and the UK’s former minister for power. Mr Hendry was a director of London Oil & Fuel, which borrowed £129m from LCF.
Mr Hendry stated: “This authorized motion towards me is completely with out advantage. I’ll contest it in courtroom as I all the time fulfilled all my tasks as an impartial non-executive director.”