Suspects in alleged Ponzi scheme ordered to return £115m to investors

Investment plan offered returns of up to 13% a month, but FSA warns investors are unlikely to ever see their cash again.

Markets

Other markets

Market Data Notice

More market charts

by Tony Bonsignore on Jun 30, 2010 at 09:15

Three men accused of operating one of the UK's largest ever Ponzi schemes have been ordered by the High Court to pay back more than £115 million to investors.

However the alleged victims are unlikely to ever see any of that cash, the City regulator has warned.

Some 500 individuals are reported to have placed money with schemes operated by the three men, John Anderson, Kenneth Peacock and Kautilya Nandan Pruthi. They were typically offered returns of between 4% and 13% a month, with a ‘guarantee’ of full return of capital at the end of the investment period.

The men then used the money to provide short-term financing for companies and partnerships, for which it typically charged between 15% and 18%.

The three men, who operated as Business Consulting International, John Anderson Consulting and Kenneth Peacock Consulting, did not register their operation with the Financial Services Authority, arguing that investors were making loans rather than deposits.

The schemes started marketing to investors 'by invitation only' in 2006, and by 2007 were operating out of offices in London's fashionable Brompton Square.

The FSA, however, argued that the men were accepting deposits, and that the scheme was therefore illegal under the Financial Services and Markets Act 2000. The City regulator applied to the High Court for a restraining order and freezing of the scheme’s assets in November 2008, and won a major ruling against the men in March 2010.

The City of London Police is also investigating the scheme, and in May 2009 arrested three men on suspicion of conspiracy to defraud, money laundering and fraud by misrepresentation. A fourth man was arrested on suspicion of money laundering in July 2009, and a police investigation into Mayfair-based consultancy Business Consulting International continues.

None of the men has so far been charged.

As part of yesterday’s ruling the High Court ordered Pruthi to pay back around £90 million, Anderson just over £13 million and Peacock close to £12 million. However the FSA warned that previous experience suggested investors would receive little or none of their initial investment.

‘As the Judge commented in his ruling the FSA took quick and decisive action against Pruthi, Anderson and Peacock and was entirely justified in intervening, using the full force of the legislation, to bring the scheme to a speedy conclusion and prevent further consumers being cheated,’ said Margaret Cole, director of enforcement and financial crime at the FSA.

‘However, this case again emphasises the importance of taking care to ensure that any firm or individual consumers deal with are authorised or approved by the FSA. Authorisation offers consumers valuable protection and access to complaints and compensation arrangements should anything go wrong.’

Email a friend

Email me when someone comments on this article Print

7 comments so far. Why not have your say?

Without seeing the full facts it is hard to make an accurate judgement of what was going on here BUT it seems like these guys and their investors have now been screwed by the government.

As the article suggests they were making short term loans at rates of between 15-18% and if successful could easily afford go guarantee returns to their investors of between 4-13% anywhere from 2-14% margin!

So the government goes in there because they think it is too good to be true, get them on a technicality (arguing that they aren't loan sharks, that they are investment advisors) and everyone is screwed!

Why? Because none of their short term loans will now pay out. If you heard that your loan shark was being investigated and closed down, you are hardly going to send in your payments are you?

The Government's actions create a self fulfilling prophecy because now the guys don't have a chance to meet their obligations when all of their loans are defaulting. I wouldn't doubt it if the Government originally went in screaming "Ponzi Scheme" then saw it wasn't that way, but it was too late....they had already screwed it all up...then they have to cover their arses by getting them on a technicality.

report this

I am sure it is worse than you are trying to make out. One of the FSA appointed flunky's will now wind the company up charging enormous fee's and take the firms not paying back their loan to court to pay said fee's leaving nothing for former investors.

report this

Actually, the largest ever Ponzi scheme in the UK was Equitable Life but for some reason the FSA chose to ignore it.

report this

Sorry to disappoint anyone hoping to pass the buck onto the FSA or any other official organisation but I'm afraid to tell you all - it WAS a Ponzi scheme - there was NO investment in any struggling businesses and the three all enjoyed the high life and their very nice cars at their victims expense. How do I know this? Because I am related to one of the accused (by marriage). I am still amazed how many people were taken in by the b******t but the three were and are very good conmen. No doubt that once the clouds have passed they will be up with another money making scheme. Won't be getting any of mine - I saw through it all along thank god!

report this

If it was legit, they would have registered with the FSA. The fact that they weren't, should have had the alarm bells ringing in the ears of potential investors. Can't really beat the comment above though!

report this

Beg to differ with Anonymous 2. The judge regarded this sort of lending as "Moral Turpitude", but actually the money is there. Why do you think there is no jail sentence & the SFO can't pin anything on them.

Scatterbrain is right the money is there, but the lawyers will take a hefty fee.

report this

jim quire

Aug 01, 2010 at 14:25

Anonymous 3 is quite wrong. In this country, we have a trial before a verdict and possible jail sentence. No trial has yet taken place. Nandan Pruthi has been charged and will face trial in due course. If guilty, he will inevitably face a substantial jail term. No charges have yet been brought against Peacock or Andrerson and inquiries are ongoing.

report this

Please sign in here or register here to comment. It is free to register and only takes a minute or two.