Biggest UK Ponzi scam uncovered
Hundreds of investors have been left nursing heavy losses in what is suspected to be the UK's biggest Ponzi scheme.
It is believed that around 600 investors, including sports stars and celebrities, collectively invested £80 million into Knightsbridge-based Business Consulting International (BCI). The company promised returns of between 6% and 13% a month if people invested their cash for up to four years.
However, the scheme, which had been running since 2007, unraveled when it failed to make payments and the authorities were alerted. A number of the duped investors have now been left bankrupt, homeless and even suicidal following its collapse.
A Ponzi scheme is a fraudulent investment operation where returns are paid using the money put in by new investors rather than from any actual profits.
The alleged perpetrators of the latest scam said it made its money through lending to troubled companies at high rates of interest. But City of London Police suspect that older investors were paid off with money from their original cash.
Investors were introduced to the scheme by family members, friends and business acquaintances they met in sports clubs and upmarket bars in London's West End. Many are now having trouble accepting they have been hoaxed and are unlikely to see their money again.
Detective Superintendent Bob Wishart of the City of London fraud squad said: 'These victims have been totally hoodwinked. They have been befriended and groomed by the bad guys. They think these people are friends and they have placed complete trust and given over a lot of personal information and it is very difficult to break that link of trust.
'Consequently we get this situation where we find they do not believe us. That is the power of the fraudster. Even though people have been arrested and we have searched their homes and offices and closed them down, the victims still do not believe anything is wrong.'
As the scheme was not regulated by the Financial Services Authority, those that have lost money are not eligible for any compensation.
BCI director, Kautilya Nandan Pruthi, 38, from Knightsbridge, and financial consultants Kenneth Peacock, 40, and John Anderson, 43, both from Virginia Water, Surrey, have been arrested in connection with the alleged fraud.
The trio has been questioned on suspicion of conspiracy to defraud, money laundering and fraud by misrepresentation and are on police bail.
Last week officers seized eight luxury cars worth £800,000 from a West Sussex dealership as part of the investigation. They have recovered other assets worth about £1 million, including jewellery and watches, and £250,000 cash.
They are also trying to trace offshore accounts in Dubai, the Cayman Islands and Thailand.
Last month, fraudster Bernard Madoff was sentenced to 150 years in jail for his $65 billion Ponzi scheme.
The practice of locating your financial affairs (banking, savings, investments) in a country other than the one you’re a citizen of, usually a low-tax jurisdiction. The appeal of offshore is it offers the potential for tax efficiency, the convenience of easy international access and a safe haven for your money. However, offshore is governed by complex, ever-changing rules (such as 2005’s European Union Savings Directive) and, as such, is the exclusive province of the wealthy and high-net-worth individuals.