After being denied compensation from the Financial Services Compensation Scheme (other than a tiny handful of exceptions,) London Capital & Finance investors have raised money via crowdfunding to launch a judicial review.
As at 23rd April the campaign had already raised £7,833, exceeding its initial £7,000 target. Technically the campaign is to fund the judicial challenges of only the four LCF investors on the creditors' committee, but if their challenges succeed, this will set a precedent for the rest.
London Capital & Finance investors have been both emboldened and enraged by the FSCS' early indications that it will bail out investors in fellow collapsed minibond scheme Basset & Gold, which went into administration on 1 April.
The collapse of Blackmore Bonds has once again laid bare the Financial Conduct Authority's institutional contempt for its objective of consumer protection.
Paul Carlier, an independent consultant most well known for blowing the whistle on dodgy FX dealings at Lloyds, contacted the FCA on March 2017 to warn them that Blackmore Bonds' high-risk investments were being missold by an unregulated introducer named Amyma.
Last week I reported on the FSCS' decision to compensate only 159 London Capital & Finance bondholders.
The decision to compensate only those who transferred stocks & shares ISAs to LCF, and not those who transferred cash ISAs, over a technical interpretation of the compensation handbook, has been a particular point of controversy.
The hopes of most victims of FCA-authorised Ponzi scheme London Capital & Finance were dashed last week when the FSCS announced it would not compensate them on the basis of having received misleading advice.
It said that investors had merely been given incorrect information, which doesn't generate a liability that is covered by the FSCS' "protected business" rules.
That the FSCS has eventually taken this decision is disappointing for investors but ultimately not surprising. London Capital Finance was not authorised to give advice to retail investors, employed no qualified financial advisers, and its call centre staff were generally trained to avoid crossing the line from information to advice - as in any other non-advisory finance company. (Although some went off-piste and crossed the line into the "I'd tell my own mother to invest in this" school of advice.)
Smith & Williamson, the administrators of the £230m FCA-authorised Ponzi scheme London Capital & Finance, have released their first six-monthly update to investors.
The administrators are currently envisaging a return of "as low as 25%" to investors. This is predominantly based on expected recoveries from Independent Oil & Gas. All other LCF assets remain of extremely uncertain value.
This is actually an improvement on S&W's initial forecast of 20% as a "best case" figure. But that is little cause for celebration, given that the LCF asset with the best hope of delivering returns for investors - the "jewel in the crown", in S&W's characteristically optimistic language - is its complex interests in Independent Oil and Gas.
An AIM listed oil exploration company may well have a better prospect of a return than, say, loans to failing resorts on Cape Verde, but that's not saying much.
Last week we noted the FSCS' reheated announcement that it would consider compensation claims by investors in London Capital and Finance if it deems they received advice from LCF's marketing agent.
With the potential for some LCF investors to be compensated and not others, it seems a good time to have a review of the full range of options available to the Government to compensate LCF investors if it wants to, based on how it has done so in the case of other collapsed investment schemes.
In September 2018 Domestic & General Insurance PLC sued Service Box Group Limited, accusing it of poaching its customers by ringing them up and lying to them that D&G had gone out of business or that their insurance had expired, and encouraging them to take out new policies with Service Box.
Since September 2017, Service Box Group Limited has been owned by Surge Group plc and its CEO Paul Careless.
Also part of Surge Group is Surge Financial, the company that ran London Capital & Finance's marketing and received £60 million in commission in return.
D&G has now sought to drag Surge Group, Paul Careless, and three other Surge directors and shareholders into its lawsuit against Service Box.
The Financial Services Compensation Scheme announced today that some London Capital & Finance investors may have claims which will be covered by the FSCS.
The FSCS has stated:
Following an extensive review of LCF’S business practices, we believe that Surge Financial Ltd, acting on behalf of LCF, provided a number of LCF clients with misleading advice. As this is a regulated activity, it means that FSCS protection would be triggered and that there may therefore be a number of customers with eligible claims for compensation.
In a much anticipated showdown with the Treasury Select Committee, FCA head Andrew Bailey made extensive use of the Glenn Beck Device.
Bailey admitted that the FCA had intervened a total of five times over London Capital & Finance over its misleading financial promotions, but feigned confusion over why the company continued to take in inexperienced retail investors' money in defiance of the FCA's insipid bleating. Almost all of which now appears to be lost.
Surge Financial CEO Paul Careless was arrested yesterday and questioned for four and a half hours, the Evening Standard has revealed.
Surge Financial was London Capital & Finance's marketing agent. Another company in the Surge network, RPDigitalservices, which was controlled by Careless from July 2018 to April 2019, ran the top-isa-rates and best-interest-rates websites which channeled investors to London Capital & Finance using misleading comparisons between FSCS-protected deposit rates and LCF's high-risk rates.