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.
A brief interim update sent by the administrators of London Capital and Finance reveals that a number of investors have contacted Smith & Williamson in an attempt to secure recordings of phone conversations between the investors and LCF.
The purpose of requesting these conversations is virtually certain to be to support claims against the Financial Services Compensation Scheme, which has confirmed that it will compensate investors who received recommendations to invest from employees of LCF's marketing agent, Surge Financial, if they amounted to regulated advice.
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.
The Times of London has revealed that of the £60 million commission paid by London Capital & Finance to its marketing agent Surge, £26 million was spent on marketing, of which £20 million went to Google.
Google was paid more than £20 million to promote high-risk mini-bonds for London Capital & Finance, the collapsed investment firm at the centre of a fraud investigation.
The Times has learnt that Surge Group, a digital marketing firm that was contracted by LCF to raise capital from investors, used the bulk of the money it spent on marketing to buy advertising via the search engine giant.
A person close to the matter said Surge spent about £26 million on marketing for LCF between 2015 and last year, with about 90 per cent of that sum going to Google.
[An expanded version of a Twitter rant posted last Monday ago.]
According to IFA trade rag Money Marketing, investors in London Capital and Finance are very angry that the Financial Conduct Authority has repeatedly referred to the loan notes in which they invested, marketed by LCF as "secured bonds", as mini-bonds.
So what is a mini-bond and why are LCF investors annoyed about the label? The FCA says (in an article belatedly posted last month) "There is no legal definition of a ‘mini-bond’, but the term usually refers to illiquid debt securities marketed to retail investors."
Jim Armitage at the Evening Standard reports that administrators are investigating the role played in the collapse of London Capital & Finance by John Russell-Murphy, who pitched LCF bonds in person to wealthier investors.
The Evening Standard has spoken to 10 clients of LCF who invested between £100,000 and £580,000 and allege Russell-Murphy gave them financial advice that experts have suggested he was not allowed to give under Financial Conduct Authority rules because he is not a regulated adviser.
One, a severely disabled woman in her late seventies, claimed he had visited her at her home, looked at the paperwork for her existing savings and recommended she put £100,000 of her entire £150,000 into LCF. The former charity worker said: “I told him I had to keep back £20,000 for my grandchild’s university bills but he said if I invested £100,000 with LCF the interest would pay for them and I wouldn’t lose the capital. Now it looks like it’s all gone."