An interesting article from Leanne Schneider-Rose, Partner at Sydney Mitchell LLP

Investment fraudsters, with official-looking websites and promises of lucrative returns, are an ever-present feature of today’s society. A High Court case showed how very important it is to take independent professional advice before parting with your money.

The case concerned four companies which were alleged to have collectively operated without required authorisation from the Financial Conduct Authority and with the intention to conduct investment fraud. Following an investigation, the Secretary of State for Business, Energy and Industrial Strategy applied for them to be compulsorily wound up in the public interest.

Ruling on the matter, the Court noted that two of the companies asserted to ordinary members of the public that they were legitimate financial institutions raising money for property developments in the UK. There was, however, no evidence that any such properties existed. Fixed-rate investment products were marketed with a promise that generous interest rates would be paid.

After investors received one or two monthly interest payments, however, further payments were consistently withheld and initial investments were not returned at the end of the fixed terms. Investors' losses were very substantial, but their full extent remained unknown because the companies had failed to cooperate in the investigation or deliver up their books and records.

Investors were informed that the products were government backed and covered by the Financial Services Compensation Scheme. They were lured by brochures that contained identically worded customer testimonials, apparently from different individuals. The website of one company included images of purported senior employees that were in fact photographs of unconnected third parties.

The Court found that the Secretary of State's grounds for making immediate and compulsory winding up orders under Section 124A of the Insolvency Act 1986 were well and truly made out. The companies' modus operandi included preying on and inducing members of the public, by a series of false representations, to participate in transactions that brought them no benefit whatsoever.

The companies traded with a lack of commercial probity and undertook objectionable business activities. The Court found that they should be prevented from continuing to trade and urged that their affairs should be thoroughly investigated by an independent officeholder at the earliest opportunity.

For help or advice on insolvency and winding up matters, speak to Leanne Schneider-Rose and on property matters speak to Ian Sheppard on 08081668827.