A Madoff-style Ponzi scheme might have ripped off a number of British celebrities, according to recent allegations.
Bernard Madoff's Ponzi scheme defrauded many high-flying American investors, and, according to City of London police, a similar (if more modestly sized) operation might have stung a few well-heeled and famous Brits -- perhaps to the tune of around £80m.
The UK case involves Knightsbridge-based firm Business Consulting International (BCI), which is alleged to have been running a bogus investment scheme targeted at wealthy people in the music and sports businesses, and which is said to have hoodwinked a "well known 1960s pop star".
Gaining trust
The alleged fraudsters are believed to have personally targeted their victims and befriended them, gaining further family contacts into the bargain. Having gained their confidence, the next stage was to offer to let them in on an investment opportunity, which would bring in returns of up to 13% per month. The money, they claimed, came from lending to companies in distress, which could not borrow money through normal channels and were willing to pay very high rates of interest.
There are, of course, two highly unbelievable aspects to such a claim. Firstly, any company, even if it was healthy, would become badly distressed pretty quickly if it faced 13% per month interest charges, and no company in trouble could agree to such terms. And secondly, if a company was facing such difficulties that it couldn't borrow from banks, lending it some money would be a very high-risk punt indeed. But then, as we have seen so many times, smooth-talking con artists can be very successful in parting gullible punters from their common sense -- and their money.
Ponzi
As it turned out, the scheme, which ran from 2007 to 2008, simply paid the interest to early investors out of deposits, and the fraudsters used the rest to live lavish lifestyles. And it ground to a halt when interest payments were missed last year, and the FSA called in the Police.
Police subsequently arrested three men, and have seized assets valued at around £1m, including a couple of Bentleys, a Rolls-Royce, a Maserati, a Lamborghini, and some cash and jewellery. But the bulk of the estimated £80m is unaccounted for, and is thought to have been transferred to overseas accounts in various countries.
Human gullibility
The Police are facing difficulties tallying up the extent of the losses, with 100 of the suspected 600 participants still to be identified. And the gullibility of the defrauded victims is also causing the police some headaches, with a number of them not accepting that their "friends and confidants" might be criminals and that they have been cheated.
At several meetings, many invited victims simply refused to believe the facts, and instead blamed the Police and their freezing of the company's assets for the downfall of the investment scheme. Like so many times in the past, the fraudsters built such a bond of trust between themselves and their victims that it can be surprisingly hard to break.
It seems that a number of the victims were people looking after cash earmarked for taking care of the needs of disabled people, with one woman having been defrauded out of £50,000 she'd put aside for the future care of her son, who has cerebral palsy. And while stealing money from well-heeled celebrities is equally wrong, such an act will surely strike a moral low point in many people's minds.
More victims?
Police are still appealing for more victims to come forward, so if you were involved or if you know someone who was, please do report it. But there appears to be little chance of getting any money back, and as the company was not licensed by the FSA, there will be no government compensation.
And perhaps we should keep our eyes open for any comebacks by 60s pop stars who suddenly seem a bit short of cash.
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