High Court finds London Capital & Finance was a Ponzi scheme

High Court finds London Capital & Finance was a Ponzi scheme
Credit: REUTERS/Toby Melville

London (Parliament Politics Magazine) – The London High Court judge ruled on Thursday that London Capital & Finance (LCF), the British investment firm behind one of the UK’s biggest retail investment scandals in 2019 was a Ponzi scheme, with five men held accountable for major damages. 

Mr Justice Miles, a high court judge, ruled that the former CEO of LCF along with four others were engaged in fraud, deceiving investors, and misappropriation of assets. The ruling was praised by LCF’s joint administrators. 

On 14 November, the court stated that former CEO Michael Thomson and associate Spencer Goldning were liable for violations of their duties as directors. 

The court revealed that three other men – John Russell-Murphy from Eastbourne, Paul Careless, former CEO of Brighton-based Surge Financial and Robert Sedgwick, all “dishonestly assisted” Mr Thomson and Mr Golding. 

The high court heard that Mr Golding was the “ultimate architect” behind the fund-raising scheme and had “actual or blind-eye knowledge” of the fraudulent activities, rendering his actions “objectively dishonest throughout”. 

Justice Miles stated that LCF “presented itself to investors as a commercial lender” to small and medium-sized UK companies”. 

LCF collapsed in 2019 after raising ÂŁ237m from more than 11,600  investors by issuing mini-bonds. These mini-bonds usually pay high returns.

People around the country invested money to buy mini bonds including from Sussex, Surrey and Kent.

Earlier proceedings documents revealed that the directors, including people from Surrey, used the funds to buy property, luxury cars, high-end travel, and donations to the conservative party. 

Judge Robert Miles said in a 335-page written judgment, “In my judgment, the fact that there were some genuine underlying assets is not in any way inconsistent with the existence of a Ponzi scheme in the present case”. 

According to the judge, Thomson “wanted to take out as much money as possible” and acted with “reckless indifference” toward bondholders, forging signatures and deceiving auditors in the process.  

Thomson’s lawyer said his client was “surprised and disappointed” by the ruling but would not comment more. 

In May 2023, Thomson was sentenced to 10 months in prison, suspended for two years, for violating a restraining order related to a Serious Fraud Office investigation, though the court has yet to decide the exact compensation amount.

Colin Hardman, of Evelyn Partners, on behalf of the administrators of LCF stated, “This fraud was perpetrated against over 11,500 bondholders many of whom suffered significant financial hardship as a result of the wrongdoings”. 

He added, “Not only were investors unwittingly mis-sold bonds but, unbeknown to them, the funds were then fraudulently misapplied for the benefit of the fraudsters’ lifestyles and their business interests. We hope that the outcome of this trial, together with tighter regulation which has subsequently been introduced, will act as a deterrent going forwards.”

Over ÂŁ177.5 million in damages are being pursued by administrators in connection with a scandal that prompted criminal investigations, regulatory probes and a harsh independent inquiry into the Financial Conduct Authority’s supervision. Former auditors and directors have also been charged. 

Finbarr O’Connell of Evelyn Partners, representing joint administrators of LCF, said, “The administrators will now be in a position where they can realise very substantial sums from the defendants for the benefit of the creditors”. 

The spokesperson for the LCF Bondholders Action Group, Andrea Hall, said that “justice has almost definitely been served”.

Ms Hall, who lost £10,000 in the LCF investment, stated, “Our six year-plus campaign to demonstrate misrepresentation and fraud through a Ponzi scheme has finally achieved its aim, despite much stress to many bondholders, many of whom are retired.

She added, “We’ve been resolute in not giving up until justice is seen to be done”.

Daniele Naddei

Daniele Naddei is a journalist at Parliament News covering European affairs, was born in Naples on April 8, 1991. He also serves as the Director of the CentroSud24 newspaper. During the period from 2010 to 2013, Naddei completed an internship at the esteemed local radio station Radio Club 91. Subsequently, he became the author of a weekly magazine published by the Italian Volleyball Federation of Campania (FIPAV Campania), which led to his registration in the professional order of Journalists of Campania in early 2014, listed under publicists. From 2013 to 2018, he worked as a freelance photojournalist and cameraman for external services for Rai and various local entities, including TeleCapri, CapriEvent, and TLA. Additionally, between 2014 and 2017, Naddei collaborated full-time with various newspapers in Campania, both in print and online. During this period, he also resumed his role as Editor-in-Chief at Radio Club 91.
Naddei is actively involved as a press officer for several companies and is responsible for editing cultural and social events in the city through his association with the Medea Fattoria Sociale. This experience continued until 2021. Throughout these years, he hosted or collaborated on football sports programs for various local broadcasters, including TLA, TvLuna, TeleCapri, Radio Stonata, Radio Amore, and Radio Antenna Uno.
From 2016 to 2018, Naddei was employed as an editor at newspapers of national interest within the Il24.it circuit, including Internazionale24, Salute24, and OggiScuola. Since 2019, Naddei has been one of the creators of the Rabona television program "Calcio è Passione," which has been broadcast on TeleCapri Sport since 2023.