UK: A Class Action Shows the Court That an Investment Scam Has Been Perpetrated

Nearly all perpetrators of investment scams have a history of fraud and generally each scam involves targeting a large number of people. Other than in the case of investment clubs, the victims are often completely unaware that there a considerable number of other people who have also lost money in the same scam. The anonymity of conducting a fraud online was swiftly recognised by fraudsters who lost no time in devising plausible approaches and maximising online advertising through social media platforms to promote their scams.

The features common to the majority of financial frauds are demonstrating to the courts that fraud has actually taken place and finding the money extracted from the victims by the fraudsters. The shock of losing their money, the realisation that they have been deceived so easily, coupled with the fact that they voluntarily handed over their money, combines to create the view that there is nothing they can do to recover the lost funds

Superintendent Sanjay Andersen, from the City of London Police’s National Fraud Intelligence Bureau, recently commented, “Reports of investment fraud have increased significantly since the start of the coronavirus pandemic, which is unsurprising when you think the vast majority of us have had to conduct nearly every aspect of our lives on a computer or mobile phone. Being online means criminals have a greater opportunity to approach unsuspecting victims with their scams.”

A class action turns the tables on proving a scam, the repeated testimony of the victims reveals to the court how they were each cynically targeted, due to their novice status and lack of knowledge of how the markets function and lured into parting with their money by a combination of fake friendship, flattery and fabrications regarding the huge success of their rising “investments”. All this, together with the fact that often the fraudsters use false names, makes it very clear that the whole exercise was a scam.

Once fraud is established and successfully prosecuted through the courts, the next step is finding the victims’ lost funds. The discovery is usually made that both the scammed money and the fraudsters’ assets are well hidden through a serpentine route of off-shore vehicles created to prevent their victims from gaining compensation for their losses.

Joanna Bailey, an associate in Giambrone’s banking and financial litigation team, pointed out “it is beyond frustration for all concerned to come up empty-handed after extensive efforts are made to track down the lost funds” Joanna further commented, “however there is now another asset the funds from which can be applied to the compensation of victims following a court ruling that pension funds can be seized and paid out to victims of financial fraud.”

A former City trader, Nicholas Levene, who set up a Ponzi scheme was the subject of a civil class action by a group of his victims. The Serious Fraud Office obtained a confiscation order relating to his assets, assessed as £1. Mr. Levene had obviously managed to hide the majority of his assets. The Serious Fraud Office was able to apply for a restraint order in relation to Mr. Levene’s self-invested personal pension (SIPP) and the court ruled that the funds could be used to compensate Mr. Levene’s victims when the SIPP matured. The court decision means that an asset that the fraudster thought was untouchable can be placed in the hands of defrauded victims of scams. The lawyers in Giambrone’s banking and financial litigation team have evolved a number of strategies for accessing investment fraudsters’ assets.

By Giambrone, England
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Joanna Bailey is an associate advising English and International clients on general commercial litigation matters, litigation against financial institutions, Forex/binary trading disputes and regulatory investigations.
She has acted and advised in disputes for clients ranging from shareholder and other commercial disputes, professional negligence, negligent misrepresentation and fraud, asset tracing and recovery, freezing orders and other injunctions and interim remedies, international/conflict of laws and human rights.
Joanna is experienced in high-value out-of-court settlement negotiations and has an in-depth knowledge of the Civil Procedure Rules as well as English common law.
Prior to joining Giambrone, Joanna acquired invaluable experience working on a range of legal matters over the last 15 years from criminal litigation to costs proceedings.

Copyright Giambrone

Disclaimer: Every effort has been made to ensure the accuracy of this publication at the time it was written. It is not intended to provide legal advice or suggest a guaranteed outcome as individual situations will differ and the law may have changed since publication. Readers considering legal action should consult with an experienced lawyer to understand current laws they may affect a case. For specific technical or legal advice on the information provided and related topics, please contact the author.

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