Investors may not recover their losses

Three men suspected of running one of Britain’s biggest Ponzi schemes were ordered to repay almost £115 million to investors yesterday.

Kautilya Pruthi, 39, Kenneth Peacock, 41, and John Anderson, 44, were told by the High Court to hand over their profits from an allegedly fraudulent investment scheme to the Financial Services Authority. The regulator has accused the trio of unlawfully accepting deposits without authorisation, in breach of City rules.

Mr Pruthi was ordered to repay £89.8 million, Mr Anderson £13.2 million and Mr Peacock £11.6 million. Overall, it is the biggest recovery the FSA has secured in a case of this kind.

The trio are also facing a criminal investigation by City of London Police after being arrested in May last year on suspicion of conspiracy to defraud, money laundering and fraud by misrepresentation. No charges have yet been brought.

They attracted hundreds of depositors between 2005 and 2008 through Business Consulting International, a Knightsbridge-based investment firm. Investors, many of whom were introduced through friends and family, were told the money would be used to provide loans to companies. They were promised high returns of up to 20 per cent a month.

However, Mr Justice Vos said: “The rates of return offered by the defendants were simply uncommercial and unsustainable.”

Yesterday’s judgment states Mr Pruthi began BCI in September 2005 and was joined by Mr Anderson and Mr Peacock two years later, who passed deposits to Mr Pruthi. They profited by paying investors lower rates than Mr Pruthi paid to them.

However, there was no evidence that Mr Pruthi ever made sufficient onward loans to fund the high interest rates he was offering, Mr Justice Vos said. “It seems that Mr Pruthi was, for a while at least, funding the payments of interest to old depositors by taking new deposits,” he said.The FSA began investigating BCI after a tip-off in August 2008. In November that year the regulator obtained an injunction freezing the trio’s assets and preventing them from accepting further deposits.

The FSA said that despite yesterday’s judgment, investors may not recover all of their losses.

Source – The Times Online – 01.07.10