Consider investment fraud victims

It is somewhat common knowledge that white-collar criminals regularly dupe innocent investors into handing over their hard-earned cash. During the fallout of such cases, we often, understandably, hear about the perpetrators and their misdemeanours.

White-collar criminals become famous. But rarely is a voice is given to victims of unregulated investment fraud and similar crimes.

Remember Bernie Madoff and Anna Delvey? Delvey was rewarded with a Netflix series that glamorised her attempts to dupe the wealthy. Fortunately, her victims were so rich that very few were affected by the financial loss. Sadly, the same cannot be said for most victims of investment fraud.

This week’s blog shifts the spotlight on this faceless and nameless group. We speak to lots of investors and have heard many stories that touch you on a personal level.

90% of the investors we deal with are over 50 years-old and most handover significant amounts of capital. As a result, the losses suffered by investment fraud victims often include pensions, lifesavings and large inheritances.

Investment fraud victims

Those in their 80s and 90s often claim their motivation for investing is to ensure financial security for their families. Others have terminal illnesses and may not live to see their funds returned or any semblance of justice.

The sad truth is the authorities have neither the resources nor the motivation to investigate and bring prosecutions. However, Insolvency & Law, with our limited resources spends hours unravelling these cases. If we can do it, why can’t the authorities?

Is it because the Financial Conduct Authority (FCA) exists to protect investors? You are protected if you have invested in an FCA-regulated company. Perhaps, the police/courts take the view that people who take risks with unregulated investments are solely responsible for the consequences.

Maybe some directors of unregulated investments are aware of the police/court view. Conceivably, a director in this position could take advantage knowing that allegations against them are unlikely to be seriously investigated.

Innocent people

How is stealing from innocent people in this way any worse than robbing a bank? Investment fraud is similar to robbery, just a higher degree of thievery. In the late 1980s, these types of cases were rare.

Nevertheless, Peter Clowes of investment company Barlow Clowes received a 10-year prison sentence for theft in 1988. Nowadays, a director will get a slap on the wrist and a disqualification, which, unfortunately, can be worked around.

Some victims of the Barlow Clowes investment fraud were retirees while others had committed their entire lifesavings. Luckily, they received 90% to 100% of their funds back after the Government paid out £150million. Something like that is unheard of today.

Many unregulated investment schemes are sophisticated operations. Some sales agents are utterly callous in their pursuit of investors when ridiculously high commissions are at stake.

There is also a veneer of respectability when professional enablers such as lawyers and accountants are involved. However, you begin to see what’s really happening once you delve below the surface.

Contorted network

You begin to unravel what in many cases is a contorted network. And if you dig deep enough, you’ll probably find associates who:

• Have previously worked together
• Conduct business through the same individuals

Lots of people that we speak to have invested in a wide variety of schemes. However, upon closer inspection, you’ll often find a connection between many of the company directors running these unregulated investments.

Sadly, the truth is that many unregulated investments are set up to fail. You’ll rarely find one with a five-year track record. Honestly, you’re better-off investing in property as you’ll have greater control over your money.

It’s understandable for investors to want higher interest rates as banks aren’t offering anything of worth at the moment. Are these people being greedy? Perhaps. But you can’t slam them for wanting to better themselves.

Just make sure you’ve seen a regulated advisor prior to investing in an enterprise. At least you’ll have that to fall back on if you become a victim of investment fraud.

Scam Alert

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