One of the crooks behind a dodgy land investment scheme was ordered to pay £1 in victim reparations following a battle with the city watchdog spanning almost six years.
Ricky Mitchie was among eight people convicted last week over a scheme in which investors were cold called and persuaded to purchase agricultural land at a vastly inflated price on the false promise of a substantial profit which never materialised.
The bogus scheme made Mitchie personally £110,000 better off but he was ordered to pay just £1, via a confiscation order, after the Central Criminal court determined that he had no identifiable assets nearly six years after the scam was exposed.
Investors of the dodgy land investment scheme are in line of a rebate of just 40 per cent
The other seven fraudsters meanwhile coughed up a total of almost £2.2million – still less than half the £5million the crooks coaxed out of investors’ pockets through the scheme.
The compensation kitty could have been bigger had the court proceedings not been delayed.
The defendants were originally due to be tried in two separate trials, with the first commencing in April 2014, but proceedings were suspended on 1 May 2014 by His Honour Judge Leonard QC because of the ‘lack of defence advocates willing to accept revised legal aid rates,’ according to the Financial Conduct Authority which brought the case.
The judge’s decision was overturned by the Court of Appeal, Criminal Division on 21 May 2014 and the trials were rescheduled to commence in January 2015.
What is more, the ensuing confiscation hearing lasted the best part of two years. These delays gave another member of the eight strong group, Ross Peters, ample time in which to get rid of some of his assets.
He withdrew £237,000 from bank accounts and disposed of his prized Rolex watches and two racehorses.
This is despite the fact that the City regulator had obtained restraint orders against Peters and six of his cohorts – excluding Mitchie who had no assets – to prevent them from shedding their financial resources.
Should you invest in an unregulated scheme?
Many investors and advisers will not touch unregulated investments with a barge pole and it is not difficult to understand why.
Many such products sound too good to be true – and in many cases they are. They typically offer eye-watering returns but investors should always consider whether they would be better off investing in less risky assets aiming for more modest yields.
Even if you think you have a bottomless appetite for risky strategies this is not an excuse not to do your research.
One of the most alarming facts here is that the investors were persuaded to part with their money by cold callers.
The best way of protecting yourself against unscrupulous cold callers is by hanging up on them.
For this, among other charges, Peters was jailed for six months.
The regulator said the investors who suffered a ‘quantifiable’ loss at the hands of the eight men should expect to receive just over 40 per of the capital amount owed to them.
The investments, which were not authorised by the FCA, were sold between July 2008 and November 2011 through Plott Investments (which changed its name to Plott UK), European Property Investments (UK) and Stirling Alexander.
Salesmen for the companies cold-called potential investors to sell the suspect scheme.
The FCA commenced its criminal investigation in July 2011. The defendants were charged in April 2013.
Mark Steward, the FCA’s executive director of enforcement and market oversight, said: ‘The FCA will continue to pursue those engaged in financial crime, including advisers and other professionals who facilitate misconduct or who launder its proceeds.
‘We will also take action, wherever possible, to address the harm caused by misconduct, including taking action to strip illegal gains from defendants for the benefit of those who have suffered loss as a result.’
The FCA’s investigation, known as Operation Cotton, led to the convictions of Mitchie and Peters as well Scott Crawley, Brendan Daley, Daniel Forsyth, Adam Hawkins, Aaron Petrou and Dale Walker.
The group were convicted of various offences including conspiracy to defraud, breaching the general prohibition by conducting investment business without FCA authorisation and possessing criminal property.
The longest sentence was handed to Crawley, who was jailed for five years and six months.
The FCA added that should Mitchie’s financial situation improve, it can apply to the Court to recoup the total value of his benefit from his criminal conduct.
|Defendant||Amount of confiscation order||Sentence in default|
|Scott Crawley||£627,190||5 years and 6 months|
|Brendan Daley||£411,815||3 years|
|Daniel Forsyth||£62,834||12 months|
|Adam Hawkins||£65,023||12 months|
|Ricky Mitchie||£1||7 days|
|Ross Peters||£136,238||15 months|
|Aaron Petrou||£4,987||10 weeks|
|Dale Walker||£887,408||3 years and 6 months|
Will this case mean investors who lost money in other unregulated schemes get compensation?
This case is not the only example of investors losing millions in unregulated schemes. In 2012, more than £100million was lost after the collapse of several Connaught Income Funds.
These were part of an unregulated collective investment scheme established in 2008 claiming it could offer returns in excess of 10 per cent to investors by using savers’ money to provide short-term bridging loans to property developers.
This was done through a regulated lender called Tiuta, charging interest rates of up to 24 per cent.
Initially the scheme worked as planned but in January 2011 Tiuta became financially unstable and allegations were made that it could not afford to repay investors’ money back to Connaught.
The fund was then formally suspended in June 2012.
Investigations are still ongoing but to date, investors have seen only a fraction of their losses recovered with a confidential settlement from Capita, one of the fund’s administrators, described by one investor as ‘inconsequential’.
The common denominator in both cases is the fact that investors lost significant sums of money to unregulated investment products that promised handsome returns.
Both cases have also raised questions over whether the FCA does enough to protect and recover people’s lost life savings when they are duped in this way.
A spokesman from the FCA said: ‘In all investigations the idea is to try and retrieve as much money for the investor as possible but ultimately the Court has the final say. Each case will be treated on individual merit.’
Darren Cooke, a chartered financial planner at Red Circle Financial Planning, has led a nationwide campaign calling for a ban on investment and pension cold calling.
He said: ‘The FCA will never be able to recoup the losses in their entirety in cases such as these because some of the assets held by the defendants are likely to disappear.
‘The defendants would probably transfer them to their partner, children or friends so that the Court is not able to get their hands on them. I think there is a bigger question on the law in regards to seizing criminal assets.’
What you can do if you have been scammed out of money
Unregulated investment strategies are not covered by the Financial Services Compensation Scheme meaning that if the project goes pear shaped, your only hope of clawing back your investment is through the courts. This process is time-consuming and does not come cheap.
However, in the Connaught case, while the fund was unregulated, the FCA has said investors can seek compensation of up to £50,000 through the FSCS as the companies that operated the fund were authorised by the city watchdog.
Therefore it is always worth checking.