The Financial Conduct Authority is assisting the United States Department of Justice (DoJ) with a probe into alleged securities fraud at collapsed wealth firm Beaufort.
The DoJ is investigating Beaufort in relation to trading in the stock of a number of US companies and international money laundering.
DoJ lawyers have compiled a multi-count indictment against Beaufort Securities, investment manager Panayiotis Kyriacou and co-conspirators Arvinsingh Canaye, Adrian Baron, Linda Bullock, Matthew Green, and Aristos Aristodemou in a federal court in Brooklyn.
The charges include conspiracy to commit securities fraud and money laundering conspiracy.
Beaufort Securities has been in the spotlight since December 2016 when the FCA restricted its discretionary powers.
The FCA said the company could not carry out any regulated DFM service unless it received instructions from clients, IFAs or pension providers beforehand.
United States attorney Richard Donoghue said: 'As alleged in the indictment, the defendants engaged in an elaborate multi-year scheme to defraud the investing public of millions of dollars through deceit and manipulative stock trading, and then worked to launder the fraudulent proceeds through off-shore bank accounts and the art world, including the proposed purchase of a Picasso painting.'
'As alleged, in a series of unscrupulous and illegal trading practices, the defendants contrived a scheme to defraud investors of US publicly traded companies by manipulating stock prices and masking the true ownership of their clients’ financial interests,' added assistant director-in-charge William F. Sweeney.
The charges date to between March 2014 and February 2018, alleging that Beaufort Securities, Beaufort Management and managers Kyriacou and Canaye engaged in a scheme to defraud investors.
Beaufort Securities facilitated at least ten 'pump and dump' schemes generating over $50 million for clients, the investigation found.
In October 2016 an undercover agent with the Federal Bureau of Investigation contacted Kyriacou and 'stated that he was interested in opening brokerage accounts at Beaufort Securities from which he could execute trades in several multi-million dollar stock manipulation deals,' according to the indictment.
Between October 2017 and February 2018 the defendants including Matthew Green, the owner of an art gallery in London, agreed to launder £6.7 million – which an undercover agent said were the proceeds of securities fraud.
It was suggested that the undercover agent could purchase a painting by Pablo Picasso, "Personnages, painted 11 April 1965". The money laundering scheme however was stopped prior to the transfer of ownership taking place.
The news comes after this morning's announcement that the company and its sister firm Beaufort Asset Clearing Services were declared insolvent by the High Court.
The court appointed Russell Downs, Douglas Nigel Rackham and Dan Yoram Schwarzmann of PricewaterhouseCoopers (PwC) as joint administrators of BSL and special administrators of BACSL after an urgent application by the financial regulator.
The FCA has also told the firms to cease all regulatory activity. Following the FCA’s action against Beaufort the Securities and Exchange Commission filed a civil complaint against the company and Kyriacou.
Earlier this year Wealth Manager learned that the Financial Ombudsman Service (FOS) has upheld a claim against Beaufort Securities, as it continues to look into a ‘steady stream’ of cases against the company.
A spokesperson told Wealth Manager at the time: ‘We have been receiving a steady stream of cases over the last 10 months or so that we are in the process of looking into.’ They did not indicate how many cases there exactly were.