Smith & Williamson's investigation into collapsed mini-bond firm London Capital & Finance (LCF) has uncovered an extraordinary web of alleged deception involving four individuals.
S&W, which was appointed to administrate the business after it was declared insolvent in January, warned as little as 20% of the £237 million invested in LCF may be recovered with a ‘small number of connected people’ in ‘personal possession or control’ of the cash.
S&W added its investigation into the company’s reported assets showed a ‘large number of borrowers do not appear to have sufficient assets with which to repay the company’.
In its report the administration team headed by insolvency partner Finbarr Thomas O’Connell said it was probing ‘a number of highly suspicious transactions… we are pressing these people to return those funds to us for the benefit of the bondholders and failing this we will pursue those individuals, as appropriate, for recovery of those sums’.
‘Multi-million pounds’ of cash nominally invested in high interest business loans by the company appeared to have been steered into the personal accounts of director Andy Thomson and Simon Hume-Kendall the chair of the company’s biggest borrower, London Oil & Gas, which owes £124 million.
Elten Barker, a partner of Hume Kendall in London Oil & Gas’ parent business, and Spencer Golding, the proprietor of a horse riding school which also has an outstanding £12.2 million loan, were also said to have personally benefited.
‘The administrators have approached all four parties asking them to pay these monies into escrow for the benefit of LCF bondholders,’ said Smith & Williamson.
‘Simon Hume Kendall and Andy Thomson have agreed to this arrangement and legal documents are currently being drawn up. Spencer Golding and Elten Barker have been asked to enter similar arrangements.’
The company added that £135 million of the total invested in the business remained unaccounted for.
Four individuals were last week arrested as the Serious Fraud Office launched an investigation into the collapse of the company. All have been released pending further investigation.
The financial watchdog froze LCF's assets earlier this year and ordered the firm to cease all regulated activity as it conducted its probe.
While mini-bonds are outside the scope of FCA regulation, concerns have been flagged about the way it was promoting its products within regulated ISA wrappers.
In a statement last week, the Financial Services Compensation Scheme (FSCS) said the firm’s 11,500 clients would not receive compensation as mini-bonds fell outside its scope.
LCF’ assets were frozen by the FCA in January, a month after it was ordered to cease all marketing materials relating to its ISA wrapper.
The consumer finance press had previously raised concerns about the company’s advertising, which had claimed to offer a yield of up to 8% on asset-backed lending, well above the yield of mainstream benchmarks.
A quick Google search under the company's name reveals a long tale of consumer questions about the legitimacy of its claims, and warnings that potential investors may not realise that their money is at risk.