London High Court Rules London Capital & Finance Operated as Ponzi Scheme

Investment firm London Capital & Finance (LCF), which collapsed in 2019, operated as a Ponzi scheme, the High Court of Justice in London ruled. In the ruling, former chief executive Michael Thomson and four others were found to have knowingly participated in the fraud, misled investors, and misappropriated assets.

The collapse of LCF, which offered high-interest rates on "mini-bonds" between 2013 and 2018, resulted in losses of over £237 million for approximately 11,600 investors and left taxpayers responsible for a £120 million compensation bill.

Administrators are seeking more than £177.5 million in damages related to the scandal, which triggered criminal and regulatory investigations and a critical independent inquiry into the Financial Conduct Authority's supervision of the firm. Former auditors and directors have also been fined.

The defendants have denied claims ranging from fraudulent trading to breach of fiduciary duties and dishonest assistance. Three former co-defendants reached out-of-court settlements.

Lawyers for the administrators detailed how the defendants funded lavish lifestyles at the expense of retail customers, including pensioners and first-time investors, with one victim attempting suicide. The defendants reportedly purchased property, luxury watches, jewellry, private education for their children, membership in London private members' club Annabel's, and made donations to the Conservative party.