South Square team successful in high-profile £236 million investment fraud case

Stephen Robins KC, Andrew Shaw and Daniel Judd of South Square successfully appeared for the Claimants in establishing that London Capital & Finance Plc (“LCF”) operated a £236 million mini-bond investment fraud, following a 20-week trial in the High Court. The Claimants were successful in all their claims.

The high-profile case has attracted significant media attention following the collapse of LCF in 2019.  Over 11,000 individuals invested in LCF believing it to be a legitimate investment scheme.  The collapse of LCF prompted the Economic Secretary to the Treasury to order an independent investigation into supervision by the FCA, as well as intervention by HM Treasury and the Financial Services Compensation Scheme.  Judgment has been keenly anticipated and the case was listed as one of The Lawyer’s Top 20 Cases of 2024.

In a landmark judgment running to 341 pages, Mr Justice Miles held that LCF operated an investment fraud by systematically marketing itself to members of the public on false pretences, misappropriating a substantial proportion of the funds paid by investors, and operating as a Ponzi scheme.

The Claimants succeeded in establishing that a number of the Defendants entered into a series of artificial transactions whose purpose was to conceal the misappropriation of funds from LCF to the Defendants.  The court made findings of dishonesty against all of the Defendants.

The Claimants succeeded in all of their claims, including claims for fraudulent trading under section 246ZA of the Insolvency Act 1986, breach of fiduciary duty, dishonest assistance, knowing receipt, and proprietary tracing claims.

Since proceedings were issued in August 2020, the case has involved numerous hearings relating to worldwide freezing orders and proprietary freezing orders, as well as a number of interlocutory applications resulting in several reported decisions.  The trial followed six case management conferences, an extensive forensic tracing exercise, and analysis of almost 700,000 relevant documents spanning a period of over 7 years.

The decision is now a leading authority on fraudulent trading, knowing receipt, and the bona fide purchaser defence.

The case represents one of the largest mini-bond frauds of recent times.

Stephen Robins KC, Andrew Shaw and Daniel Judd appeared for the successful administrators and were instructed by Mishcon de Reya LLP.

Read the judgment here.