Member Article

Serious Fraud Office break another ?Ponzi? scheme

Former city stockbroker Nicholas David Andrew Levene was sentenced yesterday at Southwark Crown Court after pleading guilty to 12 counts of fraud, one count of false accounting and one count of obtaining a money transfer by deception. The offences were committed between 2005 and 2009.

Mr Levene dishonestly accepted monies from investors and told them he had bought shares on their behalf, when instead the funds were being used for his own personal and business accounts. The investors were often provided with false profits, which infact was other people’s money. His deceit brought in over £250 million pounds fromthe investors who were under the impression that Levene was trading successfully.

Whilst passing sentence, Judge Beddoe QC stated: “It was a fraud from the outset, where countless lies were told. It was rank dishonesty. There were separate acts of individual moments of betrayal”. Confiscation proceedings are listed for 25 March 2013 at Southwark Crown Court.

As that operated by Levene, Ponzi schemes are an investment fraud that involves the payment of purported returns to existing investors from funds contributed by new investors. The organisers often solicit new investors by promising to invest funds in opportunities claimed to generate high returns with little or no risk. The fraudsters focus on attracting new money to make promised payments to earlier investors and touse for personal expenses, instead of engaging in any legitimate investment activity.

The schemes were named after Charles Ponzi, who duped thousands into investingin a postage stamp speculation scheme back in the 1920’s. The interest rate at thetime was 5%, but Ponzi was promising a 50% return to his investors. The scheme eventually collapsed and Ponzi was prosecuted.

Andrew Swan, financial crime solicitor at Short Richardson and Forth LLP commented: “The Serious Fraud Office has really stepped up its game over the lastyear or so in prosecuting those operating Ponzi schemes. These scams can have a devastating effect on their victims. Investors can lose their life savings on such fraudsand often they are vulnerable elderly people.”

This was posted in Bdaily's Members' News section by Andrew Swan .