Who said the regulator doesn't listen? In a peculiar sequence of events, a single IFA rescued an investigation the Financial Services Authority (FSA) thought was settled, and which eventually exposed a shocking investment scandal involving a ‘trading maestro', £22m and 300 victims.
Benjamin Wilson, who was sentenced in the courts on Friday, was a "charming, charismatic guy" in his 20s who seemed to possess an "exceptional trading ability that everyone appeared to believe in", said lawyer Alan May, who works on the Financial Conduct Authority's (FCA) Criminal Prosecution team.
Wilson promised investors huge returns and led people to believe he was using a special algorithm to produce them, and that he was generally an all-round trading genius.
In reality he was a fraudster who splashed investors' money on a lavish lifestyle and ended up losing the majority of what the people, mainly friends of his family, had entrusted him with.
Wilson ran a number of Ponzi-style investment schemes over the course of eight years from a plush office in Dorset. His plot was uncovered by the FSA in 2010 and he was finally shut down in December 2011. But this was only made possible thanks to one IFA.
The FSA had no clue Wilson was still trading after 2005 until it was alerted by the IFA in 2010, who passed on a brochure he received of Wilson's venture Sure Investment after detecting it was not regulated and offered "too good" a deal.
The scheme had made its unique selling point that it was unregulated, telling investors this gave it the freedom to make more money. It promised returns of 3-7% a month.
What the IFA probably didn't know was that everything, from the funds Wilson was offering, the $160m he said he was trading, down to the audit documents, were all fictitious - some even fake-signed by author Terry Pratchett.
Wilson had started his bogus venture in 2003 but it was only after the financial crisis that things really took off.
Made-up accounts of the firm showed that funds supposedly grew from $3.6m in 2005 to $28.5m in 2007.
By 2008 Wilson claimed he had $103.3m in his funds, increasing to $160m the year later. This was all made up and the actual value of his funds was more like £20m, the regulator found.
As May said at a presentation about the case: "The investment was a charade, almost nothing about it was real. It was in many ways an emperor's new clothes-style investment."
The FSA had got wind of the unregulated firm early on and asked it to become authorised. But in 2005 Wilson decided he would wind down the firm instead, so the regulator asked him to return all the money to investors and followed this up by contacting the investors to check he had done so.
Unfortunately for the regulator, Wilson had manipulated his investors to not alert the FSA to what he was really up to.
Far from winding down Sure Investment and going into consulting, as he claimed he would do, Wilson set up another, offshore, fund and continued his frenzy on a larger scale.
The investors, who had had their money returned at first, had already made commitments to the new scheme. Only 20 of the 300 investors wrote back to the FSA and none told it of the new fund.
Unfortunately for the investors the new fund was not actually located offshore in the British Virgin Islands, as Wilson claimed, but remained a UK domiciled fund and just as fraudulent as the first one. And it was growing at a rapid rate.
The scheme worked in the way Ponzi schemes do, with some initial investors being paid from the capital of the investors that come after them.
In fact, there wasn't much trading going on at all and only around 20% of the £21.8m committed by investors was ever invested. As May put it: "Rather than being the trading maestro everybody thought [Wilson] was, he was actually rather a Walter Mitty.
"He wasn't a good trader, he didn't do much trading and when he did, he lost money."
May said the FCA found that, of the £4m that was actually invested, Wilson lost half.
Wilson would always invite new investors to his office in Poole, which would stun them with modern art bull and bear statues, plasma screens, fake staff and a pool room.
Wilson had 10 staff working for him, five of which were young trainee traders. However, they weren't trading on live screens, rather they were being made to use computer simulations. When one of them inquired about it, he was told he would eventually trade live.
May said: "The staff had been as deceived about what Wilson was up to as the investors, often there was no distinction between the two.
"They were seeing simulated computer trading, not real money at all, and were not trading the Sure Investment fund."
A lot of the staff got their friends and family to invest in the fund. Wilson's girlfriend, who worked as an administrator for the business, even got her mother to invest.
However, Wilson was challenged when a family friend became interested in the funds. The friend asked to see Sure Investment's audited accounts and other documents, which naturally did not exist. There had been no auditor involved at any stage.
Wilson resorted to his imagination. He invented an auditor firm, built a fake website for it - complete with spelling mistakes and registered to his parents' address - and asked a friend from the US for a sample of accounts, which he then copied.
The auditor's name was made up of the friend's accounts' signatories and the auditor's signature came from a Google search.
On later inspection the FCA found that the signature was actually that of writer Terry Pratchett, having come up first on the search engine when typing in ‘signature'.
However, unfortunately for Wilson, Pratchett's literary talent had not made its way onto the accounts' audited statements, which were laden with spelling mistakes, including in the name of the firm, spelled Sure Invesment.
Wilson's dad's friend was not deterred however, and later invested more than £1m in the fund.
But instead of investing the money on the market Wilson used it to take his 'staff' to team building events, including a horse whispering seminar, and to buy the £800,000 statues for his office.
Wilson also treated his investors to a trip to Las Vegas, where he gambled so much on the tables that the hotel happily waived the cost of all his guests' accommodation.
In total, Wilson's expenses came to £6.3m: a £4.66m house, £233,000 spent on racing horses, £216,000 on cars, £99,000 on shopping and £74,000 on golf, including a charity event he staged.
The total amount taken from investors was £21.8m, of which £17.54m is still owed.
Losses are estimated to be £12.15m, meaning investors are unlikely to recover more than 31% of their investment, the FCA said.
However, the damage would have doubtlessly been bigger had it not been for the IFA who alerted the FSA when he sensed something was suspicious.
FCA head of enforcement Tracey McDermott said: "In our unauthorised business area we get alerts from various sources but we don't always get those alerts as quickly as you might think because the investors usually think they are on to a good thing.
"We get an awful lot from people within the regulated community, particularly from IFAs, who see their clients taking money out of traditional investments to put it somewhere else, or hear things on the grapevine.
"And it's a really, really valuable source of information for us because clearly we aren't out there in every golf club around the country listening to who is doing what.
"It was a very important piece of information and I very much encourage people to come forward."
Matthew Richards, the lead investigator on the case from the FCA's Unauthorised Business Department, added: "We've heard how much the investors believed in Wilson, it would have been reported by them considerably later.
"Eventually these kind of schemes will fall over because they can't be kept up forever, but actually they can be kept up for quite a large period of time with losses increasing, so that kind of reporting from IFAs is really important to us."
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