A law firm is preparing to launch claims amounting to £23m against Yorkshire Bank for professional negligence related to money invested in Arck LLP.
Regulatory Legal claims Yorkshire Bank failed in its duty to protect client monies which it held on account for investors in Arck.
The Arck scheme invested via financial advisers in sale and repurchase (SARP) contracts for foreign property developments which were supposed to produce significant returns.
However Arck entered liquidation in March and, along with directors Richard Clay and Kathryn Clark, is currently being investigated by the Serious Fraud Office and Nottinghamshire Police over allegations of fraud relating to investors' missing millions.
A central feature of the promotion of Arck was the use of segregated client accounts at Yorkshire Bank, and investors believed the money they had invested in Arck would be protected by Yorkshire.
According to a letter of claim seen by IFAonline, the bank counter signed letters of instruction to state any sums invested by a client in Arck would be credited to those segregated accounts, would not leave the UK, would be held away from any operational monies of Arck, and would be protected against any failure of Arck.
However when Regulatory Legal issued a freezing order on the main segregated account in December 2011 it contained just £25.92.
As of 10 December Yorkshire Bank had received in excess of 200 claims for compensation regarding money held for investment in the Arck scheme.
The letter of claim states: "The claimants relied upon the multitude of representations of the Bank as to the security and whereabouts of their monies, the Bank have occasioned a severe loss upon the claimants by failing to control monies in the represented manner.
"The losses of the claimants were occasioned by a multitude of basic regulatory failings [by Yorkshire Bank]. It is incumbent upon the Bank to take hold of such failings and act in a responsible manner in order to try and bring an orderly resolution to this matter."
Michael Cotter, solicitor for Regulatory Legal, said: "We act for just under 350 clients. We believe all have valid causes. Yorkshire Bank represented that they would handle clients' money in ringfenced segregated accounts, and as of the date of the freezing order the money is unaccounted for."
A spokesperson for Clydesdale Bank PLC, parent company of Yorkshire Bank, declined to comment.
'Right thing to do'
£69m spent on upgrades
European fintech market 'underserved'