Investors who fell victim to a multi-million pound ‘Ponzi’ scheme are being asked to contribute to a war chest to fund the legal fight to recover their money.
Law firm Clarke Willmott – which has its head office in Birmingham – is working with the Cameron Farley Action Group to raise £44,000 required for expert opinions on both sides of the Atlantic to determine whether a class action suit might succeed.
It is thought that thousands of investors, including many from the West Midlands, may have lost heavily after being persuaded to hand over their savings to Stephen Farley, who ‘‘guaranteed’’ a 9.25 per cent minimum return. The money was supposedly invested through Gain Capital, a New York based foreign exchange platform.
Clarke Willmott civil litigation partner Robert Morfee, who is advising the action group, is particularly critical of the UK Financial Services Authority, which he claims failed to act even when it knew Farley was operating illegally.
Farley, who operated from offices in Edinburgh, and recruited his victims by word of mouth, ran the scheme without FSA authorisation and was permitted to continue for three-and- a-half years after the regulator was made aware of his activities.
In that time he lost an estimated £28 million on one bad investment after another. Only a fraction of the money has been recovered, with total losses put at more than £25 million.
Even after the FSA stepped in to close Farley’s operations in the UK, the agency omitted to advise the US authorities, and Farley was able to invest – and lose – another $17.5 million held in Gain Capital’s accounts. The cash disappeared in a matter of days.
“In this case the FSA proved to be totally ineffective,” said Mr Morfee. “Even when the whistle was blown loud and clear they did nothing.
“Unfortunately the Financial Services and Markets Act 2000 prohibits claims against the FSA, so we are having to look to other parties.”
Clarke Willmott is asking victims of the scheme to contribute between £225 and £325 each to the fighting fund, to obtain expert opinions in the UK and US.
Mr Morefee said he has already made contact with 200 victims of the scam who predominantly came from the West Midlands, the North-east and North-west, south Wales, and Scotland.
The fund will be used to obtain a QC’s opinion in the UK, and pay for a US attorney experienced in New York regulatory law. If they believe the investors have a case, a full scale class action could ensue on a ‘no win, no fee’ basis.?
The situation is confused by the fact that not all of Cameron Farley’s clients lost money.
“Some of the early investors did very well,” said Mr Morfee. “As in other Ponzi schemes, those who were first in were handsomely rewarded with returns paid for entirely by the contributions of those who were sucked in later.
“In that way Farley maintained the illusion of successful trading, funding a pretty luxurious lifestyle for himself at the same time,” Mr Morfee added.
“We believe there were regulatory failings of such magnitude that the regulators, Gain Capital, and Cameron Farley’s bankers are legally required to return investors’ lost money to them.”
Cameron Farley investors willing to participate in the action group should go to www.fsauklegalaction.com