Celebrity fraudster pleads guilty
So how did he do it, and how can you protect yourself from this sort of scheme?
The scamKautilya Pruthi, a 41-year-old from Wandsworth, is thought to have conned 800 people out of a total of £115 million. He used the business name Business Consulting International, and attracted money from around the world.
He promised returns of more than 10% a month and claimed to be making it by loaning the money to companies in trouble - often shipping companies that needed the money to pay charges to free up goods. In fact he was keeping a large proportion of it for himself, thought to be at least £10 million, and using a slice to give back to old investors to convince them the scheme was working.
The money funded an incredible luxury lifestyle, renting properties in the most expensive parts of London and Surrey. He also bought a fleet of fast cars, a private jet and a motor racing company. Meanwhile many of his 'clients' went under.
The convictionThe con came to light in 2008 and a criminal investigation was launched in 2009. Pruthi pleaded guilty in January, but details were only revealed when two financial advisers he employed to help sell the scheme were cleared of fraud charges - deciding that they had no knowledge that Pruthi was in fact running a huge con.
John Anderson, 46, from West Hampstead, London, and Kenneth Peacock, 43, from Camberley, Surrey, were found not guilty of recklessly making misleading statements and not guilty of fraud. They were found guilty of unauthorised regulatory activity and are likely to be jailed.
So how can you protect yourself?One clear red light for this scheme was that it wasn't authorised by the Financial Services Authority. In fact, no scheme Pruthi ever ran would be authorised because he had been jailed for 10 months in the US for past cons.
If you are approached by someone selling a scheme that sounds too good to be true, checking if it is authorised by the FSA should be your first port of call.
Another red light was his claim that they were buying into a niche area that needed to be kept confidential to avoid alerting the competition. If you cannot access clear, official details of exactly where your money is invested, then this is another terrible sign.
The third red light was that they relied enormously on appearances. They travelled to client meetings in a helicopter, and gave personal assurances that the money was safe. The approach was very successful. According to the City of London police when Pruthi's assets were frozen, many of his victims refused to believe they had fallen victim to a fraud, and with encouragement from Pruthi and the support of local MPs tried to get detectives to unfreeze assets so the investment scheme could start running again.
In the final analysis, none of this was worth a penny. These people largely lost everything they had invested with the scheme.
DS Ben Flannaghan, who led the three-year investigation for the City of London Police said:"This case highlights the dangers of investing in unregulated schemes; there will be no compensation available for the 800 victims who have lost millions. The public need to be aware that these 'magic bean' returns do not exist and that when presented with such an opportunity should always seek advice from the FSA."
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