The former wealth manager pleaded guilty to running the scheme, and has also been disqualified from being a director of a company for 10 years.
Former UK financial advisor Freddy David has been sentenced to six years in prison after pleading guilty to running a Ponzi scheme in which 55 victims were defrauded out of just over £14.5 million (around $19 million).
David used his position as managing director of HBFS Wealth Management to sell his victims a fake investment opportunity linked to “an imaginary Bank of Scotland account”. David was also disqualified from being a director of a company for 10 years, according to a City of London Police press release.
The case was referred to the City of London Police, the national lead force for fraud, by the Financial Conduct Authority (FCA) who became suspicious of the HBFS bank accounts. Following the referral, the City of London Police worked closely with the FCA to investigate the affairs of HBFS.
This fraud was running in parallel with legitimate HBFS business, with David using the company’s name as a means to defraud victims out of vast sums of money. 55 victims invested a total of £14,545,494.48. The investments made by victims varied, between £20,000 and £750,000 per person.
David would tell victims that they could obtain interest each month and they were advised that their money was locked in for varying amounts of time, between three months and five years.
The investigation found that victims were transferring large sums of money into the HBFS business accounts, under the impression that they were investing in high interest accounts. It was found that large sums of money were being transferred into David’s personal bank accounts for his own use as well as being used to pay other investors their “monthly interest”.
A review of David’s personal bank accounts showed that once he had received transfers from HBFS related accounts, he used this money to fund his gambling habit, as well as for paying his children’s school fees and holidays abroad.
Victims were provided with forged bank documents which supposedly confirmed that the investments had been made and that interest was being accrued each month.
“Freddy David abused the position of trust he had as managing director at a regulated firm to run this appalling fraud,” said Mark Steward, executive director of enforcement and market oversight at the Financial Conduct Authority. “The FCA have been working closely with the City of London Police throughout and will now be carrying out its own enforcement action against David on the back of the criminal conviction to prevent him working in financial services again.”