The mostly retired investors were left reeling after the £236million collapse of London Capital & Finance earlier this year. They had ploughed in their cash after LCF offered ISAs promising returns of up to nine percent. Around 12,000 people were hit when the company went bust in January. Administrators have said victims of the crash may only ever receive 25 percent of their investments.
In a message to LCF bondholders, administrators said they could receive five per cent of their money soon in the first pay-back since the firm went bust.
The timing is uncertain but it is understood it could be before Christmas.
The collapse of LCF triggered an investigation by the Serious Fraud Office and four people were arrested including Simon Hume-Kendall, a millionaire former director of Crystal Palace Football Club.
LCF’s administrators Smith & Williamson said they have identified several allegedly “highly suspicious transactions” involving investors’ cash.
They are claimed to include holiday developments in the Dominican Republic, Cape Verde and Cornwall, oil exploration in the Faroe Islands, an equestrian centre in Sussex and the purchase of a helicopter.
Smith & Williamson said the deals involved a “small group of connected people” with vast sums of money allegedly ending up in their “personal possession or control”.
The administrators also expressed serious concern about £60million in fees paid to a company which promoted LCF ISAs. Customers believed they were buying high-yield ISAs offering between four and nine percent. But they were actually buying unregulated, high-risk mini-bonds.
Alarm bells were being rung as early as 2015 and investors claim the scandal would have been averted if City watchdogs had taken action more promptly.
During an angry meeting in central London in April, pensioners accused the Financial Conduct Authority of “selling them down the river.” A lawyer working with the administrators told the audience they were victims of a “raw deal – the system has let you down.”
Yesterday, the FCA announced it will ban the promotion of complex mini-bonds to retail investors from January.
Mini-bonds occupy a grey area in the world of finance. They are not regulated by the FCA but the watchdog is responsible for supervising the way they are marketed.