The Financial Conduct Authority (FCA) has secured the longest yet prison sentence imposed on an individual convicted of running an unauthorised collective investment scheme.
Alex Hope was sentenced to a 7 year term by Southwark Crown Court after a jury found him guilty of fraud and he pleaded guilty to operating a collective investment scheme without authorisation. His co-defendant, Raj Von Badlo had earlier pleaded guilty to recklessly making false representations to investors and promoting a collective investment scheme without authorisation, and was sentenced to 2 years in prison.
The scheme was closed down by the FCA in 2012, by which time over 100 investors had entrusted in excess of £5.5m to Hope. Hope told investors that he would trade their money on the foreign exchange (FOREX) markets. However, of the £5.5m acquired by Hope, only around £650,000 was ever traded, almost all of which he lost. The FCA is now likely to pursue compensation and confiscation proceeding in an attempt to recover investor funds.
It is noteworthy that one of Von Badlo’s counts only required him to have been reckless in order for him to be convicted. Actual knowledge of what Hope was doing was not required. It is therefore vital that all those involved in the financial services sector proactively assess the products and markets in which they operate. Wilful ignorance is no defence.
This case highlights that individuals can expect to receive more than just financial and regulatory repercussions for their actions if the law allows. Significant prison sentences can be imposed following a conviction as a result of the FCA investigating wrongdoing under the powers invested in them by the Financial Services and Markets Act 2000.
As well as Hope and Von Badlo’s convictions for offences under the Fraud Act 2006 and Financial Services and Markets Act 2000, other recent successful prosecutions by the FCA have included offences of insider dealing contrary to the Criminal Justice Act 1993, with several other large scale prosecutions ongoing.
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