The Financial Services Authority (FSA) has secured a court order against Sinaloa Gold Plc (Sinaloa) and one of its directors, Glen Lawrence Hoover, a United States resident, which will see money returned to 79 UK victims of a boiler room scam.
At a case heard in the High Court in London yesterday, Mr John Jarvis QC (sitting as a Deputy Judge of the High Court) ruled that Sinaloa had offered shares to the public through boiler room fraudsters, and without a prospectus – a requirement of making shares available to the public. He also ruled that Hoover was knowingly concerned in Sinaloa’s breaches.
Both Sinaloa and Hoover were ordered to pay a total of £1,097,092.11 to the FSA for distribution to the victims, and not dispose of any assets held worldwide until the payment has been made. In December 2010, shortly after becoming aware of the scam, the FSA obtained an injunction and freezing order against Sinaloa and Hoover securing £127,000.
Therefore, while the court order stipulates that over a million pounds should be returned to investors, only £127,000 is currently available to be repatriated.
The judge, Mr John Jarvis QC, said:
“The evidence therefore indicates to me that Sinaloa was set up purely as a vehicle to issue shares to the public and Mr Hoover was an integral part of that operation. Sinaloa was a sham operation. Mr Hoover knew all that was going on and took an active part in the scam that took place.”
Between August and December 2010 members of the public were offered shares in Sinaloa, a UK incorporated company, by at least 12 boiler rooms who cold called consumers. Victims were provided with material from Sinaloa stating that the company was raising funds to develop a gold mine in the Sinaloa region of Mexico. However, the FSA found no evidence that Sinaloa held any interest in the mine and that up 90% of the money raised from consumers was paid to the boiler rooms and to persons associated with Hoover.
The names of the boiler rooms selling Sinaloa shares included PH Capital Invest, Tudor Asset Management, First Geneva Wealth Management, Invest Direct Group, J.P. Brown & Partners, Steiner Haus Capital and UTC International Services.
Sinaloa briefly managed to obtain a quotation on the Frankfurt Stock Exchange’s First Quotation Board, but the shares were delisted in 2011.
Tracey McDermott, acting director of enforcement and financial crime at the FSA, said:
“The case against Sinaloa and Hoover demonstrates that we are prepared not only to take action against companies involved in the promotion and sale of their shares by boiler room fraudsters but where possible, we will also take action against the people behind these scams - whether in the UK or overseas."
“The diligent work of our dedicated team tackling unauthorised businesses means that, in this case, victims will receive back some proportion of their losses. It should however serve as yet another reminder that dealing with unauthorised businesses carries a great deal of risk.”
Background
- Court papers can be obtained from the High Court by quoting reference number: HC10C04532.
- The FSA recently contacted more than 76,000 people to warn them they are being targeted by financial conmen.
- More information about investment scams.
- The FSA regulates the financial services industry and has four objectives under the Financial Services and Markets Act 2000: maintaining market confidence; securing the appropriate degree of protection for consumers; fighting financial crime; and contributing to the protection and enhancement of the stability of the UK financial system.
- The FSA will be replaced by the Financial Conduct Authority and Prudential Regulation Authority in 2013. The Financial Services Bill currently undergoing parliamentary scrutiny is expected to receive Royal Assent by the end of 2012.
