Cayman bank named in lawsuit over Ponzi scheme

More than 300 people have sued a British Virgin Islands funds trader, its associated entities and the Cayman Islands-based dms Bank & Trust Ltd., seeking the location and repayment of tens of millions of dollars they believed was going to be invested in foreign currency trades.

A writ of summons filed July 11 with the Grand Court alleges the money was used instead to pay off previous investors with BVI-based CWM Ltd. and its associated companies, and to pay for company expenses and sponsorship agreements, or to “pay for the lifestyle” enjoyed by CWM’s chief executive, Anthony Constantinou, and others.

A significant portion of the funds invested in the scheme, which is now under investigation by the City of London Police, were deposited into the accounts of dms Bank & Trust Ltd., a Cayman Islands Class B [not locally operating] bank, the investors allege. Most of that money cannot be accounted for, the lawsuit claims.

Five other international investment banks had funds deposited from the investment scheme, but they are not named as defendants in the lawsuit filed in the Cayman Islands Grand Court.

“Of the circa £50 million received in the dms Bank & Trust accounts from investors, only about £1.2 million remains in the CWM BVI account and approximately £100,000 in the Treasure Trove account [Treasure Trove was one of the companies Mr. Constantinou owned, court records state],” the writ alleges. Dms founder Don Seymour said Saturday that the claims against his company’s bank were all denied and would be “vigorously defended,” but he did not comment regarding the writ of summons. Although CWM and its associated companies were not previously identified in court records, dms sued the former managing director of its bank, Jazeb Jones, in 2015 for entering into an “inappropriate” business relationship with two bank clients and receiving “excessive gifts” in exchange.

The CWM investors’ July 11 lawsuit surmises that Mr. Jones’s two clients were either BVI-based CWM and Mr. Constantinou, or CWM and Treasure Trove Ltd., a company Mr. Constantinou owned. The company, based in the Seychelles, has been dissolved. Dms Bank & Trust Ltd. held millions of dollars in funds for both entities, the lawsuit claims.

It is alleged by the investors that Mr. Jones must have known about the “dishonest, fraudulent, illegal or commercially unacceptable conduct” by CWM, and that he attempted to cover his activities by communicating privately with Mr. Constantinou and/or an associate of Mr. Constantinou’s, instead of using dms company communications.

When bank directors discovered the client relationship with CMW, it was noted that “several red flags were raised” and that Mr. Jones was ordered by dms directors to drop the relationship with CWM. He did not do so, the writ states.

The writ also alleges that dms Bank & Trust Ltd. should bear some legal responsibility for employee Mr. Jones’s conduct in orchestrating the scheme.

“The other dms Bank & Trust directors acted negligently,” the writ states. “Having decided, rightly, that dms Bank & Trust should not engage in further business with CWM and having instructed the closing of the dms Bank & Trust accounts, they failed to ensure that the same were closed,” the lawsuit states. “Dms Bank & Trust is liable to pay damages to the plaintiffs.”

The alleged Ponzi scheme

According to the July 11 lawsuit, CWM presented itself as a “substantial and reputable organization,” employing a number of staff members who worked from the Heron Tower in the City of London.

It had high-profile sponsorship agreements including deals with the 2015 London Boat Show, the Honda MotoGP racing team and the west London Chelsea Football Club, which touted CWM as its “online Forex trading partner.”

CWM and a handful of related companies signed agreements with investors that promised annual returns of between 4 percent and 8 percent from foreign currency trading activities, the lawsuit states. CMW pledged that invested funds would be segregated and held in trust to be used “only for the purpose of FX [foreign  exchange] trading on behalf of the [investor].”

It was a sham, the investors allege in the lawsuit.

“CWM did not, in fact, engage in any foreign currency trading on behalf of its clients,” the lawsuit states. “Although CWM appeared to have trading desks at its office in London which were shown to potential investors to encourage them to invest, no trading took place and the trading screens ran only demonstration software.”

The writ alleges that none of the CWM group companies deposited the investors’ funds into segregated accounts, but instead used them to pay for personal or company expenses. Previous investors were paid with current investors’ funds to keep up the appearance that the company was earning money, the lawsuit alleges.