RCIPS assists in UK ‘Ponzi scheme’ probe

A local resident was questioned and assisted the Royal Cayman Islands Police Financial Crime Unit in connection with a U.K. investigation into what London detectives alleged was a 50 million pound Ponzi scheme, police have confirmed.

The probe, according to a 2016 statement by City of London Police, began in 2014 and involved victims who invested sums of between “a few thousand pounds to several million” with a company called CWM.

“The City of London Police believe the net of potential victims spreads far wider, running into the hundreds, with the majority being from within the Gurkha and Nepalese community,” the police statement from February 2016 reads.

The RCIPS confirmed last week that Cayman Islands resident Jazeb Jones was questioned in connection with the investigation and assisted financial crime officers in their queries.

“Working with the Director of Public Prosecutions Office, the Financial Crime Unit initially conducted enquiries on behalf of the City of London Police and were assisted in their investigation by the cooperation from [the] individual in question,” police said. “To clarify, he was not arrested.”

The U.K. probe came to light in Cayman last summer when more than 300 people sued a British Virgin Islands funds trader, its associated entities and the Cayman-based dms Bank & Trust Ltd., seeking the location and repayment of tens of millions of dollars the plaintiffs believed were going to be invested in foreign currency trades.

A writ of summons filed July 11, 2016 with the Cayman Islands Grand Court alleges the money was used instead to pay off previous investors with BVI-based CWM Ltd. and its associated companies, and to cover 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, now the subject of the City of London Police investigation, 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 were 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 has previously said 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, 2016 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.

The alleged Ponzi scheme

According to the Cayman 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. CWM 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 evidence suggests that representatives of CWM targeted hundreds of members of the Gurkha and Nepalese community and then exploited them in order to defraud millions of pounds,” according to City of London Police Detective Chief Inspector Dave Manley.

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