Administrators to London Capital & Finance are suing a payments and custody provider that they claim failed to conduct adequate checks before the investment firm collapsed in one of the UK’s biggest financial scandals.
Court papers filed at the High Court set out details of a £32mn lawsuit against GC Partners, which LCF administrators claim processed transactions despite having “reasonable grounds for believing” they were part of a fraud.
The case is the latest attempt by the administrators to recover monies for creditors following the collapse of LCF, which was ruled last year to be a Ponzi scheme.
LCF had promised high returns to members of the public, many of them elderly, by providing financing for small and medium-sized UK companies. It raised about £237mn from almost 12,000 investors before it collapsed in 2019.
A “substantial part” of the money raised was misappropriated and used to make payments to people connected with the company, Lord Justice Miles ruled last year in a separate case administrators brought against LCF’s operators.
Several individuals, including former chief executive Michael “Andy” Thomson and “shadow director” Spencer Golding, were found liable last year to repay £180mn.
However, Judge Miles said at the time that it was unlikely they would be “able to pay anything like” the sums ordered. Individuals involved, including Thomson and Golding, have since been made bankrupt.
The case against Global Currency Exchange Network and Global Custodial Services — trading as GC Partners — centres on its alleged role handling LCF funds. The administrators claim it executed payment instructions from Thomson to transfer LCF funds to individuals including himself and Golding.
GC failed to carry out adequate due diligence or “know your client” checks, the lawsuit claims. It “had reasonable grounds for believing that the payments instructions given purportedly on behalf of LCF by Mr Thomson . . . were attempts to defraud LCF”, the particulars of the claim state.
The administrators are suing for damages and interest, totalling about £32mn, arguing GC failed to meet contractual, statutory and fiduciary duties.
A defence has yet to be filed with the court. Howard Kennedy, the law firm representing GC Partners in the case, declined to comment.
The sums claimed from GC represent only a fraction of the total amount lost in the collapse of LCF.
LCF’s creditors include the Financial Services Compensation Scheme, which paid out £172mn to victims, as well as individuals who invested particularly large sums and were not covered in full by the scheme.
