The Serious Fraud Office (SFO) has featured in the media again recently, following its successful prosecution of a former Independent Financial Advisor (IFA) for carrying out fraud through a ponzi betting scheme. Fraud is typically a very tricky crime to prove, owing to the technical legal requirements that need to be shown.
Where did the prosecution stem from?
The facts of this case are rather complicated. Mr David Gerald Dixon incorporated a company known as Arboteum Sports Ltd in 2005. He claimed that shares in his organisation would be worth more than £3 million by 2009. Furthermore, between 2004 and 2007, Mr Dixon represented the organisation as a betting company. He claimed to be an expert in gambling and advertised his company’s service to would-be gamblers: he would be able to remove the risk traditionally involved in gambling by identifying small differences in the odds that were being offered by mainstream bookmakers.
Initially, investors saw favourable returns from Arboteum Sports Ltd. This favourable performance by Mr Dixon and his company then encouraged others to reinvest their winnings. However, difficulties arose when Arboteum eventually stopped making pay-outs. Mr Dixon attempted to calm the concerns of those who had placed money with him, by attributing the lack of payments to Her Majesty’s Revenue and Customs seizing the company’s funds. The company went into Liquidation in 2007.
Mr Dixon also reportedly attracted the attention of investors, offering what turned out to be bogus shares for a casino that was to be built in Singapore. Mr Dixon claimed to investors that the project was linked to the well-known Las Vegas casino organisation, MGM Mirage.
Following the collapse of Arboteum Sports Ltd, Mr Dixon fled to Malaysia. He lived there until the Malaysian authorities extradited him to the UK in September 2014.
What did the prosecution argue?
The Serious Fraud Office, in partnership with the Hampshire Constabulary, conducted a joint investigation into the affairs of Mr Dixon and his company, Arboteum Sports Ltd. Following the misappropriation of funds amounting to £4 million, the SFO brought a prosecution against Mr Dixon for fraud by use of a Ponzi scheme. The SFO had evidence that Mr Dixon was in fact paying investor’s with cash that he had enticed from other investor’s –not from profits gained from his gambling business or from the shares in the Singapore development that he had referred investors too. In fact, there was no evidence that the latter had ever existed.
In a rather unusual, but not completely uncommon turn of events, Mr Dixon admitted to the majority of the charges brought against him:
- One count of dishonesty concealing a material fact, contrary to the Financial Services and Markets Act 2000;
- Three counts of making a statement, promise or forecast known to be misleading, false or deceptive, also under the 2000 Act;
- One count of fraud by false misrepresentation, contrary to the Fraud Act 2000.
What is the law in this field?
The SFO has, in previous years, been employing a more sophisticated approach to dealing will suspected fraudulent activity. Furthermore, it will turn to various legal provisions, as it did in the case of Mr Dixon, to catch all possible illegal activity.
The Financial Services and Markets Act 2000 is, as the name suggests, designed to deal specifically with financial affairs. It makes it a criminal offence for an individual to mislead a market or investors. Therefore, even if someone is able to evidence very convincing material that suggests an ‘investment’could be profitable, where they know this to be false then they will be vulnerable to a prosecution under the 2000 Act.
The other piece of legislation that is relevant in this particular instance is the Fraud Act 2006. The utility of the 2006 Act for organisations like the SFO cannot be emphasised enough. The Act deals specifically with fraud, but employs a wide ranging definition. Fraud is deemed to be:
- The making of a false representation;
- By failing to disclose information if you are under a duty to do so; or
- By abusing the position which you are expected to safeguard.
This is a fairly sophisticated piece of legislation that has been specifically designed to make the detection and prosecution of fraudulent activity easier –historically, fraud has been a difficult crime to prosecute.
In the context of Mr Dixon, it is perhaps unsurprising that he entered a guilty plea following his return to the UK. Mr Dixon was himself, at the time of the conduct in question, an IFA who would have been very well aware of what he was doing, i.e. taking money from his investors with no intention of providing a return on their investment.
The SFO is increasingly working in partnership with other agencies when investigating suspected fraudulent activity. This means that were individuals or indeed organisations are themselves subject to an investigation, they should seek specialist legal advice from a solicitor who understands the nature of SFO investigations.
Contact Lewis Nedas Solicitors in London
At Lewis Nedas, we have a dedicated team of lawyers who are regularly involved in advising on allegations of financial crime. If you are concerned regarding your position in relation to an SFO investigation, please contact us as soon as possible. The law in this area is particularly complicated and warrants handling by professional advisors that appreciate how the situation must be handled. Our lawyers are experts in financial and regulatory law, and are routinely instructed in SFO investigations. We will work with you for the duration of any investigation, representing you in any dealings with officials. We will also appear on your behalf in court if the situation warrants it. Any discussions that we enter into with you will be legally privileged, and the advice that we provide will reflect your needs.
The team at Lewis Nedas understand that the prospect of being the subject of an SFO investigation can result in a great deal of stress and anxiety. We take pride in helping to manage the situation effectively, and provide the specialist legal representation that you will expect. Contact us now.
