Freddy David Ponzi Scheme Stopped

Freddy David was sentenced to six years for defrauding 55 victims out of £14.5 million in a Ponzi scheme.

He used the money to fund his gambling habit, as well as paying for holidays abroad and his children’s school fees.

An investigation by the City of London Police’s Fraud Squad found that between 2005 and 2017, David had been running a Ponzi scheme through wealth management company HBFS Financial Services Limited (HBFS), of which he was managing director.

The Financial Conduct Authority (FCA) became suspicious of the HBFS bank accounts and referred it to the City of London Police who worked closely with the FCA to investigate the affairs of HBFS.

This fraud was running in parallel with legitimate HBFS business, with David using the company’s name as a means to defraud victims out of vast sums of money. 55 victims invested a total of £14,545,494.48 with individual investments of between £20,000 and £750,000 per person.

The Scam

David would convince victims, some of whom he knew personally as friends, that their funds were being held in a high interest bank account offering between four and eight percent interest annually and they would be paid interest on a monthly basis.

The investigation found that victims were transferring large sums of money into the HBFS business accounts, under the impression that they were investing in high interest accounts. It was found that large sums of money were being transferred into David’s personal bank accounts for his own use as well as being used to pay other investors their “monthly interest”.

Victims were provided with forged bank documents which supposedly confirmed that the investments had been made and that interest was being accrued each month.

Police Staff Investigator, Katie Watkins, said:

“Freddy David took advantage of individuals who placed significant trust in him. He abused his position and as a consequence this has had a devastating impact on the victims and their families, both financially and psychologically.”

This is an unusual case as normally either the scheme is setup to be a Ponzi or it starts legitimate then circumstances conspire to push it into a Ponzi. However in this case, Freddy David was a respected financier and ran the Ponzi scheme as a side business to bolster his own bank account.

Be careful who you invest money with, even if that person is a friend or works in a legitimate financial services organisation.

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