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Fraud Victim Lost Fortune in ‘Classic Ponzi Scheme’

A woman whose family lost £1.5 million in a ‘classic Ponzi scheme’ has suffered a setback in her quest to prove that her bank, through one of its senior employees, gave ‘dishonest assistance’ to the fraudsters. The Court of Appeal struck out her counter-claim against the bank which was seeking possession of her home.

The woman was duped into investing large sums in the scheme on the promise of spectacular returns. Encouraged by illusory profits on an initial investment, she re-mortgaged her home to raise more cash and recommended the scheme to members of her family and friends. The two men behind the scheme were later sentenced to lengthy terms of imprisonment after being convicted of conspiracy to defraud.

The woman was left with a £345,000 mortgage over her home, having borrowed the money to invest in the scheme, and a feeling of ‘moral responsibility’ to her family and friends who also lost very substantial sums. In her defence and counter-claim to the bank’s possession action, she alleged that one of its senior managers had ‘colluded’ with one of the fraudsters and advised her that the scheme was ‘very, very good’ and that he ‘would be investing in it himself’.

However, allowing an appeal by the bank, the court ruled that the woman’s counter-claim as originally drafted made no clear allegation of dishonesty against the bank itself and did not disclose an arguable cause of action. Previous proceedings she had instituted against the bank had been struck out at an early stage due to procedural defaults and she was not entitled to resurrect the same or similar disputed allegations by means of a counter-claim.

The court noted that, although the woman retains the right to launch an entirely fresh damages action against the bank, she would be likely to face arguments that any such proceedings should be struck out on grounds of delay.