Suspected Ponzi Scheme 79th Group Collapses After FCA Raised Concerns

Tens of millions of pounds have been lost by unsuspecting investors following the collapse of the 79th Group, now suspected to be one of the largest Ponzi schemes in British history. The Financial Conduct Authority (FCA) had alerted law enforcement to concerns about the company as early as eight months prior to its collapse, yet no public warning was issued, enabling the group to attract further investments during the period of investigation.

The City of London police began investigating the 79th Group in September of last year after the FCA privately shared its apprehensions. Despite the ongoing police inquiry, the group was still receiving funds from individual investors in its main NatWest account as late as March. The company’s board boasted notable figures, including a former senior HM Revenue & Customs official, though there is no suggestion of wrongdoing on the part of advisers.

The 79th Group attracted thousands of investors, many of whom were first-time or retired investors lured by promises of high returns on loan notes. These notes were purportedly secured against valuable property developments, including a high-profile holiday park in north Wales worth £250 million. Administrators from Grant Thornton, now overseeing the collapse, have informed investors that they believe the set up met the definition of a Ponzi scheme—the early investors being paid with the funds from the later ones, rather than the proceeds of actual business activity.

Despite private warnings to law enforcement, the FCA did not issue any public statement specific to the 79th Group before its downfall. The lack of transparency has now prompted questions from parliamentarians and the public alike. Sir John Whittingdale, Conservative MP, has spoken publicly about the plight of those affected, stating that the victims deserve answers about why no public alert was raised and how investments were able to continue despite serious FCA concerns.

Police announced the arrest of four people in February, seizing luxury watches, jewellery, and a significant amount of cash. Those arrested are on bail while investigations remain ongoing and, as yet, no charges have been brought. The FCA has reiterated that its remit is limited in cases involving unregulated firms, as was the situation with the 79th Group, but acknowledged its recent efforts to warn the public about high-risk “loan note” schemes and mini-bonds offered by such companies.

The present situation leaves thousands of investors owed in excess of £200 million, awaiting the results of both the police investigation and any potential compensation procedures. The episode has sparked debate over the powers and protocols of regulators when facing suspected fraud, especially when investors’ livelihoods are at stake.