Victims of LCF scandal share £120m refund
VICTIMS of the London Capital & Finance savings scandal have hailed a ‘hallelujah moment’ after the Government agreed to reimburse most of their losses.
More than 11,600 savers were left high and dry when LCF tumbled into administration in 2019 amid accusations of fraud, owing them £237m.
Many were pushed to desperation when the Financial Services Compensation Scheme ( FSCS), which is designed to cover customers’ losses when finance firms go bust, said LCF did not fall under its remit.
But after victims were forced to go through a legal battle with the FSCS, the Treasury has stepped in with its own £120m compensation fund, which should give around 97pc of LCF investors the vast majority of their money back.
Andrea Hall of the LCF Bondholders’ group said: ‘This is the best outcome we could have hoped for. A hallelujah moment after a really long fight. We had to ensure we stayed united throughout. We are incredibly grateful to the support we’ve had from the press.’
LCF sold so- called minibonds to savers, saying it would lend out their money to high-quality businesses which needed the cash to grow.
It promised them a generous return of around 8pc on their money – but in fact, the cash was funnelled to a small number of companies, several of which were connected to people with links to LCF, including the firm’s founder Simon Hume-Kendall.
The Serious Fraud Office is pursuing a criminal investigation amid claims that savers’ money was used to buy luxuries, from a helicopter to a membership to a Mayfair private members’ club. LCF’s administrators Smith & Williamson are also trying to sue several individuals to get more of savers’ money back.
Some victims were able to get money from the FSCS – but only if they fitted very strict criteria. The scheme has paid out more than £57m to 2,800 bondholders.
Now the broader Treasury scheme will give investors back 80pc of their initial investment in LCF mini-bonds, up to a maximum of £68,000 and minus any money they get back through other routes. Around 97pc of bondholders invested less than £85,000, so will not hit the cap.
John Glen, economic secretary to the Treasury, said: ‘It is an important point of principle that Government does not step in to pay compensation in respect of failed financial services firms that fall outside the FSCS. However, the situation regarding LCF is unique and exceptional and the Government has decided to establish a compensation scheme in this instance.’
‘The best outcome we hoped for’