Former LCF trustees ordered to pay £150,000 in court costs

THE former security trustees of bust mini-bond firm London Capital and Finance (LCF) have been heavily criticised and ordered to pay an initial £150,000 in costs over the case that led to their removal.

A High Court judge said that Global Security Trustees had “clung to its office without regard to the reasonable concern of the bondholders and placed their own commercial interests first”.

GST was stripped of its role in December after LCF’S administrators successfully pointed to conflicts of interest, and in a judgment handed down yesterday was ordered to pay the administrators’ costs in that case.

GST has been replaced as security trustee by Madison Pacific Trust, in the latest twist in one of the biggest City scandals in decades.

LCF raised money from small investors by selling mini-bonds.

It invested the cash in various companies and used the interest from those loans to pay back bondholders, promising returns of up to 8pc. It collapsed in Jan 2019 after a concerned Financial Conduct Authority froze its assets and ordered it to withdraw marketing materials, and was placed into administration.

Administrators Smith and Williamson later found that investors’ cash had

‘The case for replacement was compelling. The sight of a trustee clinging to office is unattractive’

been put into a small group of companies, many of which it said did not have enough assets to repay the company.

Their initial report last year added: “There are number of highly suspicious transactions involving a small number of connected people which have led to large sums of the bondholders’ money ending up in their personal possession or control.”

Bondholders have been warned they could get back as little as 20-25pc of their original investment. The Serious Fraud Office is investigating.

According to the court judgment from December, GST was created in December 2015 and “its sole business appears to have been acting as security trustee for LCF”.

In that judgment, Chief Master Marsh said it had “very close connections” with Buss Murton Law, a firm of solicitors that acted for LCF.

Also, former GST director Jeremy Friedlander had provided consultancy services to companies that LCF loaned money to before becoming a director of GST.

Awarding costs to LCF administrators, he said there was a “singular failure” among GST directors to to address the “very real conflicts that existed”. He added: “The case for replacement was compelling. As has been said before, the sight of a trustee clinging to office is unattractive.”

GST has been asked to pay £150,000 upfront with further payments to be determined. Administrators’ costs in the case run above £350,000.